When they were first introduced in the early 1980s,
cell phones were a status symbol, owned by an elite few. Now everyone
and his kid has one. In 2004, some 182 million wireless phones and
related devices were operating in the United States. Worldwide,
an estimated 1.2 billion people will own a cell phone by the end
of this year. Cells outnumber land-line phones, which are absent
in many households.
Yet despite their convenience
and broad acceptance, many of these handy gizmos have a dark side. Although cellular
technology can be liberating, the language of traditional service plans can be
Traditional contracts: Corleone-style?
Consumers say that they find it difficult to compare cell-phone
plans because information on terms, pricing and service is confusing
and not presented in a uniform manner. Carriers, for their part,
often fail to clearly and fully disclose the true cost of their
plans, adding various surcharges and fees to consumers' bills only
after service begins. Consumers also complain that they cannot adequately
judge the quality of the cellular service in their area before choosing
a provider and plan. There is no try-before-you-buy option, for
example, that could help a potential customer gauge whether a service
will suit real-world needs.
of all, should they end up frustrated or dissatisfied with carriers' billing errors,
inadequate customer service or poor coverage, consumers generally discover too
late that, by signing up with a traditional cellular provider, they've locked
themselves into long-term contracts with hefty early termination fees.
survey conducted by the U.S.
Public Interest Research Group, or U.S.PIRG, a public-interest
watchdog organization, found that 47 percent of those polled said
they would switch or consider switching cell phone service carriers
to get a lower rate and better service if they didn't have to pay
an average penalty of $170 per cell phone to cancel their service
"Consumers are now basically captives, locked
in a cell by early termination fees," says Ed Mierzwinski,
U.S.PIRG consumer program director. "These penalties have cost
consumers more than $4.6 billion in the last three years -- that's
$2.5 billion in actual penalties paid and $2.1 billion in lost benefits
from consumers who either couldn't afford the penalty or who didn't
think it was worth paying."
fees are also onerous because they do little to advance competition in the industry
or bring about improvements in levels of customer service. They also give the
cell phone service provider unfair leverage over consumers in any disputes.
carriers, for example, require customers to extend the term of their contracts
whenever they upgrade to a better plan or purchase a new phone. As a result, if,
after one year of a two-year agreement, a customer needs to increase the number
of minutes of free cell phone usage or wants to switch from a "local"
to a "national" plan, then they must either enter into a new contract,
extending the agreement (along with the early termination fee) for another two
years, or pay an early termination fee and switch companies.