October 17, 2007

Consumer Wireless Issues

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Consumer wireless issues involve two types of proposals that are conceptually distinct: regulation of specific contract terms and regulation of disclosures. To understand the effects of regulations mandating specific contract terms or disclosures, three questions need to be answered:

1. Is there a systemic problem that regulation might solve?

As the Federal Communications Commission's annual wireless reports amply demonstrate, wireless is undoubtedly the most competitive of all telecommunications markets. Given the extent of competition, it is unlikely that regulation of specific contract terms can significantly increase consumer welfare. New disclosure regulations can only be justified if accompanied by a coherent theory explaining why competition systematically fails to produce clear disclosure, along with strong evidence that this is a significant systemic problem.

2. How effective are alternative solutions?

If competition is insufficient to produce the blend of contract terms consumers are most willing to accept and pay for, policy makers could address the root cause of the problem through competition policy, rather than regulation. Congress could facilitate wireless competition by directing the administration to identify additional spectrum for auction that is currently unused or under-utilized by federal agencies. The FCC's current approach to add-on charges for universal service and regulatory costs addresses the core consumer protection concern-ensuring that consumers are informed of possible add-on charges before they commit to a contract-without getting the FCC into the business of regulating the size of the charges.

3. What are the likely unintended consequences of new regulation?

Since the terms of wireless contracts are not comprehensively regulated, selective regulation of some terms would simply induce wireless companies to alter other terms in ways that would harm consumers. S.2033 actually appears to reduce transparency and disclosure by preventing companies from breaking out universal service assessments and regulatory costs as additional line items on consumers' wireless bills.