Crave

Try as I might, I can't get that worked up about carrier exclusivity. If a cell phone carrier and a manufacturer want to pair up and offer a handset for a certain period, I'm not going to oppose it purely on principle. Granted, such deals may not be fair to absolutely everyone, but I'd argue that there are much bigger problems with how the U.S. wireless industry operates.

Yet, a few U.S. Senators don't appear to agree. On July 7, a few weeks after a Senate committee grilled national carrier reps on device exclusivity, Sen. Herb Kohl (D-Wis.) wrote letters to both the federal Communications Commission and the Justice Department's antitrust division asking the agencies to investigate the issue and suggest possible regulatory proposals.

The original iPhone made carrier exclusivity an issue.

(Credit: Corinne Schulze/CNET)

"The practice of large cell phone companies gaining exclusive deals to the most in-demand cell phones is a serious barrier to competition," Kohl wrote. "Consumers are unlikely to obtain cell phone service from companies if they cannot obtain desired handsets."

I'm no carrier lackey, but I find it fascinating that Congress is just now noticing that carrier exclusivity exists. The practice, which is hardly unique to the United States, has been around for a long time. So from where is the sudden interest coming?

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Class action suits against carrier early termination fees (ETFs) are nothing new, but now it appears one case may come to an end.

Though it has yet to be approved by the court, T-Mobile has proposed a settlement in an $11.5 million class action suit filed in August 2008 in the U.S. District Court for the District of New Jersey. The suit alleges that T-Mobile broke federal and state laws when charging the ETFs.

The settlement would cover T-Mobile subscribers who were charged a flat-rate ETF from July 23, 1999 to February 19, 2009, or those whose service contract included an ETF during the same time period. The settlement would resolve several other pending cases that challenge T-Mobile's flat-rate ETFs.

T-Mobile customers who file a claim form will be eligible for one of three awards, according to the terms of the settlement. Customers who paid an ETF can receive up to $125. Customers who were charged an ETF but did not pay and did not receive a full credit within 30 days, can receive up to $25.

"Non-cash" relief will be provided for customers who had an ETF in their contract. Such relief could include 50 bonus minutes a month for three months, 100 bonus text messages a month for three months, "T-Mobile HotSpot" access for three days, or the right to have your contract with T-Mobile contain a prorated ETF. T-Mobile began prorating ETFs in June 2008.

Q: I was wondering why U.S. carriers have not picked up Nokia's N-series phones. Why wouldn't a carrier like AT&T or T-Mobile want such high-end handsets to attract customers?
- Zoheb

A: There are a few answers, Zoheb, but they all boil down to money. More so than in other countries the cell phone market in the United States has long centered on the service rebate. Carriers discount phones to attract customers and their contracts, while customers are trained to expect free or discounted handsets. While this dynamic is beginning to change due to the growing popularity of unlocked phones, service rebates largely rule the day here.

Nokia N96

(Credit: Corinne Schulze/CBS Interactive)

Though the rebates have their upside--customers can get $200 knocked off the price of a nice smartphone--they have their downsides as well. And I'm not talking about service contracts. Rather, the widespread use of service rebates has helped to "dumb down" the cell phone selection in the United States. With notable exceptions, carriers tend to keep their phones below $300 to make them as affordable as possible.

The problem with the N-series phones is that they cost well over $500 (the fancy Nokia N96 is $776 unlocked). So even with a service rebate they're going to remain pretty expensive. Sure, there will be customers like yourself who will be willing to buy one, but that's not enough incentive for a carrier to buy a several thousand of them. Instead, they're going to pick handsets that will sell in the biggest numbers.

T-Mobile G1

(Credit: Corinne Schulze/CBS Interactive)

We also have to remember that the N-series phones are complicated with a lot of different features. U.S. carriers tend to be in the driver's seat when it comes to choosing phones for their lineups. They have a lot of say in how the phone looks and what features it has. Thanks to the iPhone and the T-Mobile G1 this is also beginning to change, but they still like to exert their control. I'd wager than the N-series phones are simply too complicated for U.S. carriers. There are too many parts and features that the carriers can't control. Also, I'm sure that carriers haven't figured out how to monetize all the services on a handset like the N96. That's yet a another deterrent against picking it up.... Read more

Sprint will change course and start prorating early termination fees, the company's CEO said Tuesday. In an interview with the Associated Press, CEO Dan Hesse said the carrier could initiate the practice as early as December, after updating its billing software.

Sprint has been the lone holdout of the major carriers in trimming ETFs as customers near the end of their two-year contract. T-Mobile started prorating fees in June following the lead of Verizon Wireless and AT&T.

Though ETFs have long been the been the bane of consumers, carriers maintain that they are a way for them to recoup costs for offering free or heavily discounted new phones to customers. The Cellular Telecommunications Industry Association, which represents carriers in Washington, supports ETFs for the same reason.

Currently, ETFs are not regulated by the the federal government, but the Federal Communications Commission is considering taking some oversight. During a hearing with the FCC in June, carrier representatives said they would be willing to accept some limitations on ETFs as long as the carriers could be absolved from class action lawsuits over the fees.

Verizon Wireless is offering cell phone subscribers the chance to go month-to-month with their cell phone service without signing a pesky contract.

The second largest wireless operator in the U.S. announced Monday that it will offer month-to-month service for all its current wireless plans. Monthly subscribers will pay the same rates as those with long-term contracts, but month-to-month customers won't be required to sign contracts.

This means that month-to-month customers won't have to pay an early termination fee if they decide to quit Verizon's service and go elsewhere. In exchange for not being bound to a contract, customers will have to pay full retail price for their Verizon phone. The other option is for customers to use their existing Verizon phone or buy a pre-owned Verizon phone. Existing Verizon Wireless customers can switch to monthly plans after completing their current contracts.

The move to offer month-to-month service comes as mobile operators face pressure from customers, Congress, and the Federal Communications Commission to open up their networks and loosen contract terms.

Earlier this year, Verizon Wireless settled a class action lawsuit in California over early termination fees. The FCC and federal lawmakers have also been putting pressure on wireless operators to reduce the cost or even do away with early termination fees. All four of the major wireless operators are now offering pro-rated contracts, which reduce the cost of early termination fees over time.

Wireless operators have long argued that early termination fees are necessary to help them recoup the cost of subsidizing handsets. For example, Verizon offers the new LG Chocolate for free with a two-year contract. But without that subsidy it will charge customers about $300 for the phone.

Other carriers have also started offering month-to-month service. T-Mobile offers a similar service plan called "FlexPay." Sprint Nextel's no-contract option offers customers 200 minutes of talk time, plus nights and weekends for $39.99 per month. The plan works with all phones except the Instinct and other PDAs and includes 200 minutes, unlimited night and weekend minutes starting at 9 p.m., and nationwide long distance. AT&T offers a month-to-month plan, but it isn't available for all their phones.

The Aliph Jawbone 2. Is its radiation harmful?

(Credit: Aliph)

Q: I'm curious as to whether Bluetooth headsets also emit radiation, which could prove harmful to one's health. What can you tell me about this?
- Craig

A: Bluetooth headsets do emit radiation, but they do it at a much lower power than a cell phone. In fact, it's so low that it's almost negligible. Keep in mind that while cell phones need to connect to a tower that could be a couple of miles away, a headset has an effective range of just 30 feet. However, if the prospect of Bluetooth radiation really worries you, I would suggest using a wired headset instead.

Q: Why do Sprint and Verizon Wireless appear to get sloppy seconds when it comes to the best and brightest new smartphones? It seems as if AT&T and T-Mobile get the most interesting phones, even though their networks aren't as extensive as Verizon and Sprint. I know Sprint has the Samsung Instinct, but that phone has no Wi-Fi. Will Sprint be getting something like the Samsung Omnia for the holidays?
- Eric

The Samsung Omnia could come to AT&T.

(Credit: Samsung)

A: Though the selection of Sprint and Verizon Wireless smartphones isn't quite as extensive as with the GSM carriers (AT&T and T-Mobile), I'd say they have some very decent options. Verizon has the XV6900, the RIM BlackBerry Curve 8330, and the Samsung SCH-i760, while Sprint offers the RIM BlackBerry Curve 8330 and the Motorola Q9c, to name a few. And though it's not a smartphone by our standards, the LG Dare is a solid option as well. I'd agree, however, that the CDMA phones are lacking in Wi-Fi support. AT&T in particular does better in that department. And incidentally, if anyone is getting the Omnia, Bonnie Cha thinks it will be AT&T.

Because CDMA has a smaller global footprint, some cell phone manufacturers are less inclined to make CDMA phones. Just look at Nokia and Sony Ericsson, for example. Nokia has dabbled in CDMA phones, but it has never had a clear-cut strategy for doing so. And Sony Ericsson, on the other hand, shuns CDMA completely. The technology does get attention from Japanese and Korean manufacturers like Samsung, LG, and Kyocera, but that's mainly because they have CDMA in their own back yards. Moto spends a good deal of time in both sectors, but there again, Moto operates in a country that uses CDMA.

As for the lack of Wi-Fi on Sprint and Verizon phones, I'd blame that on the peculiarities of the carriers. In my experience, the CDMA carriers tend to be much more controlling and protective than T-Mobile or AT&T. Verizon was the last carrier to remove Bluetooth restrictions in its phone and it was only last year that Sprint and Verizon said they would start allowing unlocked phones on their networks. I'd theorize that they're slow to adopt Wi-Fi because they want to keep their customers using their calling minutes.

Q: I bought a new unlocked phone and would like to start a new account at AT&T. Can I get out of paying an activation fee and signing a contract? - Elisa

A: As a new customer you will have to pay an activation fee, even if you're using an unlocked phone. Yet, you might be able to avoid signing a contract that includes an early termination fee. The only reason carriers charge an ETF in the first place is to recover the cost of selling you a new phone at a discount. But, if you're not getting such a discount or rebate then there's no reason you should be stuck with an ETF. If AT&T tries to press you with one, I'd argue that point.

Kent German, CNET's cell phones guru, answers your questions about cell phones, services, and accessories and reports on the state of the industry. Send him a question.

A judge in California has ruled that Sprint Nextel's early termination fees are illegal and said the wireless operator should pay back $18.2 million in collected fees to consumers, a decision that could help sway decisions on similar cases throughout the country.

The preliminary decision released earlier this week is a major blow to Sprint and to other phone companies in their battle to defend themselves against angry consumers who say the fees imposed on them when they leave the companies' services are unlawful.

Verizon Wireless, which was also being sued in California, has already settled its case, agreeing to pay $21 million to settle all claims against the company. And after the decision against Sprint, there's a chance that cases against T-Mobile and AT&T could also be settled.

T-Mobile USA is the latest mobile operator to make it easier to get out of those dreaded cell phone contracts.

On Monday the company said that it will pro-rate or reduce the cost over time of its early termination fees for contract customers. This means that customers will pay less to terminate their subscription as the end of their contract nears.

Beginning on June 28, customers with a one-year or two-year contract with T-Mobile will see their early termination fee drop from $200 to $100 if they end their contract with 91 to 180 days remaining on their agreement. If they end a contract with fewer than 91 days left on it, they will pay a termination of fee of $50. For customers who terminate their service in the last 30 days of their contract they will either pay the $50 fee or their standard monthly charge, depending on which one is cheaper.

The new policy only applies to new T-Mobile subscribers and subscribers who are renewing their contracts on or after June 28.

The battle over early termination fees has heated up recently as wireless operators face multimillion-dollar class action suits from consumers who say these fees are unfair and deter competition. Earlier this month a California state jury ruled that Sprint Nextel's fees were indeed legal in the first of these class action lawsuits.

Now the Federal Communications Commission is looking to get involved, and is considering making rules about early termination fees. Chairman Kevin Martin has included pro-rated contracts in his proposal, which he is hoping the commission will consider later this summer. Congress has also weighed in with proposed legislation.

Cell phone operators seem to have gotten the message. And the major players are starting to make changes. Verizon Wireless was the first major carrier to adopt a pro-rated policy almost two years ago. AT&T also announced it had changed its policy in October. Starting May 25 new AT&T subscribers will have their termination fees pro-rated over the life of their contract. The early termination fee will start at $175 and it will be reduced by $5 every month over the life of the one- and two-year contracts.

Sprint Nextel also said it will change its early termination fees. But the carrier has not implemented the new policy yet.

In addition to the new early termination policy, T-Mobile has also recently announced more options for customers who don't want a contract. The T-Mobile FlexPay plan offers T-Mobile customers its typical cell phone packages that include long-distance calling, roaming, and special rate offerings like MyFaves with no contract. Subscribers simply pay the retail cost of the phone and the regular monthly service charge for the service.

T-Mobile has also added more options for its pre-pay and pay-as-you-go customers. Consumers can choose a Pay By the Day plan. Under this plan, users pay $1 for every day they use their phone. They are given unlimited T-Mobile to T-Mobile calling and unlimited night calling from 7 p.m. to 6:59 a.m. For all other calls, users are charged 10 cents a minute. And they're charged 10 cents a minute for outgoing text messages and 5 cents a minute for incoming text messages.

T-Mobile also offers a Pay As You Go plan, which had previously been called T-Mobile To Go. This plan allows customers to pay for minutes they use. If they top off their account with $100, they get a 15 percent discount.

And finally, T-Mobile renamed its Sidekick To Go plan simply the Sidekick Prepaid plan. This plan offers users unlimited domestic e-mailing, Web surfing, instant messaging, and text messaging for $1 a day. And nationwide calling under this plan is 15 cents per minute.

The Federal Communications Commission will discuss a proposal at an open meeting Thursday that could reduce the cost of getting out of your cell phone contract.

The industry-sponsored proposal would give new cell phone customers a 30-day grace period to cancel their contracts without penalty. After those 30 days, early termination charges would then be pro-rated over the life of the contract. This means customers who want out of their contract in month 20 would pay less than those cancelling their service after only four months.

Cell phone operators have argued that they must impose early termination penalties on contracts because they subsidize the cost of the handsets. And to recoup the cost, the operators must be guaranteed a certain amount of service revenue.

AT&T and Apple just announced this week that the new iPhone 3G will be offered in this way. AT&T customers will be required to sign a two-year contract in exchange for the subsidy, which brings the cost of the new 8GB of the phone down to $199.

Customers who bought the first iPhone were also required to have a two-year contract with AT&T despite the fact that the phones were not subsidized.

In the eyes of many consumers these early termination restrictions are unfair and hamper competition. And thousands of them have banded together to file class-action lawsuits.

Check back on Thursday for coverage of the FCC hearing, which begins at 7 a.m. PDT.