Wireless Industry Defends Billing Practices

The terror of Sept. 11 brought to the forefront the importance of wireless communications to safety and security. Yet, despite increased cell phone use, a growing number of users complain that their service is inadequate—particularly with regard to billing.

Lag-time roaming, rounding up usage minutes and misleading rate plans are among the issues that the media, state attorneys general and consumer advocates have taken up.

“Our customers like the simplicity of paying by the minute,” therefore rounding up minutes in wireless bills is the way to go. So a Sprint PCS spokesman tells Forbes in its Sept. 17 issue, in the magazine’s harsh indictment of the industry as part of an exposé called “Cell Hell.” Tracked down by Billing World & OSS Today, Sprint PCS spokesman Dan Wilinsky says indeed the essence of the quote is true, but not all of the stories are entirely accurate.

Customer Convenience?

According to carriers and consumer advocates alike, most wireless providers subscribe to the same theory: Customers would rather pay more for their cell phone use than get a bill that has been calculated to fractions of minutes—even though most providers have the technology to calculate them that way. Carriers believe that rationale, combined with a growing number of packages offering extra minutes, justifies the upward-rounding method.

However, according to Forbes, 20 million people will abandon their cell provider in search of better service in 2001, which represents a 25 percent churn rate—evidence of deep customer dissatisfaction.

“The only thing Sprint PCS has to say on the subject of rounding up is that it’s the industry practice, has been for years, and at the present time we have no plans to change our billing-by-the-minute structure,” Wilinsky says.

Jim West, vice president for IT and CIO at US Cellular, concurs that industry practice has typically been to round up and bill in minutes. “In the early days of the industry, that was really the only way that we knew how to do it,” he explains.

Ahead of Itself

“This is an industry that got way ahead of itself. It cannot deliver the service it promises when people want it. Basically, they sign too many people up for their facilities, so the result is poor quality service,” says Mark Cooper, director of research at the Consumer Federation of America. “And of course they sign people up frequently with long-term contracts—so that you have people locked into service that is inferior, and the industry is not sufficiently competitive to weed it out.”

The wireless companies cannot, or sometimes have decided not to, invest in all the expensive equipment necessary to handle the growing number of calls. There are also too few competitors in the market to make it a truly competitive industry, says Cooper.

“In most places if you buy a bad product, and it’s repeat business, they lose your business. But the problem here is that there are only two or three guys and they all do the same thing, and have gotten away with these long-term contracts that make switching more difficult,” he continues. “The irony is that many consumers call their public service commission when this happens, but it is not telephone service, so they end up complaining to the wrong people. We need an effort to shine a light on the industry to discipline it a little bit—to hold people’s feet to the fire.”

Legislation Proposed

In an effort to help consumers review the performance of wireless service providers, U.S. Rep. Anthony Weiner, D-N.Y. has submitted legislation in each of the past two years to the House telecom subcommittee that would seek service disclosures.

The Cell Phone Consumer Protection Act of 2001 (H.R. 1531) would require the FCC to compile statistics on cell phone service problems like dropped calls, busy signals, dead spots, and improper and confusing billing. An FCC spokeswoman tells Billing World & OSS Today that the FCC has begun compiling the data, but it is not ready to be released to the public.

A Weiner spokeswoman says the congressman plans to follow through with the legislation, which has been introduced in the House, but sidetracked by the New York terror attacks. “We hope to see it in committee as soon as the situation in New York has calmed down.”

The number of subscribers in the United States will reach nearly 135 million by the end of this year, according to projections from the Strategis Group, a market research firm in Washington, D.C. At the same time, the minutes in use per subscriber are increasing by about 22 percent each year.

According to the Washington Post, analysts say this kind of growth would normally encourage increased network spending. Verizon Communications, the largest U.S. cell phone company, this year will spend the same as it did last year—about $4 billion—on network equipment like switches, antennas and base stations, and general IT development.

Reston, Va.-based Nextel Communications announced recently it plans to install voice-coding software that will double its voice capacity in 2003, says company spokeswoman Audrey Schaefer. But in the meantime, Nextel, the fifth-largest carrier, plans to spend $2.5 billion on its network this year, down from $3 billion last year.

“Capital is so constrained at the moment, it’s the worst I’ve ever seen it,” Frank Dzubeck, president of Communications Network Architects, a telecommunications consulting firm in Washington, told the Washington Post. “The wireless guys we’ve talked to are talking about flat or slightly [reduced] expenditures.”

‘Angry Customers’

Linda Baker, customer service vice president at US Cellular, which ranked eighth among the top carriers in “angry customers,” says the judgment is misleading, as US Cellular is one of the smaller carriers.

“Our No. 1 calls are questions regarding the bill. I wouldn’t call them complaints; I’d call it confusion,” she says. “It is our goal to try and make it as simplistic as possible, but at times roaming is still a little bit confusing to the customers.”

Forbes claims that one of the largest complaints is lag-time billing, the practice of not posting charges for roaming and excess minutes to customer bills for several months, by “which time they can run into thousands of dollars.” Both West and Baker say it is not to U.S. Cellular’s benefit to lag in billing time.

“We can’t bill anything that is not received by us within 30 days, so if one of our customers is roaming in New Mexico, if that record does not come in within 30 days, then it isn’t filled,” West says. “If it does come within 30 days, then the customers bill cycle is also a 30-day cycle. So it’s possible the bills go out on the second of the month, and any roams on the third of the previous month, that come in the third of the next month, don’t get on their bill until the third of the following month, so that can end up creating a lag time of 59 days or 60 days.”

West says most roaming charges come into the company within two or three days, and US Cellular sends their charges out every day. “It usually goes out to the clearinghouse within a day or two of getting the credit,” he says.

Lawsuits Filed

Rounding up, and billing from the moment the “send” button is pushed, are integral parts of the cost of doing business, but they are by no means meant to hurt the consumer, according to Brian Wood, a Verizon spokesman. “We at Verizon bill in the same method; rounding up, for the customer’s convenience,” he says.

“Clearly, with 28 million subscribers, there are going to be communications problems that take place between people that call up and customer service and staff,” says Wood. “Keeping churn down is a major objective for this business, … and we are really serious about what it means in terms of satisfying customers. I can’t guarantee that it is going to be foolproof, but it is something we will continue to work on.”

In recent years, numerous lawsuits have been filed centered on rounding calls up to a minute. In 1999 alone, suits were brought against AT&T Wireless, AirTouch Communications, GTE Wireless, Pacific Bell, Sprint PCS and dozens of smaller carriers involving claims worth hundreds of millions of dollars.

And back in April 1999 Billing World asked if subscribers are angry enough to drag carriers into court, why don’t wireless carriers simply switch to per-second billing? Which time increment should wireless and long-distance carriers use when calculating customer bills? Is it too costly and mind-numbing a task to change systems to calculate bills based on per-second rates?

Changing to per-second billing would “definitely cut into most wireless carriers’ revenue stream big time,” says Christine Loredo, a senior analyst with the Strategis Group. Those carriers can expect to see a significant fall in their operating margins because they would lose seconds of billing time based on the national average duration of a wireless call, she adds.

And the cost rises even more when one adds the expense of upgrading billing software, redesigning customer bills (both paper and electronic), educating customer service representatives, reconfiguring CSR computer screens and conducting a marketing campaign to alert subscribers to the change.

Changing call duration data and changing the billing system to process that data is relatively easy, industry experts say. The switch already records time in split-second increments. Nortel and Lucent switches, for instance, are required to record call duration and other temporal data down to the tenth of a second, under industry standards set by Bellcore.

Billing vendors say developers can easily change the algorithm that rates the call detail record and rewrite business rule formats in the mediation module to accommodate per-second pricing. “Pricing tables aren’t that complicated,” one vendor says. “Things are already timed by the second. You can set the table up to put the seconds in.”

The consumer federation’s Cooper puts it this way: “The question of wireless billing is no longer a business issue alone. It is a consumer issue, and it’s our issue. So if attorneys general need to bring more lawsuits or be pushed to do so, then we will back them.”