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4/14/2008
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Senate Considers Striking Down 'Common Carrier' Exception

The wireless industry is expected to fight hard against repealing a rule that exempts telecommunications providers from the requirements of the FTC Act.

Seeking to bring more transparency and consumer-friendliness to the U.S. mobile and wireless industry, two U.S. senators have introduced a bill that would for the first time bring wireless carriers under the authority of the Federal Trade Commission.

Specifically the new bill -- the FTC Reauthorization Act of 2008, co-sponsored by Hawaii Democrat Daniel Inouye, chairman of the Senate Commerce Committee, and Byron Dorgan, a Democrat from North Dakota and the chairman of the Interstate Commerce, Trade, and Tourism Subcommittee -- would repeal the "common carrier exception," which has been in force since the 1930s and exempts big telecommunications providers from the requirements of the FTC Act.

The Dorgan/Inouye bill "repeals this exemption, allowing the Commission to protect consumers from unfair and deceptive acts or practices by telecommunications common carriers, particularly in the areas of advertising, marketing, and billing," according to a joint statement outlining the bill's provisions.

Facing a raft of federal legislation that would increase government oversight of its contracts and marketing practices, the wireless industry is expected to fight hard against repealing the common carrier exception.

Testifying before the Senate Commerce Committee last week, FTC Chairman William Kovacic said that the common carrier exemption, which dates from the era of highly regulated telecom monopolies -- is obsolete.

"Technological advances have blurred the traditional boundaries between telecommunications, entertainment and high technology," stated Kovacic in his prepared statement. "As the telecommunications and Internet industries continue to converge, the common carrier exemption is likely to frustrate the FTC's ability to stop deceptive and unfair acts and unfair practices and unfair methods of competition."

Among the congressional attempts to shorten the regulatory reins on the industry is a bill introduced last year by Sen. Amy Klobuchar, Dem.-Minn., called the Cell Phone Consumer Empowerment Act. Included in that measure's provisions is a requirement that wireless carriers pro-rate early termination fees, which are viewed by consumer advocates as locking customers into restrictive contracts, regardless of the quality of service. Under the Klobuchar act, for example, a customer ending a two-year contract after the end of the first year would pay only half the normal termination fee.

Seeking to head off such legislative mandates, the U.S. wireless carriers have already begun moving toward pro-rated termination fees. Last month AT&T, the No. 1 U.S. wireless carrier, became the latest provider to announce it would adjust the fees, beginning in May.

The AT&T move "needs to be followed by other reasonable reforms that will provide consumers the freedom of choice they deserve in the wireless marketplace," Sen. Klobuchar said in a statement. "I will continue to push for the cell phone consumer 'Bill of Rights' to help modernize the rules governing this industry and make sure consumers are getting a fair deal."

The FTC Reauthorization Act would also increase the Commission's budget by 10% in each of the next seven years.

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