Consumer Federation of California

Backers of stronger protections face foe in Governor’s Office.

As a member of the California Public Utilities Commission, Susan
Kennedy helped dismantle the nation’s first "bill of rights" for
telephone customers and replace it with a less restrictive one.

Kennedy is now Republican Gov. Arnold Schwarzenegger’s chief of staff
— and Democrats who control the Legislature are shepherding through a
set of bills designed to reassemble some protections that were shelved.

This is not the first time the Legislature has tried to do by
statute what the PUC has been reluctant to do by regulation. In 2005, a
bill of rights by Sen. Martha Escutia, similar to the one Kennedy
helped overhaul a year earlier, died in the Assembly.

Lobbying heavily against it was the telecommunications
industry, which according to the Consumer Federation of California
contributed more than $20 million to lawmakers in the Capitol between
2000 and early 2006.

The legislation would have required clearer disclosure of
rates, terms and conditions of service. Companies that market in a
language other than English, for example, would have had to provide
contracts and disclosures in the same language.

Escutia was termed out of office last year. But Assemblyman
Hector De La Torre has introduced a bill — Assembly Bill 891 — that
would make the language requirement law and apply to both land lines
and cellular phones.

De La Torre recalls that after Kennedy, as a member of the PUC,
testified against Escutia’s legislation, she assured him the PUC would
address the language issue.

"Now they’re telling me that they are going to have something
by summer," said De La Torre, D-South Gate, whose district has a
sizable immigrant population. "Well, I’m sorry if I’m a little
incredulous."

Kennedy, who has argued that consumers benefit when phone
companies are allowed to compete free of government interference,
declined to comment through a spokesman.

"Susan is no longer a member of the PUC," said administration
spokesman Aaron McLear. "Her position on telecom regulation is not
relevant in her current capacity."

But supporters of stronger consumer protections fear that Kennedy’s clout in the Governor’s Office could sink their proposals.

"Most likely we will not have a proponent," said state Sen. Alan
Lowenthal, D-Long Beach. "But this is a basic protection and we’ll
speak directly to the governor, too."

Of the three Democratic consumer bills, Lowenthal’s Senate Bill
831 is the broadest. While it applies only to cell phones, it
establishes a comprehensive set of remedies for unsatisfactory service.

Cellular phone companies ranked first in 2006 among all
industries in consumer complaints filed with the Better Business
Bureau, Lowenthal said.

"There’s a disconnect somewhere," he said. "All we’re saying is people are entitled to a basic minimal standard."

Under his legislation, customers would have 30 days to cancel
contracts without early termination fees. Thereafter, termination fees
would be pro-rated, meaning a customer would be charged only for the
unused portion of a typical two-year contract.

The legislation also would require clear notification of rights
when unauthorized charges are made and limit a customer’s liability for
unauthorized charges on a lost or stolen phone to $50.

The third bill, Assembly Bill 826 by Assemblyman Lloyd Levine,
D-Van Nuys, is designed to rein in high-pressure sales by phone
companies. Customers, for example, would have to be notified that a
product within a bundled service may be purchased separately.

The current tug of war between the PUC, whose five members are
appointed by the governor, and the Legislature dates back to 2000.

In 2004, after four years of hearings around the state during
which consumers complained about shoddy phone service and deceptive
marketing, the PUC adopted a consumer "bill of rights."

But after the commissioners who pushed through the changes left
the panel, Kennedy and other panel members responded to complaints by
industry officials with a weaker Consumer Protection Initiative.

With Schwarzenegger’s blessing, the PUC replaced the litany of
rules with beefed-up enforcement, improved its complaint resolution
process and expanded consumer-education efforts.

In introducing the alternative plan, Kennedy predicted the
proposal would "empower consumers to protect themselves," minimize
financial burden on cell phone companies and avoid higher phone bills.

Michael Bagley, executive director of public policy for Verizon
Wireless, said cell phone users have benefited from the less
restrictive regulations.

"In the past decade, the cost to consumers has gone down by 74
percent while the use of minutes has gone up 200 percent," Bagley said.
"What you see is the industry continuing to invest its resources and
consumers benefiting."

Bagley said the proposed bills are "not necessary" and seek to "micromanage" the operations of telecommunication firms.

"We’re a national company, and it would be very costly to our
business if we had to do operations 50 different ways in 50 different
states," Bagley said.

But Richard Holober, executive director of the Consumer Federation of California, argues that early termination fees restrict cell phone competition.

"Most contracts used to be one year, but now most are two
years," Holober said. "So if you find a better deal or just don’t feel
satisfied with the service, you have to pay an exorbitant fee to get
out of a bad contract."

Holober, whose organization is sponsoring the Lowenthal bill, says cell phone customers are often charged for unwanted services and don’t have redress.

"You thought you were signing up for, say, a $59.99 family plan,
you don’t know that you’re going to get text messaging, or ring tone
charges, or any other things added on," he said.

Holober said Kennedy is "clearly on the side of the industry and not on the side of consumers."

"But we’re not going to give up just because the governor and the
Legislature have received millions of dollars from the phone industry,"
Holober said. "That buys you a lot of votes and a lot of vetoes."