Mobile Providers, Can You Hear Us Now?

Angry consumers are filing lawsuits against wireless companies, reflecting a wave of discontent with new, mostly Web-focused, services

by Olga Kharif

Consumer grievances against wireless companies are taking on a new dimension. For more than a decade, mobile-phone customers have griped vociferously about what they consider unfair billing and inadequate wireless voice calling. But the advent of mobile data services—from texting to gaming to social networking to Web surfing—has given subscribers a whole host of new beefs to complain about.

In the past few months, users have filed class actions against AT&T (T), Verizon Wireless, Sprint Nextel (S), T-Mobile USA, and many smaller wireless service providers. The complaints cover a multitude of alleged sins, from excessive roaming charges to text-message spam. One filed in April says Verizon Wireless should pay damages for harm suffered by a 14-year-old girl after she was sexually assaulted by an adult male who contacted her through an Internet profile she created using her cell phone. Another attempts to hold Verizon Wireless and third-party content providers responsible for illegal gambling by users. Verizon Wireless declined to comment.

Confusion Over Pricing

What these seemingly different lawsuits have in common is that they reflect users' discontent with a wave of new services, many of them Web-focused, that are crucial to the wireless industry. Though slow to take off in the U.S., especially in comparison with the rest of the world, text messaging, wireless music, and video services are finally entering the mainstream. AT&T received 21.5% of its wireless revenues from data services in the first quarter, up from 16% a year earlier. Industry revenue from the larger category of wireless data, which includes mobile content and Web access, rose 53%, to $23 billion, in 2007, according to industry group CTIA. With increased usage comes new frustrations.

Damian Fernandez tapped into that rising ill will when he launched a class action on behalf of users of Apple's iPhone. The California lawyer set up a Web site, appleiphonelawsuit.com, after reading about angry U.S. users who racked up hundreds of dollars in unexpected fees after using their devices abroad. "I still remember the passion and anger that people felt," Fernandez says. Within days, he received several hundred complaints and the attorney who previously focused on business contract disputes suddenly found a new calling. Fernandez now represents five clients, who complain of everything from high roaming charges to buying iPhones that no longer work, in a class action against Apple (AAPL) and AT&T, its U.S. service-provider partner. Apple and AT&T haven't filed a response to the allegations. Apple declined to comment. AT&T didn't address specific litigation.

According to the Federal Communications Commission, in the first quarter of 2007, the number of wireless service-related complaints rose 14%, to 5,242, led by billing issues. "There's so much confusion out there in regards to what the price of the data plan is, what's included or not," says Bill Stone, CEO of wireless content seller Handango. "Consumers don't know the fine print."