FCC may limit early-termination fees

If you hate paying a fee to end your cell phone contract yearly (and really, who doesn't?), you'll be interested to know that the Federal Communications Commission may just have your back. The Associated Press is reporting today that the FCC is considering proposals to regulate, but not eliminate, the early-termination fees (ETFs) that have become a sore spot for cell phone owners. Currently, wireless carriers charge up to $200 for customers who leave service contracts before their end date.

The FCC is not commenting on the proposal, but according to the AP, the agency is negotiating with carriers on a number of terms. Most importantly, ETFs would be capped at an undisclosed amount and carriers would be required to prorate fees according to how long a customer has stayed with the contract. While most major carriers prorate ETFs already (the longer a customer has been in a contract, the lower the ETF) they are not required to do so. Legislation proposed in the Senate last year also calls for prorating ETFs, but so far the Cell Phone Consumer Empowerment Act of 2007 is not close to passing.

The FCC proposal also would prohibit carriers from charging an ETF to customers who change terms of a contract or end one contract and start another. New customers would be able to end a contract without paying an ETF in the first 30 days of their contract or for up to 10 days after they receive their first bill.

As expected, the government would give carriers some concessions in return for the regulations. The AP says the proposal would prohibit states from regulating ETFs and that carriers could not be held liable in a number of ETF-related class action lawsuits that customers have filed in several states.

Carriers have long held that ETFs are necessary because they sell phones at a loss to their customers. In their view, the fees are a way to recoup the costs for offering free or heavily discounted new phones. The Cellular Telecommunications Industry Association, which counts a lot of carriers in its membership, supports ETFs for the same reason; it contends that ETFs benefit consumers because they allow carriers to offer phones and plans at a lower monthly price.

[jefferygentry]

The FCC's got my back? The last thing I need behind me trying to take care of me is a government agency. So if I come to an agreement with AT&T to provide me with a free smart phone and complementary oil changes for $300 over a period of two years, I might like that deal, but if it exceeds some monetary cap set by the FCC then we can't make that deal? Thanks...but no thanks. It's none of the government's business what kind of deal two private entities agree to for mobile phone service.

[k2dave]

It's about time something is done about those ETF's. If the service and price is good there would be very little pressure for people to leave, these ETF's artificially lock in people who are dissatisfied with service. If the price of the phone is being subsidized, which is aurgable (look at Europe where you can buy a unlocked phone with no contract or even no service for about the price as we can buy a locked phone with a 2 year contract) , then some prorated allowance should be made. <cr> f

[k2dave]

It's about time something is done about those ETF's. If the service and price is good there would be very little pressure for people to leave, these ETF's artificially lock in people who are dissatisfied with service. If the price of the phone is being subsidized, which is aurgable (look at Europe where you can buy a unlocked phone with no contract or even no service for about the price as we can buy a locked phone with a 2 year contract) , then some prorated allowance should be made. <cr> f

[thewump]

Another area of my life where I can agree to one thing to get what I want up front, but then not take responsibility for it later. How empowering. Can I get a free mortgage with that?

[wirebarbed]

The carriers are going to get the money out of the consumers one way or another. If the carriers can't count on ETFs anymore, then I can see higher monthly rates in the future or paying more for handsets. The FCC is well intentioned, but for those of us who don't end (in violation) our contracts early, we're going to be paying more for nothing. It's communism at its finest.

[Pete Bardo]

If those rates are paying for the discounted cell phones, then why don't my rates go down after I have fulfilled my contract? I bought my phone used off eBay. That means I don't have a contract, no EFT, but I pay the same monthly rate as some who does have these things.

The cell phone business model has to change, but I'm not sure the FCC will be the ones changing it. All of the providers will be going towards a flat monthly rate and away from airtime charges. They're going to have to do it. It's a matter of time. Some companies have already started. If the cell phone providers want to complete with home-land lines, they will have no choice but to change their business model.

[unionizer]

FCC LEAVE THIS ISSUE ALONE! Another example of the Bushies "regulating" something by not do anything useful except making things more expensive for consumers. Cell companies like Sprint and US Cellular already offer 30 day satisfaction guaranteed periods, so we don't need the FCC regulating one for us. Cell companies like Cingular and Verizon have already moved to "pro-rated" early termination fees, so we don't need the FCC regulating them for us. The cell industry would love for the FCC to declare that it's going to regulate this issue, because they know nothing will ever happen. Like the FCC's regulation of cellular rates and quality of service. Right, no regulation happening there. What ever happened to state's rights? We don't need any more federal regulation!

[timber2005]

One thing they need to look into then is, if ETF's are charged when someone buys a phone at a lower rate, why are these still enforced when someone buys a phone at full price or from somewhere like eBay?

[Brandonius Maximus]

Non-prorated early termination fees are already illegal. That's why those class-action suits will win, and why the companies are starting to end the flat ETF. Do some research on the subject of "liquidated damages" for more information on this. They can only be charged if the actual cost to one party of a contract due to the other party breaking it cannot be readily determined.

[browninggold]

Carryover to cable/satellite television-if you find a better deal so be it, you should not be penalized for that.

[DesmoLocke]

Finally!!! Something like this is long overdue... I've always hated that fee because its entirely stupid. Don't they realize that they are part of the technology world? The world in which things are "old" in less than a year... I'm currently with Sprint and when I went in to upgrade to a new phone because I had an ancient Samsung, I found that if I didn't want the ETF then they would gladly extend my contract for another year. I just wanted to upgrade my phone.. Who knows if i move out of the area before those 2 years and into an area that has poor Sprint coverage... I'm waiting for the first service provider that comes up with the 1 YEAR PLAN. That way the customer can get a new phone every year... Also, I like Sprints $99.99 a month ($1200/yr) UNLIMITED EVERYTHING PLAN but if the price was more like $69.99 ($840/yr) I'd be sold...sorry this post was so long.

[Composer_1777]

Cell phone companies in this country are a joke, they lock-up everything so much it should be illegal; in-fact they do run a sort of oligopoly and get away with it.

[humanssssss]

FCC is not the answer to a private contract between two mutually agreeing parties. If one party lies to another during the contract signing, the injured party can take the other party to court.

FCC should encourage more competitions so these early termination fees will go away because carriers will lose more businesses if they continue to have these early termination fees.

Let the market take it away.

[feliusrex]

I'd rather see the mobile companies end the subsidies for phones and end the ETFs all together. A more important issue to regulate is carriers being able to lock phones to their networks. I'll pay $200 for a phone if I could move it from carrier to carrier at will with no ETF's or worries about number portability.

[jskrenes]

get ready for higher activation fees. Cap ETFs and you'll see $50 activation fees within a year. Just like other hikes, Verizon will do it first, then ATT, then Sprint if they're still around, then TMob or Alltel. Or maybe ATT will buckle first. It really doesn't matter.

[chash360]

If the FCC truly had the consumer in mind, they would not have sold the 700MHz band to corperations and opened it for unlicensed usage, to create a free wireless internet where all you had to do is buy the device, not pay a monthly service fee. Its not like the EM Spectrum has to have repairs and maintenance like wired networks. This is just so the Telco's and wireless providers can get out of their class action lawsuits.