Wireless cramming: The tip of a very large iceberg

By John Breyault, Vice President of Public Policy, Telecommunications and Fraud

Wireless cramming is at the top of the Federal Trade Commission’s agenda today, as government officials, advocates and industry representatives gather to discuss the issue and potential solutions at the FTC’s Mobile Cramming Roundtable. I am honored to present at the event, along with a number of other experts on the topic. For those loyal readers unable to watch the live webcast, I can sum up my comments thusly: Wireless cramming is a big problem and is only going to get worse without action by regulators to protect consumers.

Cramming fraud has been around for decades. Beginning in the late 1990s, enterprising scam artists learned that they could get small charges placed on consumers’ landline phone bills. With doctored “authentications” and poor policing by the phone companies and billing aggregators, scammers made millions of dollars. As consumers increasingly adopted wireless phones, the scam artists moved to those bills. Wireless cramming is proving to be just a lucrative for the fraudsters. In its first enforcement action against alleged wireless cramming outfit Wise Media, the FTC stated that the company made millions of dollars in less than two years of operation.

Wise Media is likely just the tip of a very large iceberg. While there is precious little data about the scope of the wireless third-party billing market generally and the cost of wireless cramming on consumers, we can make some educated estimates based on the data that is available.

Consumers need an FCC chair on their side

By Sally Greenberg, NCL Executive Director

Last month, the Federal Communications Commission announced that Julius Genachowski would soon be stepping down after four years as chairman. Now, all eyes are on the White House as it prepares to nominate his successor.

The FCC serves a critical role as a government watchdog and is charged with the important task of protecting the public interest in the telecommunications industry. Though the FCC is bound by law to weigh the interests and concerns of all parties, it is clear that consumers depend on the FCC to protect them and the public interest first and foremost.

Any consumer who has opened their mobile phone or cable bill in recent years understands the importance of having an FCC chair that is on their side. While the Obama Administration will undoubtedly consider a number of worthy candidates, we believe that the next FCC chair should have significant experience in public interest advocacy.

In the coming months and years, the FCC will consider a wide range of issues that impact consumers on a daily basis. Spectrum auctions will determine the shape of our mobile broadband future. The transition from a copper-based to IP-based telephone system will be felt by all Americans. Enforcement actions against fraudsters will protect millions of consumers.

The next FCC chair will play an enormous role in shaping how these and the myriad other issues the Commission handles on a daily basis are addressed. A background in public interest advocacy is therefore critical to helping that person understand how these issues affect consumers at a very basic level.

Washington is filled with lobbyists who have deep backgrounds in telecommunications and technology policy. They play an important role in helping the Commission address the often complex issues that it faces on a daily basis. That said, the FCC’s mission is to defend the public interest, not corporate bottom lines. Having someone at the top of the agency’s leadership who comes out of the public interest community will ensure that the FCC’s decisions reflect that critical responsibility.

This September 19, remember: ‘It Can Wait’

By John Breyault, NCL Vice President of Public Policy, Telecommunications and Fraud

“My aunt was in a car accident. She was texting and driving and drove off the edge of a bridge that didn’t have any guard rails. Her skull was crushed in and she was killed instantly. That haunts me every day. I want to take the pledge for her, and for my family and friends. #itcanwait” – Kelsey, TN

Today is September 19, 2012. While it may seem like any other Wednesday, it’s a special day for consumers concerned about the rising numbers of serious accidents attributed to texting while driving.  The quote above comes from a consumer who wrote in to ItCanWait.org, a website created by AT&T in partnership with more than a dozen community organizations (including NCL) to raise awareness about the dangers of texting while driving.

The numbers are frightening.  A 2009 Virginia Tech study found that operators of heavy vehicles or trucks are more than 23 times as likely to risk a crash or near-crash as non-distracted drivers.  A study by the Centers for Disease Control and Prevention founds that 58 percent of high school seniors said they texted or emailed while driving. About 6,000 deaths and half a million injuries are attributed to distracted driving per year, according to the U.S. Department of Transportation.

Clearly, texting while driving is an issue that continues to pose a major threat to consumers, despite the significant numbers of states and localities that have outlawed texting while driving.  Despite these laws, thousands of drivers continue to get hurt due to distracted driving, and particularly texting while driving.

More needs to be done to educate consumers about the dangers of distracted driving. This is why NCL is proud to support AT&T’s “It Can Wait” consumer education campaign.  If you haven’t already done so, head over to ItCanWait.org and sign the pledge to refrain from texting while driving.  Today is “Pledge Day,” so encourage your friends to support the campaign by sharing information about the campaign on Facebook and tweeting about it with the #itcanwait hashtag.

Remember, no life is worth risking over a text message. As Val from Texas put it:

Life >>>>> A silly little text message #itcanwait

‘CN U PIK ME UP FRM SOCCR, MOM?’ – NCL survey examines pre-teens and cell phones

By John Breyault, NCL Vice President of Public Policy, Telecommunications and Fraud

In addition to lunch money, friendship bracelets and the occasional frog for teacher’s desk, today’s pre-teens are just as likely to carry a cell phone in their backpacks.  According to a new survey released today by NCL, nearly 6 in 10 (56 percent) of parents of tweens have purchased a cell phone for their tween-aged (8-12) children.

Why the focus on pre-teens?  According to a 2007 survey by C&R Research, 46 percent of children ages 9-11 had cell phones.  Today’s report shows that cell phone penetration rates among this demographic continues to climb.

In response to this development, over the past twelve months, NCL has worked to provide parents of younger children the tools they need to make an informed buying decision.  Parents of pre-teens clearly have different priorities to consider regarding cell phone use than parents of teenagers.  In addition, more than 30 percent of American households now have cell phones as their only phones.  These market developments have left many parents scratching their heads as to how they deal with this brave new world of kids and phones.

That’s why NCL has developed a parent’s guide to pre-teen cell phone use.  We also have tips for parents on how to take advantage of parental control technologies to manage kids’ cell phones.  Indeed, NCL’s survey found that among parents whose cell phones bills were higher than expected, investigating parental controls was the preferred method to control costs (62 percent), higher than setting a monthly budget (38 percent), cancelling the phone (23 percent) or switching to an unlimited service plan (22 percent).

It’s never a good idea to go grocery shopping without a list (or on an empty stomach), because you’re likely to buy things you don’t really need.  The same principles are at work when it comes to buying a cell phone. A rough game plan developed before you start shopping can help you stay within budget and get a phone that fits for your kids. Our pre-teen cell phone guide has some suggested questions to ask yourself before you head in to the cell phone store and your child’s eyes get wide at the site of the latest iPhone or Android superphone.

Armed with a good idea of what kind of phone works for your child and how much you want to spend, parents can (hopefully!) avoid sticker shock from pre-teen cell phone use.

Now if they could just make a consumer guide for getting kids to eat their broccoli and stop picking on their kid brothers …

Baby steps towards cell phone cramming progress

By Sally Greenberg, NCL Executive Director

Cell phones and “cramming”: we have had some – and I stress “some” — progress for consumers in recent weeks. After years of pressure from consumer groups – which NCL helped to lead – and hearings in the U.S. Senate, first Verizon and then AT&T agreed to block most unaffiliated third parties from adding charges onto landline phone bills. For years consumers have been discovering unauthorized charges on phone bills and to get rid of them, have had to go through 1-800 hell to get the charges removed. I’ve been through this: sometimes you get a sympathetic operator who cancels the charges without a fuss, and sometimes you have to fight up the supervisory ladder to get the charges dropped. For an extra $9.99 how many consumers are willing to devote sometimes an hour or more to fighting with some anonymous operator. Furthermore, many consumers either don’t realize the charges are unauthorized or never look at the bill.

So I said above “some” progress – while consumers won on blocking charges for landlines, what about blocking unauthorized charges on your cell phone?

David Segal’s “The Haggler” columns recently asked the question, why don’t the cell phone providers block third-party charges on cell phones too? Why isn’t there an opt-in requiring consumers to say “yes” when a third-party wants to charge for an added service? Instead of forcing us to opt out if they don’t want any third-party charges? Segal also notes that the carriers get up to a third or half of the revenue so it may not be in their interest to block crammers from adding on charges.

I have to agree with Segal; the pro-consumer angle is surely to give consumers the chance to opt-in if they want a third-party service and not require them to block all services on a case-by-case basis. Some consumers may actually want services, like weather updates or sports scores. Let those consumers provide an affirmative “yes” and the rest of us won’t have to get on the phone to cancel a service they didn’t order and don’t want.

Caller ID spoofing threatening cell phone privacy

By Sally Greenberg, NCL Executive Director

Recently the New York Times reported on the explosion in spoofing caller ID’s by debt collectors or marketers. It turns out that anyone basically can get access to a consumer’s cell phone and spoof the caller ID number—pretend to be a friend, a relative, or a nonprofit like the Humane Society to get you to answer the call.

Ironically, after reading the Times story, I searched the paper’s Web site and found two sites that promise “legal spoofing” so that you can pretend to be someone else when make calls. Spoof Card sells credits—$4.95 is the cheapest—and anyone can buy the credits and use them to spoof any other number but their own.

The other site sounds more sinister, and its name is fitting. “Phone Gangster” makes the following claims and says its spoofing is legal in the USA and Canada:

Upon calling a person, you will get to choose what number you want to appear as. Best of all, there is no way the party can find out what phone number the call originated from because their phone records will display the altered number. Our service is not only fun and useful, but it is legal as well. We have tested and confirmed our caller id spoofing service works in the USA and Canada. Purchase an instant phone card from us today!

In September, the Federal Trade Commission received 140,000 complaints about pre-recorded robocalls, more than double the 61,000 complaints in the same month a year ago, the agency said.

Under the Truth in Caller ID Act, passed last year and enforced by the Federal Communications Commission, it is illegal to transmit inaccurate or misleading caller ID information “with the intent to defraud, cause harm or wrongfully obtain anything of value.”

In addition to potentially violating the law, what’s wrong with being able to call someone using a phony caller ID? Because this would be a heyday for telemarketers, debt collectors, and scammers who already prey on consumers using landlines. Cell phones are the last bastion of privacy, where friends, family, and business associates—in other words, only those you choose to share your number with—get access to your cell phone. If that falls victim to spoofers, consumers will lose the trust they have in their cell phones and their cell phone providers.

Enforcement of the FCC and FTC protections are important, but state attorneys general offices should also stay involved, and no legislation should preempt their ability to protect consumers from the mischief of the explosion of fake caller IDs.

Committee investigation confirms advocates’ worst fears about “cramming”

By Alex Schneider, NCL Public Policy Intern 

For more than a decade phone bill cramming has been costing consumers millions of dollars.  But until the recent release of the Senate Commerce Committee’s report on cramming, few knew just how pervasive and insidious this problem has become.

“Cramming” is defined as the placement of unauthorized third-party charges on a consumers’ monthly phone bill.  The charges could be for anything from yoga classes to fax or voice services to credit protection plans.  But overwhelmingly, they have one thing in common: consumers were charged without ever asking to be signed up for the service.

Since the mid-1990s, third parties have crammed these illegal charges onto monthly phone bills, relying on the concept that consumers will pay their bill without painstakingly analyzing each and every line item.  The phone industry said it would clean up its act, but, as Senator John Rockefeller made clear at a hearing of the Senate Commerce Committee last Wednesday, these voluntary fixes just haven’t worked.

“I plan to introduce legislation that will a put a stop to this,” Rockefeller said. “I simply cannot find any grain of sense in us having to have a hearing like this.”

Astonishing findings

The committee report extends 50 pages and reveals that cramming hurts individuals, government agencies, and businesses of all kinds (including the phone companies themselves!).  The following are a sampling of the committee’s new findings:

• Verizon, AT&T, and CenturyLink/Qwest earned $650 million since 2006 in $1 and $2 incremental fees as a kickback for permitting third-party phone bill fees.

• Crammers have doctored authorization forms to charge consumers in egregious ways, including listing deceased relatives as those who signed up for the services and charging unlikely phone numbers, including dedicated lines used for ATMs, alarm systems, modems, and emergency calls.

• Companies allegedly offering third-party services operated out of fake mailboxes, fake offices, and fake residences.  In one case, the president of a company had no involvement in the business and had been asked to sign some forms by a friend.  In another instance, the address of a cramming company was listed as “Suite #237,” but the ‘suite’ turned out to be a mailbox at a UPS Store, not the greatest of places to host an office meeting.

• A gaming service charged to customers by a “company” called EZPhoneBill provided the same games as another free website and had no users despite enrolling 20,000 customers at $14.95 per month.

• Bill blocking procedures initiated by customers did not 100% guarantee they would not be billed.

Solutions To Cramming Are Within Reach

In a letter to the Senate Commerce Committee, NCL urged Congress to follow the lead of Vermont and pass legislation ban third-party charges on landline phone bills.  As we wrote, the findings of the Commerce Committee as well as those of various state Attorneys General, the FCC, and the FTC highlight that there is little legitimate reason why a consumer would want to be billed for a third-party service on their wireline telephone bill.

Indeed, a FCC investigation released last month found that only 20 out of 17,384 consumers actually used the third-party service for which they were billed, a usage rate of roughly 0.1%.

As assistant Attorney General of Vermont, Elliot Burg, noted at last week’s hearing, consumers don’t expect that they can be billed for unrelated products and services on their phone bills.  Thus they aren’t likely to be on the lookout for cramming charges. Lawmakers in Vermont concurred, took action to ban third-party charges, thus saving consumers in that state from future aggravation due to cramming.

Cramming is a Significant Crime with Real Victims

The Commerce Committee estimates that third-party charges on landline phone bills cost consumers $2 billion every year.  That doesn’t include the time and energy that goes into calling customer service to rectify a bill or the losses to businesses that might be required to take precautionary measures to review employee phone bills for potential fraud.

Cramming is not going away.  The fact that AT&T itself has been crammed 80 times, according to Commerce report, is indicative of a larger problem that requires an aggressive solution.  We believe that banning third-party charges on landline phone bills is just that solution.

Consumer Tips for Avoiding Cramming

Until third-party charges are banned, here are some basic steps you can take to avoid falling victim to cramming:

1. Contact your phone company and ask to opt-out of third-party billing.
2. Watch for any changes in your monthly phone bill.  Even a change of a few dollars could indicate a cramming charge.
3. Be careful about answering phone surveys or Internet surveys that ask for your phone number, or participating in online sweepstakes.  If you do participate, make sure you understand any charges you may incur.
4. Before paying your phone bill, scan for a “third-party” charges section.  If you do not recognize the charge and if you have any questions, immediately call your phone company.
5. Learn more from the FTC and FCC about filing a complaint or file a complaint directly with NCL at www.fraud.org.

New bill addresses confusion over meaning of “4G”

By Larry Rose, NCL Public Policy Intern

You’ve probably heard the term “4G” being mentioned a lot recently. And, if you’re like most consumers, you probably have no clue as to what that means. In theory, a fourth generation, (4G) wireless network is a network that offers significantly greater speed than the third generation (3G) wireless networks that most smartphones run on.  The International Telecommunications Union (ITU) used to define 4G services as broadband technology that has a speed exceeding 100 M bit/s.  ITU later changed the definition of 4G to any form of mobile broadband that marks a meaningful improvement over 3G services. This definition is vague and allows the telecommunications industry to refer to many different types of mobile broadband as “4G.”

The four largest members of the telecommunications industry all provide services that are advertised as being “4G.” However, these four companies use the term “4G” to refer to three different types of mobile broadband technology. AT&T and T-Mobile advertise their Evolved High Packet Speed Access (HSPA+) networks as being “4G” despite the former company considering its HPSA+ network to be a mere “transition” to “true” 4G technology.  On the other hand, Verizon uses the term to refer to its Long Term Evolution (LTE) network, which typically provides faster speeds than the HPSA+ network. Sprint markets its WiMax technology as “4G” despite being somewhat slower than Verizon’s LTE network. These three services are considerably different from one another from a technological point of view, but they all operate under the same marketing label.  This creates difficulties for consumers who are trying to determine which wireless service to purchase.

Fortunately, consumers have found themselves a champion in Congress. Last month, Representative Anna Eshoo of California introduced H.R. 2281, the Next Generation Wireless Disclosure Act.  This bill requires wireless service providers to disclose information about the speed, reliability, price, network management policies and the terms of the wireless service, as well as costs for the service that are not included in the stated price and the technology used to provide the service. The bill would also direct the Federal Communications Commission (FCC) to create a side-by-side comparison of the speeds and prices of the 4G services provided by the top 10 U.S. wireless carriers.

The telecommunications industry isn’t pleased with this bill. According to the CTIA, the bill adds unnecessary regulation at a time that Congress should be focused on finding more spectrum to devote to 4G technology.

A study from Nielson found that only two out of five consumers understand what the term “4G” actually means. 27% of respondents incorrectly believed that Apple’s iPhone 4 offers 4G technology . That false assumption was most likely aided by the fact that a previous version of the iPhone was called “iPhone 3G,” after the type of mobile broadband that it used.

Last week, NCL, joined the ranks of Consumers Union, Public Knowledge, Media Access Project and the New America Foundation’s Open Technology Initiative in endorsing the Next Generation Wireless Disclosure Act. In an economy where many consumers rely on mobile broadband for Internet access, it is essential that consumers know what type of mobile broadband service they are purchasing.

Smart computing

By Jacob Markey, Summer 2010 LifeSmarts intern

In just a few weeks, LifeSmarts teams from across the country will travel to Hollywood to compete for the 2011 LifeSmarts National Championship. They will get the chance to put their knowledge to the test, while also enjoying the city, meeting some great new people, and having a ton of fun.

Like other readers of the Savvy Consumer Blog, they would be wise to review this month’s LifeSmarts post on Technology. As I mentioned back in December, there are many safety concerns consumers should keep in mind online to keep their personal information private online to better avoid identity theft. With more consumers going online to buy goods, conduct online banking, or read the news, identity theft is a persistent problem for consumers.

Here are some helpful tips to ensure that you have a safer experience online:

• Know that the site you are buying from is safe and reliable. Be thorough and review a person’s or online store’s background information: Check the person’s online ratings to see if others give the seller positive or negative reviews; see if the business is accredited with the Better Business Bureau in their state; make sure the site is secure if you are paying with your credit card. By taking these types of actions, you will decrease the likelihood that you will do business with a person looking to scam you.

• Watch the actions you take when using an unsecured wireless network at places like cafes, hotels, and airports. Computer thieves can snoop on unsecured connections to steal your personal information and exploit it if they acquire it. It is recommended that you abstain from reviewing banking and other sensitive information when using an unsecured wireless network. If you need to work on confidential information, it is better to choose a secured wired connection or an encrypted wireless connection that requires a password.

• Do not click on links or go to sites that you are unsure of or don’t trust. The page or file could contain viruses, spyware, or other material that could wreck your computer. As repairs can cost hundreds of dollars, it is important to practice safe browsing.

Teens must be aware that there is much to watch out for on the Internet. Even Web sites that look harmless may contain dangerous information. If you have any concerns about these types of issues, ask your parents for advice.

Identity theft and computer issues remain a problem. Following smart Internet browsing will help decrease the likelihood that your computer will become infected, your personal information stolen, and losing a ton of money.

LifeSmarts: teens’ technology education destination

By John Breyault, Vice President of Public Policy, Telecommunications and Fraud

The thought of teaching a modern teenager about technology may seem counterproductive to many people. Indeed, it is teens who seem to be the ones on the cutting edge of technology. The vast majority of teens not only use the latest social networking sites like Facebook, but they are also often inseparable from their cell phones.

Unfortunately, expertise about how to use these technologies doesn’t always equate to knowledge of how to do so safely.  Today, it is more important than ever for teens to know how to use technology wisely. For example, snooping on unsecure wifi connections (such as those found in many coffee shops) is increasingly easy for unscrupulous scam artists. Privacy, which for many Facebook-obsessed teens may seem to be an afterthought, could actually be critically important in college admissions and getting jobs later in life.  Online scholarship and grant scams is also an area where NCL has noticed an uptick as well.

Fortunately, there are tools and smart practices that teens can use to avoid some of the most common technology pitfalls. It is these good technology habits that LifeSmarts’ technology curriculum seeks to promote. LifeSmarts team members learn, for example, the importance of taking advantage of their privacy settings on Facebook to make sure third parties can’t get access to sensitive personal information. Knowing how to differentiate a secure Web site from an insecure one can save teens from having nasty malware surreptitiously installed on their computers. Understanding the importance of using strong passwords (as opposed to easy-to-guess common words) can save teens from seeing their laptops become part of a botnet or worse.

During National Consumer Protection Week, we urge teens and their parents to consider the important value of this knowledge in today’s 24/7 digitally-connected world. By becoming savvy technology consumers, LifeSmarts participants become better prepared to choose their own cell phone plans, get broadband service at their first apartments, and pass on lessons learned in LifeSmarts to friends, family members and, eventually, their own children.

For more information on the LifeSmarts technology curriculum, visit LifeSmarts.org. To learn more about National Consumer Protections Week, visit www.ncpw.gov.