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Submission For The Record of Jot D. Carpenter, Jr., CTIA - The Wireless Association, Vice President, Government Affairs

CTIA, The Wireless Association
Washington, DC.
April 14, 2008

Rep. Stephanie Herseth Sandlin, Chairwoman
Rep. John Boozman, Ranking Member
House Veterans’ Affairs
Subcommittee on Economic Opportunity
335 Cannon House Office Building
Washington, D.C. 20515   

Re: H.R. 3298

Dear Chairwoman Herseth Sandlin and Ranking Member Boozman:

On behalf of the members of CTIA – The Wireless Association® (“CTIA”), I am writing to share the wireless industry’s views on H.R. 3298, the “21st Century Servicemembers Protection Act.”  I respectfully request that this letter be included in the record of the Subcommittee on Economic Opportunity’s April 16 hearing on H.R. 3298.

CTIA commends the Committee for its attention to this issue, and we thank the bill’s sponsor, Representative Patrick Murphy, for his and his staff’s willingness to work with the wireless industry to improve the legislation.

CTIA’s service provider members, as a matter of corporate policy, permit members of the U.S. armed forces facing deployment to terminate service without penalty.  Additionally, many carriers (including the six largest, representing nearly 93 percent of “post-paid” consumers) have policies regarding contract suspension which offer the affected consumer an opportunity to stop service and reserve his or her existing telephone number for a set period of time. CTIA therefore does not oppose Representative Murphy’s proposal to amend Title III of the Servicemembers Civil Relief Act (“SCRA”) to allow a servicemember to terminate his or her contract for wireless service upon either receipt of military orders for a deployment of more than 90 days or a change in permanent station to a location where service covered by the contract is not supported.

Rep. Murphy’s proposed Amendment in the Nature of a Substitute (dated December 19, 2007) includes a number of improvements over the introduced version of H.R. 3298.  Nonetheless, there are several provisions of the bill that still could be improved, and these are detailed below.

Covered Contracts: The amendments to the SCRA proposed by H.R. 3298 are intended to cover contracts for “cellular phone service.”  Because “cellular phone service” is not defined in either H.R. 3298 or the Communications Act of 1934, as amended, CTIA recommends striking the term and replacing it with “commercial mobile radio service” as such term is defined by section 332(d) of the Communications Act of 1934 (47 U.S.C. 332(d)).

Preservation of Existing Carrier Military Service Suspension Programs: In response to the needs of military personnel facing deployment, many carriers have implemented service suspension programs that allow individual consumers to place their account(s) on “hold” status for between 12 and 24 months, depending on the carrier.  The suspension process generally allows consumers to reserve their existing wireless telephone number(s) without incurring any monthly or other recurring fees, and for many customers it offers an attractive option short of contract termination.  Because the Murphy bill is silent on how suspension would work in any particular context, and since neither the bill nor the SCRA’s definitions section define “suspend” or “suspension,” it is unclear whether existing carrier suspension programs would continue to be permissible or require modification.  Since efforts to define these terms or otherwise conform existing carrier suspension programs to a government-imposed standard could upset these pro-consumer carrier practices, CTIA recommends that the scope of the bill be narrowed to exclude all references to “suspend” or “suspension.”

Arrearages and Refunds: The vast majority of the more than 255 million wireless subscribers in the United States purchase service on a “post-paid” (as opposed to “pre-paid”) basis, and nearly all “post-paid” consumers subscribe to flat-rate “bucket” plans that allow them to use a fixed number of minutes per billing cycle for a flat fee.  These flat fee plans have been an overwhelming consumer and competitive success and allow consumers a broad choice of plans to suit their widely varying calling needs.  These plans do not make any distinction regarding whether the consumer uses all of the covered minutes on the first day or last day of the billing cycle, or whether the consumer distributes the minutes equally over all days covered in a particular billing cycle, and carriers employing this business model do not pro-rate a flat fee if a customer deactivates service in the middle of a billing cycle.  Accommodating a pro-rating requirement would require an industry-wide expenditure of millions of dollars for billing system modification and customer care retraining.  Because of the magnitude of the compliance costs associated with this type of pro-rating, CTIA recommends that the first sentence in the proposed 308(e) be expanded by adding at the end “except that any such unpaid amounts shall be due in full for any contract period in which the servicemember utilized the service if the contract provides for service on a flat rate basis.”

Penalties: CTIA remains concerned that the penalty provisions included in the proposed 308(h)(1) have the potential to be unreasonable in relation to the size of any harm that could accrue to a servicemember should a carrier representative fail to terminate a contract appropriately.  While CTIA’s members have individual corporate policies that provide for contract termination without penalty when a servicemember provides appropriate deployment orders, mistakes can happen.  In the event of such a mistake, the limit of any customer harm is the imposition of an early termination fee, which generally is less than $200 (and increasingly is being pro-rated so as to decline across the term of the contract).  Given this, and the equitable relief provisions in the proposed 308(i), the penalty provisions in the bill should be clarified and narrowed to cap fines at no more than $5,000.  Additionally, CTIA asks that the legislative history accompanying the bill clarify that fines at that level should only be levied in cases where there is knowing and repeated violation of the law.

The wireless industry recognizes the dedication of members of the U.S. armed forces and is pleased to work toward enactment of appropriate Federal legislation to benefit servicemen and servicewomen facing deployment.  CTIA and its members look forward to working with the Committee and the bill’s sponsor to improve H.R. 3298 as it moves through the legislative process.

Sincerely,

Jot D. Carpenter, Jr.
Vice President, Government Affairs