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

The FCC was unable to be reached for an opinion...

[Slashdot Suxxors]

because they left early and everyone had to pay 200 dollars.

Market Forces At Work

[milsoRgen]

Early termination fee's are ridiculous, I can understand an earlier time when the costs of building the cellular network were to be thought of. Now it would seem they like their little cash cow, must help them subsidize the latest shitty phone. It's a shame it's taken this many years for it to finally get some government attention.

Re:Market Forces At Work

[Robert1]

I'm not sure what you're getting at. In Europe when you want a new phone you have to shell out several hundred dollars, there are no free phones or discounts. The phone companies here give them away for free*.

*Of course the price of the phone is rolled up into the price of the service you get - that's why new phones need a 2 year service plan because after 2 years you will have paid off the cost of phone. It is also why when you renew your contract you get a new phone, since you have paid off the old one and are making payments on the new one.

If there were no cancelation fees then the company would have no way to make up its initial gift of a several hundred dollar phone to you if you decided to stop paying the monthly fee for it.

If the FCC strikes down cancelation fees then the price of phones will suddenly increase several hundred bucks. This isn't necessarily a good thing for the market since almost everyone I know tends to go for the free phone or the 50 dollar phone when getting a new plan - no one is willing to spend several hundred dollars. At least, not in a lump sum up front.

Re:Market Forces At Work

[Anonymous Coward]

If the FCC strikes down cancellation fees then the price of phones will suddenly increase several hundred bucks. This isn't necessarily a good thing for the market since almost everyone I know tends to go for the free phone or the 50 dollar phone when getting a new plan - no one is willing to spend several hundred dollars. At least, not in a lump sum up front. What I would like to see is:

A) The "free" phone would be require the contract and have it clearly stated (not buried in the contract) that this will include both an increased monthly cost and a early termination fee. The termination fee should be the amount you haven't paid off yet. Ie, keep it for year and a half and cancel, you only have to pay the remaining balance.

B) The option to buy a phone upfront in full, and have a monthly discount (compared to the "free" phone cost). As it is with most companies you can't do this. Even if you spend hundreds on a phone, you have to fight with them to get service without a multi year contract if you're able to get service at all. Even then you pay the same monthly cost as the person with the "free" phone.

I'd like to have the choice. Personally, I'd take B. What I have now is a "free" phone, but I read through the contract you have the choice to not renew it after the 2 year term. I took that option, though it took a lot of arguing with them over it. I still pay the same amount even though it's a three year old phone, but at least I can cancel it whenever I want.

Re:Market Forces At Work

[imageboard]

In Europe when you want a new phone you have to shell out several hundred dollars, there are no free phones or discounts. This is news to this European who has not paid for a handset for ten years.

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.

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.

Except that's not really the way it happens

[Crazy Taco]

*Of course the price of the phone is rolled up into the price of the service you get - that's why new phones need a 2 year service plan because after 2 years you will have paid off the cost of phone. It is also why when you renew your contract you get a new phone, since you have paid off the old one and are making payments on the new one.

That's all well and good in theory, but that isn't even remotely how things happen in practice. Cell phone companies actually use these plans to protect themselves from free market competitive forces and to secretly overcharge people for services and products they've already paid for. I can (and will) back that assertion up with examples in the next few paragraphs, but let me say first I hope those lawsuits suck tens of billions of dollars out of these cell phone companies, because they've easilly gotten billions in ill-gotten gain. On to the examples:

When my wife and I got married December 2006, I was three months away from a new phone and and ending a two year contract. We went to Verizon and asked to consolidate our two phones into one family plan. They did this, but then without telling us extended our contract by a full year. All we wanted was consolidated billing: we kept our same phones, our same numbers, etc. Nothing changed. But they extended our contract by a year, and suddenly I'm continuing to pay off my already paid off phone, I didn't get a new one, I'm told leaving will cost me a 200 dollar termination fee (for what, I might ask, since my phone is paid off), and getting a new phone will cause them to extend my contract by two years.

But it gets better than that. My wife and I found we weren't using all that many cell phone minutes, so we went back a few months later to lower the minutes on our plan. They secretly extended our contract again without telling us. Meaning once again I'm paying for a paid off old crappy phone, I still didn't have a new one, and I was going to get charged an early termination fee (for no justifiable reason) if I quit.

So that's how these things really work in practice. They do nothing but screw over the consumer in what really is an entirely illegal way. Obviously, if I had known in either case my contract was going to be extended, I would have said no way (I didn't find out about those secret extensions until months after the second incident). What it comes down to is this: I was unknowingly placed by Verizon into a contract I never agreed to, and then was charged an early termination fee quitting it! That is the definition of unethical, I'm not the only one they did this to, and the judge can't take away enough billions from them to satisfy us (or make up for what all these cell phone companies have done to American consumers).