FCC To Hold Hearings On Early Termination Fees

Isaac-Lew sends word of an article in the Washington Post reporting that on June 12 the FCC will hold a hearing regarding cellphone early termination fees. The Commission may look at early termination fees for TV and Internet service as well. The wireless carriers are taking a Bre'r Rabbit approach toward possible FCC regulation of early termination fees — the FCC's intervention would pre-empt a number of class-action lawsuits going forward against Verizon, Sprint, and others. These suits, stemming from state regulations, could cost the carriers billions. "...the carriers have renewed a lobbying effort in recent weeks to persuade the FCC on a legal definition that would stave off the state lawsuits on cancellation fees. On May 6, 2008, Verizon Wireless chief executive Lowell McAdam and the company's chief lobbyist, Tom Tauke, met with [FCC Chairman] Martin, urging him to adopt a federal policy, according to FCC records."

Comments

Re:So the price of phones will just increase, nice

[poptix_work]

I have never accepted one of their free/reduced priced phones (I prefer to buy online as well, provider selection + disabling of functionality sucks) but you still get forced into a contract. I see no problem with allowing the early termination fees for people that take advantage of free/reduced price phones, you should not be forced into a contract when you bring your own phone though.

read the effin contract

[gadabyte]

don't like termination fees? don't sign a contract agreeing to pay them if you leave. duh. it's not like you have some inalienable god-given right to a cell phone. hence the contract.

i don't think this should apply to dropping service if the cell carrier isn't holding up their end of the bargain (crappy coverage, non-functioning hardware, refusal to address issues, etc) - then, by all means, the customer should have full right to leave without ANY penalty. but if the customer is leaving because they want the sweet phone on the other network, or just because they feel like it...maybe they should have thought of that before signing.

Re:read the effin contract

[JohnWhitney]

Well hell, why don't we apply this to ALL areas of life, instead of just cell phones?

Gas station chains that only sell gas to if we agree to enter into a contract to only buy gasoline from their stations, and you agree to buy a minimum of 50 gallons a month! Don't like termination fees? Don't sign a contract agreeing to pay them if you leave. It's not like you have some inalienable god-given right to drive a car. Hence the contract.

I have my own cell phone. I currently use a pay-as-you go system, precisely because I don't want to be force into multi-year contracts, and I typically only have my cell phone for emergency purposes. But let me tell you, I pay significantly more per-minute than those with a contract (about $0.25 a minute, plus fees).

In an ideal world, a competitor would come along to service my needs. In the real world, there are very few companies with the money to buy the spectrum necessary for cell phone use, and those that have have all gotten together and decided that all of them will use this lock-in method. That leaves me with no choice but to pay exorbitant rates for their service without a contract.
And as I said in a post above, I've had providers attempt to lock me into a one-year contract for the mere privilege of changing my phone number after I moved, so don't give me garbage about this contract being used to subsidize the price of phones.

They'll just change the system

[SamP2]

If it becomes illegal to charge a penalty for early termination, I imagine they'll change the scheme to something like this:

- The "free" phone that is given to you in exchange for signing a 3-year contract, instead becomes a "lease"
- You must give a "deposit" in exchange for the lease. The deposit is equal to the cost of the phone that they would sell it for, should you choose to buy it without a contract
- They'll conveniently offer you an instant loan to cover the cost of the lease. So you don't have to shell out those $300 bucks, you just "owe" them to the company.
- Each time you pay your plan, part of the money is used to cover that deposit loan. If you finish your 3-year contract, the owed amount becomes 0, and you get to keep the phone.
- If you leave early, they charge you the remainder of the loan.

They'll just wrap it all in the same kind of contract you sign without reading anyways, and for most customers it won't be any different in how or how much they pay, compared to the current system. But from the legal perspective, it suddenly becomes a whole new ball game.

Re:They'll just change the system

[Fulcrum of Evil]

Sounds great to me. I get unlocked phones off amazon that I can't get in the USA, so that'd drop $10-$20 off my bill.

You should maybe do some research, ok?

[hassanchop]

Easier said than done when none of the competitors offer anything w/out a contract.

Hmm. Let's examine this.

http://www.wireless.att.com/cell-phone-service/go-phones/

AT&T Go phone. No contract.

http://www.t-mobile.com/shop/plans/default.aspx?plancategory=4

T-Mobile. No contract.

http://www.verizonwireless.com/b2c/store/controller?item=prepayItem&action=viewINpulsePlanDetail

Verizon. No contract.

http://www.boostmobile.com/

Boost Mobile (owned by Sprint-Nextel). No Contract.

Did I misunderstand you when you said "none of the competitors offer anything w/out a contract." because that ALL of the (major) competitors, and no contracts. There are literally dozens of options for cell service without a contract.

Re:Market Forces At Work

[Tony Hoyle]

You could then buy it in a bubble package at Walmart.
Motorola, Samsung, LG, Nokia would have sales reps calling on Walmart, Target and other retailers selling them phones in huge volume to sell us without any bundling, and there would then be significant competition.

What, you can't do that in the US? In Europe we can walk into any supermarket and walk out with a contract free phone 5 minutes later. They're not free but they're fairly cheap - competition keeps the prices down.

One GOOD thing that has happened in the last year, the IPHONE came out.

Previously, you signed up for a longish contract and you got the phone free.

With the iphone, sign up for a longish contract and you pay full price for the phone.

I fail to see why this is a good thing.

Re:Market Forces At Work

[Tanktalus]

Apparently you did that wrong. What I've been told is that I should never talk to the service people at a cell phone company. Instead, always ask to be put straight through to their cancellation department. For whatever reason, they're MUCH more willing to negotiate than the regular service folk.

Personally, I haven't done that. I just can't be bothered. If your front line isn't authorised to make the customer happy, this customer will take his business elsewhere. I don't play games with my business, so if you want to screw me over, well, screw you.

Re; On the flip side;

[Technician]

At least, not in a lump sum up front.

How many phones does the typical person have in a drawer, locked to some provider they had a falling out from?

This may be the end of locked phones. Pick up a phone that you like, not just what they push this week, and pick up a SIM card from your favorite carrier. This iPhone dilemma of nice phone, carrier sucks would end. Service would improve to reduce churn.

You are no longer forced to buy a new phone to change carriers. Why is this a bad thing? As a trend this way, one of the cell stores has a sidewalk sign board advertising unlocked phones for sale. This may be the beginning of a good thing.