Mobile Providers, Can You Hear Us Now?

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Bills have become all the more confusing with the proliferation of services that barely existed a few years back, consumer advocates say. "The lawsuits are following the technology," says Art Neill, attorney for advocacy group Utility Consumers' Action Network, which has filed a lawsuit disputing charges Sprint added to its broadband card users' bills. "A couple of years ago, everybody began getting ringtones," Neill says. "Now, these services are expanding to streaming audio and video. The breadth of lawsuits being filed is following that [expansion of offerings]." Some class actions are asking for reimbursements of charges as low as 15¢. Some seek damages in the millions of dollars.

Market Saturation

Most subscriber contracts explicitly prohibit consumers from filing class actions, and instead require that disputes be handled in arbitration. Some carriers involved didn't respond to BusinessWeek.com's request for comment. Others declined to comment, saying they couldn't talk about pending litigation. "There's no ambiguity about [our charges], our terms and conditions are very, very clear," AT&T spokesman Mark Siegel says.

A new wave of potentially costly litigation comes at a bad time for the wireless industry. With 83% of Americans already brandishing cell phones, carriers face an uphill battle retaining users. In the first quarter, the U.S. wireless industry added 23% fewer subscribers than in the same quarter a year earlier, according to Bernstein Research. The firm estimates that by 2010, the market will reach peak penetration of 89%. To grow, carriers will increasingly have to poach each others' subscribers, offering plans that are cheaper and less profitable for the provider. "The cost [of adding a subscriber] is $400," says Rich Nespola, CEO at consultancy TMNG (TMNG). "Do you really want to alienate and possibly lose a subscriber over $20?"

Rising dissatisfaction with wireless data plans and pricing may also result in more calls to customer service, boosting costs to carriers, analysts say.

Mobile Education

What's a carrier to do? Already, they're making billing for nonvoice services more straightforward. "We need more simplicity of pricing," Stone says. Today, people can get subscription services, individual ringtones, and free or ad-supported trials of mobile content. But Stone suggests content should be bundled into wireless plans for free, or that people use a universal "mobile content currency"—tokens for which they can purchase content that is, perhaps, included with their plan.

T-Mobile USA, owned by Deutsche Telekom (DT), is among providers that have revised texting policies. Several recent lawsuits, including one from Joseph Calloway filed in Seattle in May, allege that the carrier's users are being charged 15¢ for text messages they don't want to receive. "T-Mobile is working on implementing an enhanced service this summer that would enable customers to block text messages, beyond the functionality that is currently available," writes T-Mobile spokesperson Peter Dobrow in an e-mail. "It's too early though for me to disclose specifics on the planned service."

To dispel confusion, carriers are also likely to embark on extensive consumer education programs. "You've got a market that didn't exist three or four years ago," says Steve Shivers, a general manager at OpenMarket, a provider of wireless billing services. "And you don't have customer expectations set in."

Kharif is a senior writer for BusinessWeek.com in Portland, Ore.

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