Mobile carriers have pulled in hundreds of millions in profits through third-party charges tacked onto customers' bills without their consent, according to a report from a U.S. Senate committee.
The carriers have been slow to act against scammers tacking third-party charges onto mobile bills even after thousands of complaints by customers and investigations by multiple state attorneys general during the past six years, said the staff report from the Senate Commerce, Science and Transportation Committee, released Wednesday.
While the mobile industry has suggested unauthorized third-party billing — often called cramming — is a minor problem, the practice has been "widespread and has likely cost consumers hundreds of millions of dollars," according to the committee staff report.
Third-party billing on mobile phone bills has been "a billion dollar industry that has yielded tremendous revenues for carriers," the committee report said. The four largest U.S. carriers — AT&T, Sprint, T-Mobile and Verizon — generally take 30 to 40 percent of the cut for third-party services, often tacked on as charges of less than US$10 a month, but continuing indefinitely, the report said.
Those four carriers had assured the committee they were taking "robust" steps to combat a minor problem with mobile cramming when the committee began asking about the issue, said Senator John "Jay" Rockefeller, a West Virginia Democrat.
"There is now overwhelming evidence that these statements were just not true — cramming on wireless phones has been widespread and has caused consumers substantial harm," Rockefeller said in a statement.
Carriers had little incentive to crack down on third-party billing schemes, said Senator Richard Blumenthal, a Connecticut Democrat. "I don't think the telephone companies were happy or content that crammers were defrauding their customers," he said. "But they almost certainly welcomed the revenue that third-party billing was generating for them."
Mobile carriers have taken several steps to end cramming, countered Michael Altschul, senior vice president and general counsel at mobile trade group CTIA. Last November, the large U.S. carriers agreed to stop billing for most premium short message services [PSMS], one of the major third-party billing options, he said.
Carriers are also actively monitoring for third-party billing fraud and keeping a close eye on short-code campaigns on mobile phones, Altschul said. CTIA and its members have developed guidelines for third-party billing, but found that "trust alone was not sufficient to ensure compliance," he said. "The industry recognized that wireless customers and carriers were being victimized by determined fraudsters who crafted elaborate schemes to defeat the industry's self regulation and third-party monitoring."
Blumenthal asked what segment of the mobile industry should take responsibility for monitoring third-party billing. Carriers are taking responsibility, Altschul said.
Sign up for CIO Asia eNewsletters.