FCC Used Title II To Fine AT&T For SMS Cramming And The World Didn't End: Why Would It For Broadband?

from the questions-to-ponder dept

Tue, Oct 21st 2014 1:45pm — Mike Masnick

You may have heard the story a few weeks ago about how the FCC and FTC teamed up to fine AT&T $105 million for mobile cramming (allowing unauthorized mobile charges for premium -- costly -- SMS, of which AT&T kept 35% of all money made). As the FCC noted:

The Enforcement Bureau launched its investigation after receiving consumer complaints alleging that AT&T customers had been billed with months of unauthorized charges for third-party services that they did not request. In some cases, complaints alleged that AT&T Mobility refused to issue refunds or would only refund one or two months' worth of such charges, leaving consumers on the hook for the rest. Until January 2014, AT&T Mobility included charges for third-party services -- such as monthly subscriptions for ringtones, wallpaper, and text messages providing horoscopes, flirting tips, celebrity gossip, and other information -- on its customers' telephone bills. The charge for each of these types of subscriptions was typically $9.99 per month.

This was the largest fine the FCC has ever given out. Some, quite reasonably, pointed out that it took the FCC (and the FTC) quite a long time to catch up on this, as such practices had been called out for years and years.

However, there was a much more interesting element to this fine, as it relates to the current net neutrality "Title II" fight. Remember, the telcos (including AT&T) are pretty adamant that if broadband is classified under Title II it will be the death of all good things. It will be a huge regulatory burden and companies like AT&T are likely to cease all investment and such. Similarly, AT&T and others insist that there's enough competition in the market to prevent anti-consumer practices, and that Title II simply isn't necessary in such a "competitive" market.

So, um, what authority did the FCC use to fine AT&T this time? Well, buried in the official filing, we see that it was done under Section 201(b) of the Communications Act of 1934. You can see 47 USC 201 and read it for yourself, but it's mostly important to know that 47 USC 201 is Title II. In other words, despite an even more "competitive" mobile market than broadband, the FCC had to break out Title II regulations to protect consumers from a years-long scam in which AT&T profited massively, scamming millions from consumers.

And... notice that AT&T accepted the fine and isn't complaining about it. Nor is it challenging the use of the Title II authority, despite SMS being considered something of a service in "limbo" in which it hasn't been definitively classified under Title II or Title I.

And yet, the mobile world has not collapsed. AT&T and other mobile operators aren't screaming to the heavens about how this use of Title II will chill all investment, create massive problems and lead to the end of all that is beautiful and innovative, as they claim about broadband. Instead, they're basically admitting that they helped out with and profited from this scam for years, and that the FCC needed to make use of this authority to protect the consumers that AT&T did nothing to protect, despite knowing full well what was going on for many, many years.

So, from all this, we sense two things: (1) these big telcos can be nasty scammers, cheating people out of money even when there is competition and (2) Title II is not so horrible after all and can actually be quite helpful (eventually!) in getting the big telcos to eventually stop their scammy practices and pay up...

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Filed Under: competition, cramming, fcc, ftc, net neutrality, regulation, scams, title ii
Companies: at&t

11 Comments

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Anonymous Coward, 21 Oct 2014 @ 4:07pm

business as usual
"So, from all this, we sense two things: (1) these big telcos can be nasty scammers, cheating people out of money even when there is competition"

I learned that lesson many years ago when the US government busted up AT&T and allowed consumers to switch to low-cost long distance service. I was "slammed" multiple times, forcing me to pay a higher rate, and the local phone company (another branch of AT&T) refused to do anything about it, such as locking down my account to prevent another telemarketing scammer repeat the process. As it was hardly worth going to court for being swindled out of less than 10 dollars, for myself or the millions of others who routinely got "slammed" back then, these companies made out like bandits.
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Anonymous Coward, 21 Oct 2014 @ 6:19pm

Corporations as "People"
For years, corporations have wanted to be treated as people under law, and, for the most part, have achieved this. Unfortunately, the "people" they ended up becoming, you would not invite home to meet your parents. They seem to be the most singularly immoral, inconsiderate, consciousless money grabbing individuals around. They seem to have absolutely no qualms about cheating anyone and everyone in the pursuit of profit at any cost. So, IMHO, the idea of making one of these characters even bigger by joining several together is anathema.
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Anonymous Coward, 21 Oct 2014 @ 6:34pm

Title II
As for Title II regulation of ALL telecom companies, go for it. All such companies are, in fact, communications companies and SHOULD be so regulated. How they managed to squeak under the law is still a mystery to me. There's no fundamental difference between wired services and wireless or "internet" providers. They all provide services to the end-user that amount to virtually identical mechanisms. So what if one uses copper and another uses the air waves they all provide the same service and should be regulated as such.
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Ninja (profile), 22 Oct 2014 @ 2:01am

from all this, we sense two things: (1) these big telcos can be nasty scammers, cheating people out of money even when there is competition and (2) Title II is not so horrible after all and can actually be quite helpful (eventually!) in getting the big telcos to eventually stop their scammy practices and pay up.

(1) is only possible if they have a natural/forced monopoly in their hands which (2) tries to mitigate even though the regulatory bodies seem to be quite slow to use them despite mounting concrete evidence. We know that broadband is somewhere between a natural or forced monopoly. Natural because the infra-structure is expensive to lay down (this could be addressed in a number of ways but that's for another story) and forced because there are significant barriers to enter such market and some of them come from the Government in the form of regulations (not that regulations are bad per se).

Still, this case should be waved all over the neutrality discussion and hopefully the FCC will finally take a stand.

On a side note, I hope regulatory bodies here take note of these scam sms services. People are being outright robbed here because of them.
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beHomeBased (profile), 22 Oct 2014 @ 6:50am

This is Verizon's and probably AT&T's Customer Service reps.
Not sure if I know how SMS Cramming works; but I guarantee that with Verizon it is their Customer Service Reps signing up people for these services. When I added a new line for my daughter, Verizon made it the MAIN number. At least twice when I called because of erroneous data charges (I had data block on at the time), within 5 minutes of hanging up with Customer "Service" my daughter had 'signed up for premium services'. BOTH times, my daughter's phone was sitting on the kitchen counter while she was out playing.

I would guess Verizon's, and probably AT&T's reps get a commission; or just think it is a way to get back at problem customers that actually make them do work.

We should be able to sue these idiots, including the service rep that signed people up for these.
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Mike Wendy, 22 Oct 2014 @ 8:03am

201(b) allows reasonable discrimination
Thanks for highlighting the section of the Comm Act - i.e., 201(b) - that allows reasonable discrimination and service differentiation by common carriers. If ISPs get regulated with Title II, it is here they'll be able to provide, gulp, prioritized services.
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John Fenderson (profile), 22 Oct 2014 @ 8:11am

Re: 201(b) allows reasonable discrimination
Perhaps, but it would break the monopoly that ISPs currently have and lead to a competitive market for internet service. I'd gladly make that trade.
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Anonymous Coward, 22 Oct 2014 @ 8:37am

i would think that everyone knew this and know it wont end over broadband. the only ones that pretend they dont know, probably because they are aware that kick backs will come from the way they vote, is the politicians. the pisser is that they are the ones that should know it and should do what is necessary rather than allowing the people to get screwed, again!!
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Mike Wendy, 22 Oct 2014 @ 9:50am

Re: Re: 201(b) allows reasonable discrimination
How so, John? 201 (and 202) have nothing to do with that.
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John Fenderson (profile), 22 Oct 2014 @ 5:07pm

Re: Re: Re: 201(b) allows reasonable discrimination
Because if it is given common carrier status, then any company will be able to provide internet access over the existing infrastructure.
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Mike Wendy, 23 Oct 2014 @ 7:52am

Re: Re: Re: Re: 201(b) allows reasonable discrimination
This idea is not specifically on the table (we are led to believe), but it could happen via Section 251. But, Open Access has failed here. Why would it now "work"?
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