Most customers are generally satisfied with their wireless telephone service, but many are frustrated with fees associated with ending their contract to switch carriers, according to a congressional study released on Thursday.
The study by the Government Accountability Office also found that the Federal Communications Commission needs to improve how it processes customers' complaints.
The GAO report, which was requested by U.S. Representative Ed Markey, found that 42 percent of wireless customers who wanted to switch their service during their contract did not because of an early-termination fee.
The GAO said the number of U.S. subscribers has increased to about 270 million in 2008 from about 3.5 million in 1989. Verizon Wireless, AT&T Inc, Sprint-Nextel Inc and Deutsche Telekom AG's T-Mobile serve more than 85 percent of the U.S. wireless subscribers. Verizon Wireless is a joint venture of Verizon Communications Inc and Vodafone Group Plc.
Markey, a Democrat who chairs the House Energy and Commerce subcommittee on telecommunications and the Internet, said early termination fees charged by the carriers raise consumer protection and competition concerns.
In the digital age, where technology can change overnight, consumers should not be chained to their wireless provider for years through exorbitant early termination fees, Markey said.
Last week the FCC launched an inquiry into why Verizon Wireless doubled fees to $350 for terminating contracts linked to some smartphones, which are often offered to customers at a reduced cost if a contract is signed.
A company spokesman has said that customers can choose to avoid paying an early termination fee by buying a mobile phone at full price.
The inquiry into Verizon's fees is part of a broader consumer protection inquiry the FCC launched in August into the disclosure of fees and charges associated with advertisements, point-of-sale and bundling.
In its report the GAO said it found about 84 percent of users are very or somewhat satisfied with their wireless phone service. However, concerns have increased about billing, customer service and contract terms while most were satisfied with the quality of the call.
It also raised questions about the FCC's ability to effectively process tens of thousands of public complaints each year. The FCC has largely refrained from regulating wireless phone service in order to promote competition, it said.
FCC monitors wireless consumer complaints, but such efforts are limited, the GAO report stated, adding that the agency may not be aware of trends or emerging issues and whether new rules are needed.
The GAO recommended that the FCC improve its complaint processing system and also work more closely with state utility regulators.
The GAO said the FCC has the authority to regulate wireless phone rates and new entrees, while states are preempted from doing so. However, states may regulate the other terms and conditions of wireless phone service, the GAO said.
Consumers are being forced to pay huge fees that the phone companies just can't justify, said Chris Riley, policy counsel at Free Press, a public interest group. The FCC must act and put a stop to this anti-consumer practice that threatens innovation and competition in the mobile marketplace.
(Reporting by John Poirier; Editing by Steve Orlofsky)