The Hidden Charges On Your Cell Phone Bill

“You’ll need two dozen purple-scented candles and a goat suitable for ritual slaughter. Oh, and about a kilo of salt to draw a pentagram on the floor (blackboard chalk doesn’t work),” read a response to a frustrated consumer on an online forum asking for advice on how to unsubscribe from unwanted mobile content.

Although this advice was posted in 2007, many consumers still feel this way when it comes to trying to cancel mobile subscriptions – and that’s if they are even lucky enough to have discovered the charges gnawing away at their airtime or hiding in their monthly bill.

Cellphone operators say they have implemented measures in recent years to make it more difficult for people to unknowingly subscribe to these services, but a chat with colleagues over the water cooler or a brief look at complaints on the Hello Peter website show many South Africans remain ignorant of how they became subscribed to mobile content services, who is offering the services and what they need to do to cancel them.

Revenue
But last year, 1.68-million customers’ efforts to cancel an unwanted subscription did find their way to the unsubscribe list of the Wireless Access Service Providers’ Association (Waspa).

There are 274 service providers (Wasps) that belong to Waspa and they offer content services of all kinds, ranging from SMS notifications related to banking or sporting events to ringtones and ever-popular adult entertainment.

In the absence of any figures on the revenue generated by these services, had all those on last year’s unsubscribe list been charged just R3.50 a day (although some of the services can amount to R21 a day), the deductions would have come to at least R6-million a day – and that is just for those who realised they were subscribed to these services.

‘Not our problem’
Vick Venter struggled with these kinds of subscriptions and the subsequent charges for three months. At R4.40 a day, deducted for about 60 days, Venter found himself more than R260 out of pocket.

“In my mind, it was fraudulent. It was not as a result of my attempt to subscribe to anything. Cell C’s response was that ‘it’s not our problem’. They only act as the carrier … [and said that] it was between me and a third party,” he said.

After having struggled to get hold of the third party, he eventually found relief with the help of an input code he found online (see the end of the article) that enabled him to block the unwanted subscription.

These codes were tested in the Mail & Guardian newsroom and, of the 15 people who activated the codes, two people found they were subscribed to services they were unaware of.

Many users on the M&G Facebook page used the code and, out of 76 responses, which included many “thank yous”, 16 users said they had been subscribed to content without knowing about it.

Akhona Sir Jongs Jonginamba had been unknowingly subscribed to a “31975 GW 25884 service” and Nthabiseng Kuali said she found she had been subscribed to Hugemob at a cost of R21 a day.

Not significant enough
“I have also just unsubscribed from two things I didn’t subscribe to,” Nkosinathi Mcetywa said. “They both cost R6 per day.” Mpho Kelepetsweng discovered he was being billed R40 a day on his Samsung Galaxy tablet.

Mobile operators receive revenue by allowing Wasps and content providers to use their networks, which can be up to 40% of the fee, industry sources say.

Cell C did not respond to questions specifically related to revenue generated by allowing Wasps to use their networks and MTN said it did not report those figures. But Vodacom spokesperson Richard Boorman said Wasp services have never been a “material” source of revenue for the Vodacom group and were not significant enough to be disclosed in annual financial results.

But Dominic Cull, a telecoms expert at Ellipsis Regulatory Solutions, disagreed. “That’s nonsense. The percentages that they [the operators] take are significant. They are by no means passive. This is a very profitable business for them.”

Boorman said Vodacom charges the content provider a percentage of the service fee billed to the customer, as it provides a wide variety of services to Wasps, such as wholesale messaging, location-based services and USSD (unstructured supplementary service data) services. The fees vary according to the services used.

“It’s important to understand that these services are delivered using our infrastructure, which does generate costs for Vodacom. This infrastructure also requires ongoing investment.”

Safeguards
Profitable or not, mobile network operators have implemented safeguards in response to concerns about unauthorised subscriptions, which they say have reduced the number of complaints dramatically.

Vodacom was the first to institute a double opt-in mechanism two years ago, which they say requires a customer to actively agree to a subscription twice before any billing takes place.

The new system, which competitors MTN and Cell C implemented in December, means “it’s not possible to autosubscribe someone to services. Nor is it possible to make it contingent on someone to actively opt out to avoid being billed,” Boorman said.

He said the customer has to request a service and then again actively confirm they signed up for a specific service. The confirmation note must show the details of the cost of the service, Boorman said.

Eddie Moyce, chief customer service officer of MTN South Africa, said MTN has introduced a token-based billing system, which generates a token for customers to opt in and approve their purchase or subscription to any Wasp service before being billed.

It’s meant to address “simmering distress experienced by its customers who are being unwittingly billed for services they have not subscribed for by unscrupulous wireless application service providers”, Moyce said.

Cell C’s executive head of communications, Karin Fourie, said the company has also implemented a double opt-in procedure. She said Cell C helps customers to deactivate these services but they are referred to the Wasp call centres if they request refunds.

Telkom Mobile introduced event billing, a mobile payment solution, with BlackBerry as its first partner at the beginning of March this year. It includes a double opt-in service and customers can also contact the Telkom Mobile call centre to cancel their subscription at any time.

Cull said that, although the double opt-in procedure is an improvement, it is a wonder why it took so long.

“We need to focus on who are the people who are being affected by this the most. There is simply a lack of awareness,” he said. “Despite what they [network operators] are saying, I would like to see marketing spend go into full-page adverts about Waspa.”

When one of the service providers goes bad, Waspa, which describes itself as a voluntary self-regulatory body, is responsible for taking action.

James McNab, the chairperson for the Waspa communication working group, said members are sanctioned for breaches of its code of conduct and lawyers who act as independent adjudicators for the organisation decide on the penalty.

“Sanctions vary but [they] can be fines, the suspension of services or operations or, ultimately, expulsion from Waspa,” he said.

Suspension can be crippling, as service providers must be a member of the organisation to access a mobile operator’s network.

McNab said the industry complies with the Protection of Personal Information Act and the Consumer Protection Act, and works with the National Consumer Council and the Independent Communications Authority of South Africa.

Insist!
Nigel Cupido, commenting on the M&G‘s Facebook wall, said he has always been able to recover airtime deducted for subscription fees.

“I usually first call MTN to cancel and to find out who is deducting subscription fees. Then I call the culprits. Usually this is a useless step as they never get back to you or the manager stays in meetings.

“My final step is Waspa … no matter what the culprits say or what gibberish they send as proof of subscription, I insist to Waspa that they must have used some devious method to subscribe me. Insist! It takes time, a few days, but I always got my money back.”

Although the double opt-in requirement has had a negative impact on business, the overall effect is ultimately positive as both consumers and Wasps are better protected, McNab said.

A better record is now being maintained when there are disputes and not only have complaints fallen but McNab believes the measures will also ensure they sign up customers who legitimately want services provided to them.

“Are we unfairly tarnished? Yes, but this comes from a lack of understanding as to how mobile services are billed to the consumer.

“By putting in place regulatory procedures, and the ability to adapt the code of practice within an ever-changing technological environment, [it] allows for better consumer protection,” McNab said.

To block all existing content billing on:

All providers must contribute to the federal Universal Service Fund, which funds initiatives such as the Connect America Fund, Lifeline and E-rate, according to the FCC. But while prepaid service providers like Cricket and MetroPCS absorb the cost, the Big Four carriers (AT&T, Sprint, T-Mobile, and Verizon) pass that cost along to you. Wireless customers pay about $5 billion annually in Federal Universal Service Fund surcharges, the Tax Foundation estimates. The FCC regulates this charge and adjusts the fee quarterly based on the fund’s current balance.

These taxes are billed to your primary “usage place,” Zulager says — generally your residence or business address. But if you’ve moved out of state and kept your number, check with your carrier to see if they’ve updated your bill. “Sometimes if they don’t upgrade a tax code, you may be getting taxed incorrectly,” Zulager says. That could make a difference if you’ve moved to a state with lower taxes.

Many states, New York among them, levy specific sales and excise taxes on telecommunications services. Overall, customers in New York state pay an average of 24.36% in federal, state and local taxes on their wireless bills, according to the Tax Foundation.

The carriers are authorized (and at times, required) to collect these fees from customers to help local governments pay for emergency services such as fire and rescue. The fees are generally billed as either an amount per telephone access line or a percentage of revenue. The National Emergency Number Association has a state-by-state guide.

Despite the name, regulatory charges are not government-mandated. Instead, they are surcharges that you get charged to help the carrier defray the costs of federal, state and local regulations. At T-Mobile, this is billed as the “Regulatory Programs & Telco Recovery Fee,” and covers fees like local number portability, government programs, and charges imposed by other carriers for the delivery of calls.

Administrative charges are similar to the regulatory charges, but more nebulous. They’re generally billed as fees used to cover the costs paid to other carriers when talking to someone on a different network. AT&T’s $0.61 fee, rolled out in 2013, also goes toward “charges associated with cell site rents and maintenance.” These fees can (and do) change from time to time.

U.S. lawmakers have proposed bills like the Wireless Tax Fairness Act and the Digital Goods and Services Tax Fairness Act, aimed at curbing some of the excessive fees and surcharges — but neither has gotten much traction.

Cities and counties can also add taxes that inflate your bill. There about 12 states in which local governments charge some type of local tax or fee, many of which are legacy taxes established for landline services that have been extended to wireless services. For example, New York City charges the MTA Telecom Surcharge, which is a 0.375% tax that applies in to New York metropolitan area residents.

These fees — which stem from the taxes that some states, counties and cities impose on the carriers’ total revenue — can range dramatically. The Tax Foundation found that states like Pennsylvania and Rhode Island charge a 5% state gross receipts tax, while New Mexico charges a 5.13% state tax and an additional 2.62% in certain cities and counties, and many carriers pass this along to users.