RSSFCC debates regulation of wireless early termination fees
By Ed Oswald | Published June 13, 2008, 11:53 AM
With complaints to the FCC rising over the long-held practice of fining those who end their cellular contracts early, the agency looks poised to intervene. And for the first time, all sides may be nearing some sort of agreement.
Yesterday afternoon, FCC commissioners heard testimony from consumer advocate groups and carriers alike, and there seemed to be at least some agreement among all parties on the subject of early termination fees (ETFs). Chairman Kevin Martin has taken the lead on the subject, questioning the reasoning for the fee that has become a common part of everyday life with wireless devices.
"I am concerned that early termination fees are being used not as a means of recovering legitimate costs but as a means of locking consumers into a service provider," Martin said in his opening remarks.
Depending on the carrier, fees range from $150 to $225. Some carriers have taken the lead in prorating these fees based on the number of months that a customer has left in the contract: Verizon was first in 2006, with AT&T changing its policy in April of this year.
Carriers typically argue that the fees are necessary to recoup subscriber acquisition costs and the losses incurred from subsidized handsets.
However, it's apparently not enough, and Martin has expressed concern that ETFs are being abused. He disclosed that the FCC received more than 3,700 complaints from consumers in 2006 and 2007.
Congress has even stepped into the matter, with a bill introduced last year in the Senate mandating prorating. "Too often, consumers find out only after committing to a multi-year contract that their wireless service doesn't meet their needs," said Sen. Amy Klouchbar (D - Minn.), a co-sponsor of that bill.
Martin recommended that any new policy meet some basic standards for protection. First, the ETF should bear direct relation to the cost of the phone purchased, and should be prorated over the life of the contract. If a consumer does not purchase new equipment when renewing, his or her ETF should not be extended. He also called for carriers to give customers more time to see if the service is right for them -- up until they receive their first bill.
Currently, most providers only give new subscribers about two weeks to test out the service before the termination fees kick in.
Regulation at the federal level may make some uneasy; however, the FCC is arguing that a national policy is the best option. If states are allowed to set their own ETF policies, there could be significant differences in consumer protection from state to state.
While the wireless industry questions the need for federal regulation, Verizon Wireless seems prepared to support Martin's proposal if the FCC decides to implement it. The carrier said that if anything is to be done, it should be on the federal level.
There were some panelists who used the hearing to argue against the necessity of such fees, presenting evidence that losses from a departing subscriber are nowhere near the amount of the associated penalty.
Dr. Lee Selwyn, president and founder of Economics and Technology Inc., presented evidence that showed carriers on average were only losing about $14 per handset, and there was "very little" lost profit from early termination.
Nebraska Public Service Commission head Anne Boyle went even further, saying the practice should be banned altogether. Customers should be able to purchase the products on their own and pay month-to-month, arguing that consumers pay for most other services in the same way.
I love headlines like these "FCC debates regulation of wireless early termination fees" Yeah right, never going to happen. These giant multi-billion dollar companies will fight, lobby, appeal anything that would threaten their enormous profits. Getting rid of early termination fees is a pipe dream. Welcome to American style capitalism.
Worst case scenario: Nothing will change and early termination fees will stay the same.
Best case scenario: They abolish early termination fees by calling it something else and charging it to you upfront.
Either way, none of these companies are going to just simply give up the enormous profits from it that they've grown so accustomed to.
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|Such cliche ridden BS.
You might want to do a bit of research and discover that net all of the companies involved in such practices are American corporations.
Oops! But that would assume an understanding of business at somewhat greater than a 4th grade level.
As far as the enormous profits they enjoy, you can credit the stupidity of people like you and the others here who are whining that they were forced to extend their contracts when they voluntarily opted to buy a fancy new subsidized phone. I wonder who forced them to want and buy he new phone? Of course, we would never want to hold them accountable for their own choices now, would we?
And as EU based corporations are involved as well in this practice, one might be curious as to where your Utopian market where BOTH responsible companies AND responsible consumers who don't raise victimhood to an art form exists - aside from you imagination located on Uranus.
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|Ah here comes foxfyre from the peanut gallery. Where exactly did I say such practices were non-existent in countries outside of the US? I love when morons like you try to put words in my mouth. It obviously happens in other countries too, but it is by FAR the most rampant in the USA.
"Such cliche ridden BS."
Cliche ridden? Where do you see a single cliche, let alone multiple cliches in what I posted? Or let me guess, you don't understand the word "cliche" and you're one of those idiots who likes to use that word to try and sound smart.
"As far as the enormous profits they enjoy, you can credit the stupidity of people like you"
Again, spouting BS and putting words in my mouth. I have never signed any wireless contract, try making up something new. Now go crawl back under that rock you came from.
PS. - I don't live in "the land of the free" (now THAT's a cliche) and I can actually get cellular service here without being tricked into a long contract by the promise of a free phone.
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|"Where exactly did I say such practices were non-existent in countries outside of the US?
"
Good one phony!
So subsidized products carrying a term of use constitute "American style capitalism" and then wants to act like 'where did i say it was American' as he whines that "Where exactly did I say such practices were non-existent in countries outside of the US?"
We don't have to put words into your mouth, as you obviously don't understand those that you yourself use!
You are the one who chose to characterize the practice as "American" capitalism - which, as you are obviously not smart enough to understand, distinguished it in your itty bitty brain from other forms of 'heinous' capitalism.
But it is instructive to notice that the technological advance to which you whine do come from America. Of course, your hell hole produces what exactly? aside from idiots who fail to comprehend that words have meaning and that you have placed restrictions and qualifications on a term that you then stupidly deny.
Go back to your 3rd world hell hole and stop editing your posts from "American capitalism" to "American style capitalism" and then acting like no one else understands your peculiar form of dishonesty and illogic.
And I said that consumers who place their perceived value of the service and new trendy phone over that of the extension of their contract are responsible for the companies making a profit on the plan. And that is correct. Such people exhibit a singular lack of the ability to place value just as YOU edit your posts and fail to understand that YOU call the practice "American capitalism" as distinct from other capitalism!
And your rant is exactly that, a tired cliche.
I guess in your case it doesn't matter with which hand you wipe your @ss or feed your mouth, as the distinction is moot.
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|About time.
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|When I bought my phone, I purchased a one-year contract. I paid $100 for a phone that would've been free on a standard two-year plan. Two months in I had to make a minor change to my contract - I actually ADDED a service, increasing the carrier's revenue. They not only extended my contract by a year without telling me, but when I went to the local store the rep told me that my records stated I had purchased a two-year contract originally! Of course, the rep who actually sold me the phone no longer worked there..they said that he'd left for a better job elsewhere (probably one where he didn't have to work for crooks). When I brought in the hard copy of my single-year contract, they told me that they had never sold one-year contracts, and that the extremely knowledgeable and friendly guy who sold it must have "gotten confused". I offered to show them pictures on my phone that I took of the signs on the walls of the store advertising the very contract that I purchased - the one they denied ever selling me. The manager refused to look at them, so I called AT&T directly and made my case. They repeated the same lies as the store manager and refused to do anything. I said I would promptly upload the unmodified, dated picture files along with scans of my contract to the internet for all to see. Their response? "That would be a bad idea..you really wouldn't want to deal with our legal department." I did it anyway, using a friend's home site. Three weeks later he called me and said AT&T had emailed him demanding he remove the materials or he would be facing litigation. I told him to comply.
THIS is the new AT&T.
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|Biggest reason I left Sprint was the way they were constantly screwing me. Need another phone? New contract. Bring in a phone of my own, they want a fee to "program" it for use. At least with T-Mobile, I can use any unlocked GSM phone without having to deal with anyone. Very happy with them so far. Best prepaid plan out there too.
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|I agree with NE's Commissioner, Ms. Boyle, that month-to-month should be a required offering.
The phone companies claim they are covering costs of subsidizing my phone. Let's presuppose that is "true" -- then when my contract ends, why isn't my monthly fee reduced by the phone repayment fee? Why is someone who doesn't contribute to Global Waste penalized for not upgrading? After contracts have expired, I continue to pay their "phone-replacement costs". If someone doesn't replace their phone for five years, why should they be charged the same monthly rate as those getting new phones every two years?
The Telecommunications Service Providers (TSP's?) shouldn't require me to change my phone to switch providers anymore than ISP's require me to switch computers. Phones are quickly becoming small computers -- even in low end phones, the hassle of re-entering scores of addresses and settings is a waste of consumer time. Phone companies should be required to offer UNBUNDLED pricing and allow device PORTABILITY between TSPs.
UNBUNDLING does not prevent TSP’s from continuing to offer subsidized calling contracts. They would still have the freedom to offer the plans they wished — but they should be required to accept & activate user-owned devices and charge only for service — not the phone.
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|It is about time someone took a stand on this. I received a "free" phone for a two year contract in the summer of 2005. In December, I bought a phone and added it to my plan. The company extended my contract to the full two years. A year and a half later, I got a part time job that necessitated my using the phone extensively. I upgraded my "pre-paid minutes" - and the carrier extended my contract to two years from the change date. That was about a year ago. In the past couple of months, the company has been calling me and sending me mail to try to get me to upgrade to a newer model phone - with my contract being extended to two years from date of renewal.
It's about time someone put a stop to this foolishness! If a two year contract was enough for them to give me a phone, it seems that my adding a phone (at my expense) and adding minutes (at my expense) should not add to their expense of the original phone. So, why do I still have more than a year on my contract almost three years after I originally began doing business with this company? Yet, if I switch providers, I will be hit with a termination fee.
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|"So, why do I still have more than a year on my contract almost three years after I originally began doing business with this company?"
As lousy as the practice may be (and I certainly agree that it is!), the reason you still have a contractual agreement is that you CHOSE to upgrade your phone and to change plans! They didn't force you to geta new phone with a contractual obligation!
You DO have choices! Funny, I don't have a contractual obligation...but then I refrained from purchasing a new phone with the obligation as part of the agreement. You note it is an "agreement", as you had an opportunity to decide whether the cost was worthwhile - and you decided it was!
I am amazed at so many who were "forced" against their will to enter into such heinous acts! Gee, allot of folks do just fine without a fancy phone and a 2 year agreement, and many don't need 10,000 cable channels only to complain that 9,999 of them are trash.
You DO have choices. Yo could opt for a plan without an obligation, or you could use a TZrac Phone or any other number of options! Ot heaven forbid, you could use a land line and a Skypephone or even WiFi and SkypeOut. Again, there are any number of options if the contractual agreement is so heinous that you might someday choose to forgo it.
ut this notion that "they" force us to do this is simply nonsense. You CHOOSE to agree to the terms as part of the cost of ding business. Ironically, if a vendor screws me, i take my business elsewhere. I don't voluntarily keep returning only to cry that they are victimizing me!
Maybe its time you and others begin to do the same and assumed a bit of responsibility for your actions. If more did so, you just might exert enough market pressure to change said practices.
In the meantime, can the "I am a helpless victim" whine.
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|fcc is fortunate it can debate the fees...
WE CONSUMERS CANNOT!!!
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|Sure you can!
If you make the decision that not buying a phone is more important than buying it and agreeing to the terms of service, you might be surprised at the power of the consumer!
Of course that implies that the consumers have to get off their collective asses and actually assume responsibility for their own actions instead of merely whining that they cannot do anything as you have just done!
But as long as all the poor victims continue to buy and agree tot eh terms os service that you feel are so unacceptable - as you actively choose to accept them!!!! DUH!; why should they change? You poor lemmings have proven their strategy correct!
The victim mentality raised to an art form. Waaaaaa.....
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|Too little too late...
Only early termination fees?
Why not the right of an individual who buys a phone to be provided with the unlocking codes and to make it portable to any compatible service they choose to subscribe?
The rates are still FAR too high for such limited service.
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|This would be great to see. I'm tired of hearing that if I want to change my plan that suddenly I have to lock in to another 2 years. Eliminating this and putting the focus just around purchasing a new phone would be great, especially for people like me to don't go through phones very quick. In the end it means the wireless industry becomes more competitive because you can't lock down your subscribers as tightly.
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|Maybe we should move to the model that is used in much of the rest of the world. I would have no problem paying full price for a phone and then contracting with a service provider for what I need. If I move to an area where Company B has better coverage than Company A, I simply cancel billing with A and get a new SIM for B. Let the service providers be service providers, not necessarily as much a middleman for the handset manufacturers.
While the current Us cell system is horribly fractured (GSM vs CDMA), the adoption of LTE by the major players may open up the possibility for better number and phone portability. That is, unless AT&T and Verizon find a way to differentiate their LTE systems and lock customers into one side or the other yet again.
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|I kind of agree, if you're going to buy a cheaper phone that would be ok, but if you're going to buy a $500+ phone then paying full price for the phone wouldn't make to many people happy. I do like the idea of just buying a different SIM for company B but using the same phone.
Yes we are fractured and that does suck. Thats why I think T-Mobile or AT&T should buy Sprint. This way in a year or so their will be phones that use both GSM and CDMA and that would close the fracture. If AT&T bought Sprint then it may give an insentive for T-Mobile and Verizon to come up with a deal of some kind in the US (T-Mobile is huge in EU so I don't think Verizon would buy T-Mobile).
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|T-Mobile is huge in EU so I don't think Verizon would buy T-Mobile.
Just so you know, Verizon is 45% owned by Vodafone, which is the largest mobile carrier in Europe. Deutsche Telekom (T-Mobile) is smaller than Vodafone, so we'll have to see how these mergers will play out.
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