Two issues that could have major repercussions for consumers are now floating around the executive offices of the Federal Communications Commission headquarters.
The first is a proposal recently drafted by the wireless telephone industry involving those maddening early termination fees consumers are forced to pay if they decide to change carriers before the end of their long-term service contracts.
A few weeks ago Verizon Wireless approached FCC Chairman Kevin Martin with a plan to make certain changes in the way the industry imposes the fees – such as some pro-rating of the fees over the life of the contract and moving back deadlines for new customers to cancel their service without penalty.
In exchange, the industry is asking the FCC to take away the regulatory and legal powers over early termination fees that currently reside with the states. That is a huge deal because several wireless carriers are now facing class action lawsuits over early termination fees in state courts that, if successful, could result in billions of dollars in damages. In theory, those lawsuits would go away if the FCC were to preempt the states on early termination fees, as called for in the Verizon plan.
There was a hastily-arranged FCC hearing on the Verizon proposal on June 12, where the agency heard testimony from wireless industry executives, attorneys involved in some of the pending ETF lawsuits, and other stakeholders – including Consumers Union, the publisher of this blog.
Since then, there have been rumors that FCC Chairman Martin is circulating proposed regulations based on the Verizon proposal and might try to get the full commission to take action on the issue as soon as its regularly scheduled public meeting later this month.
Consumers Union is opposed to the Verizon proposal and would be highly skeptical of any new FCC regulations based on it.
Although they are touted by wireless carriers as necessary so they can provide customers with cheaper or free phones, early termination fees are in fact penalties designed to stop consumers from switching companies for better service and better price.
These penalties don’t save consumers money as the carriers claim, and they rob consumers of the benefits that an open and competitive market would otherwise bring, according to Consumers Union’s telecom policy analyst Chris Murray, who testified at the recent FCC hearing on early termination fees.
XM-Sirius Merger Decision Could Be Close
Rumors are also circulating that the FCC is close to reaching a decision on whether to approve the pending merger of the country’s only two satellite radio companies, XM and Sirius.
The Justice Department’s antitrust division rubber stamped the merger in March, somehow arguing with a straight face that the resulting satellite radio monopoly the deal would create won’t harm consumers.
We begged to differ at the time, to put it mildly. And we continue to hold out hope the FCC will not buy the tortured logic offered by the Justice Department in its approval of the deal.
The simple fact is that monopoly businesses – particularly unregulated monopolies – are by their very nature anti-consumer, no matter what the Justice Department and other supporters of the XM-Sirius merger might think. The whole idea of a monopoly is to destroy all competition in the marketplace, cut services and choices, and then slap consumers with high prices.
XM and Sirius have recently offered up some sweeteners aimed at easing some of the monopoly concerns shared by most anyone with even the most rudimentary understanding of basic economics – which unfortunately does not include the so-called “antitrust watchdogs” at the Justice Department, who approved the deal without any sort of conditions.
For example, Sirius CEO Mel Karmazin – without offering too many details – has said the merged company would not raise subscription prices and will allow subscribers to pick and choose the channels they receive under certain circumstances.
Karmazin may be a fine and honorable fellow, but we think it is an acutely bad idea to ever let the competitors in any industry combine to become a monopoly, particularly a government-blessed one.
Washington Post business columnist Stephen Pearlstein did a very good job of presenting the rational arguments against the XM-Sirius deal when it was approved by the Justice Department a few months ago.
By the way, did we mention that it was the FCC which cleared the way for XM and Sirius to get in the satellite radio business more than a decade ago, but with one very important caveat – the two companies could not merge? We’re not making this up.
We hope the FCC will read and heed Pearlstein’s insightful words about this anti-consumer deal – and remember what the agency itself thought about such a merger when it created the satellite radio industry more than a decade ago – as they consider the XM-Sirius deal in the coming days.