With less than a month until Halloween, some wireless companies have decided to set the mood by scaring their subscribers with unexpectedly high bills. Several months after an initial investigative letter was sent by the Federal Communications Commission, Verizon Wireless has admitted that 15 million of the company’s subscribers have paid “phantom charges” over several years for data transfer fees that those subscribers did not knowingly initiate. Such fees could easily amount to hundreds of millions of dollars per year (up to $23.88 per subscriber per year before taxes and fees, assuming a monthly maximum fee of $1.99) in unjustified revenue for Verizon and unjustified payments by consumers. Verizon’s undisclosed calculations peg the number of erroneous charges much lower, resulting in a total of $30 to $90 million.

Context is important here. On the FCC’s October open meeting agenda is a Notice of Proposed Rulemaking (NPRM) concerning “Bill Shock.” The NPRM comes as part of a broader inquiry into billing practices for telecommunications services following years of consumer complaints. In fact, a recent national survey by the FCC revealed that 30 million Americans have experienced “bill shock.”

The response from the industry on this issue has been evasive rather than constructive: The industry maintains that nothing is wrong, that voluntary measures are ensuring sufficient disclosure, and that the industry can effectively police itself. Wireless industry lobbyists attacked the FCC’s bill shock survey using spurious methodological arguments -- an attempt the FCC directly rebutted. Professional lobbyists should be above such tactics, but apparently, no bar is too low.

Now, thanks to Verizon, the industry’s cover of “no problems” seems pretty well blown. I’m glad Verizon has come clean about its mistakes, and has offered to pay subscribers back. But I don’t think this is an act of corporate goodwill, or any evidence that industry self-regulation works – Verizon’s actions were almost certainly prompted by the ongoing FCC investigation, and by the imminent NPRM. The original piece by David Pogue included statements from alleged Verizon employees that the company was well aware of the problem, and deliberately chose not to correct it.

Clearly, “self-regulation” is not enough. As an editorial at the New York Times put it, “The lesson Congress should take from this incident is that the telecommunications networks are too vital to leave to industry self-regulation…. These decisions are too vital to our economy and our democracy to leave solely to industry.”

Many leaders in government are listening, including Senators John Kerry, Amy Klobuchar, and Mark Begich, and FCC Commissioner Mignon Clyburn, who have all called for further investigation of Verizon’s practices, and Sen. Tom Udall, who has introduced legislation to install clear safeguards against bill shock. Free Press has supported these efforts, and has asked other leaders to join them.

Transparency in billing, and safeguards against phantom charges and bill shock, would help many consumers sleep better this Halloween. But more effective competition in the wireless industry is the ultimate solution to price gouging. Lots of obstacles stand in the way. Some of these are being addressed, such as data roaming and spectrum policy reform; others, such as handset exclusivity arrangements and special access reform, seem to have fallen by the wayside. Let’s hope that Congress and the FCC view increasing misbehavior in the wireless industry as a sign that more rapid reform is needed.