Wireless Industry Agrees to End 'Bill Shock'

NEW YORK ( MainStreet) -- Mobile phone users who exceed monthly bandwidth allotments or send too many texts can get hit with massive overage charges, sometimes running up hundreds or even thousands of dollars every month. Now, the wireless industry has agreed with the Federal Communications Commission to end "bill shock" by alerting users who are about to exceed their plan limits.

In a joint press conference held Monday, FCC chairman Julius Genachowski announced that the wireless industry has agreed to a new self-enforcement regime to end bill shock, which he described as "when wireless subscribers experience a sudden, unexpected increase in their bill for unknowingly exceeding plan limits for voice, text or data, or unexpected roaming charges." He pointed to a couple of extreme examples, including a man who got an $18,000 bill when his free data downloads expired and another who racked up $200,000 in roaming charges during an overseas trip.
Wireless carriers will begin sending text alerts to consumers who are in danger of incurring overage charges.

Under the plan, carriers will send text messages to users who are approaching their plan limits for data, text or voice calling minutes, plus an additional text when those limits have actually been reached and overage charges have begun to apply. Users will also get a text telling them when they are about to incur roaming charges. The alerts will be offered for free and sent automatically, with no opt-in required, Genachowski says.

The plan comes as most wireless carriers have ended unlimited data plans for smartphone users. And as more people use their connections for bandwidth-intensive activities such as streaming video, it's not hard to imagine that we're going to see more smartphone users exceed their limits and get hit with big bills.

Joining the FCC at the event were Consumers Union, a nonprofit consumer advocacy group that has lobbied for regulatory action, and CTIA, the wireless industry's trade group. CTIA's president and CEO, Steve Largent, said it would add the wireless alerts to the group's Consumer Code, and that all participating carriers would implement at least two of the four alerts -- voice, data, text and roaming -- by Oct. 17, 2012.

By April 17, 2013, the participating carriers will implement all four text alerts for overuse charges. The CTIA counts among its members Verizon ( V), AT&T ( T) and Sprint ( S) as well as a number of smaller carriers, and says that its providers cover more than 97% of all wireless customers in the U.S.

Consumers Union policy counsel Parul P. Desai urged the wireless industry to implement the alerts more quickly than the proposed timeline.

By implementing the alert system voluntarily, the wireless industry avoids official regulatory action by the government. Genachowski says the FCC will take a "trust but verify" approach and put regulatory action on hold for the time being, but didn't rule out further action in the event of noncompliance by the carriers.

>To submit a news tip, email: tips@thestreet.com.

Follow TheStreet.com on Twitter and become a fan on Facebook.