NCPA - National Center for Policy Analysis

Wireless Companies Hide Rate Hikes to Retain Customers

May 23, 2003

Across the country, wireless companies engaged in price wars to lure customers have imposed hidden rate hikes on consumers to keep advertised prices down. Certainly, companies have every right to pass along the costs of complying with government regulations. But they don't have the right to hide them in ways that mislead consumers about the real costs of services.

Unlike taxes passed on to the government, the companies keep the fees. Mislabeling these fees as taxes creates openings for anti-consumer abuses:

  • Companies can sign up customers with deceptively low prices, but nationally, they tack on 20 percent in fees and taxes on average, according to the Wireless Consumers Alliance.
  • Normally, companies let customers out of six-month and one-year contracts if they raise rates, but by passing increases off as taxes, they can keep customers trapped in the contracts.
  • The telephone industry has a history of inflating costs for federal regulations they say they are passing on to customers; for example, on April 1, the Federal Communications Commission set a 9.1 percent monthly "universal service" charge to cover the costs of federal mandates on land-line phones, but this action came after the FCC concluded that companies overcharged when allowed to set the rate themselves.

Customers may or may not object to paying these charges when they are clearly identified. But they need to know about them before they sign on the dotted line.

Source: Editorial, "Disconnect deceptive tactics," USA Today, May 22, 2003.

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