Dial L for litigation

"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, American users have filed class actions against AT&T, Verizon Wireless, Sprint Nextel, T-Mobile USA, and many smaller wireless service providers, with complaints covering a multitude of alleged sins, from excessive roaming charges to text-message spam.

One filed in April claims Verizon Wireless should pay damages to a 14-year-old girl who was sexually assaulted by an adult male who contacted her through an internet profile she created using her cell phone. Another claims Verizon Wireless and third-party content providers are responsible for illegal gambling by users.
Unfortunately for phone companies, the emerging message here is that users are unhappy with a wave of new services, "many of them web-focused, that are crucial to the wireless industry," says Kharif. Text messaging, wireless music, and video services are now well and truly entering the mainstream.

According to America's Federal Communications Commission, the first quarter of 2007 saw the number of wireless service-related complaints rise 14 per cent, 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."

"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 are seeking damages in the millions of dollars.

This new wave of litigation comes at a bad time for the wireless industry, says Kharif. With 83 per cent of Americans already brandishing cell phones, carriers face an uphill battle retaining users.

Bernstein Research estimates that the US market will reach peak penetration of 89 per cent by 2010. To grow, carriers will have to poach each others' subscribers, luring them with cheaper, and thus less profitable, plans.

Even without litigation, rising dissatisfaction with wireless data plans and pricing will result in more calls to customer service, boosting costs to carriers, analysts say.

So, "what's a carrier to do?", asks Kharif. "We need more simplicity of pricing," says Handango's Stone, who suggests content could be bundled into wireless plans for free.

T-Mobile USA, owned by Deutsche Telekom, is just one company that has already revised its texting policies, says Kharif, after several recent lawsuits alleged that the carrier's users were being charged 15¢ for text messages they didn't want to receive.

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."

Mobile providers, can you hear us now?, Olga Kharif, BusinessWeek