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U.S. Customers Could Look Forward To Nicer Fees

The FCC will hold an open meeting today (PDF) on the topic of Early Termination Fees, bringing in a variety of panelists to discuss the future of a thorny practice that, while rankling consumers, is claimed as necessary by the cellular service industry.

Central to the discussion will be an industry-sponsored proposal that seeks to make massive changes in the way providers handle termination fees: under the proposed changes, customers would receive a 30-day grace period to cancel a contract after they sign it, and in the event of a terminated contract after that time, the applicable fees would be prorated down based on the contract's time remaining.

Traditionally, cell phone companies charge the same termination fee regardless of where a customer is in their contract -- fees stay the same regardless of whether they are 60 days in, or only have 60 days left. This policy, combined with an increasingly skyward rise in the fees themselves, recently resulted in a phalanx of class-action lawsuits against the industry as consumers become bitter over what they perceive to be company lock-in. Providers say the fees are necessary in order to subsidize customers' phones, which are frequently sold far below cost in order to make service plans more appealing.

The new iPhone 3G, with its $199/$299 price point in the United States, will be one of the first phones offered under these new rules. While AT&T customers are still required to sign a two-year agreement to buy the phone, if a customer chooses to terminate his or her contract they will only pay a prorated fee calculated from the time remaining on their contract. Purchasers of the original iPhone will remain bound to the old rules.

Meanwhile, a series of e-mail messages recently revealed by the Associated Press showed that some, if not all, providers in the cell phone industry exempt the government from termination charges.

"The government will never, never accept [a termination penalty] and for the most part I think a lot of the [complaining] is real," wrote Nextel (now Sprint Nextel) former marketing vice president Scott Weiner, in an "confidential" e-mail dated January 2004. It regarded a question of whether or not to assess termination fees for government subscribers that canceled their contract.

As it exists currently, cellular service regulation is handled in a "patchwork" fashion at the state level; industry representatives want the FCC to establish a national regulatory framework instead.

Appearing at the hearing are representatives from the trade group CTIA, DIRECTV, and Verizon, as well as a variety of professors, lawyers, and ordinary consumers.

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One way to avoid termination fee's
By Elementalism on 6/12/08, Rating: 0
By FITCamaro on 6/12/2008 10:00:29 AM , Rating: 5
Yes and I believe that would qualify as fraud.

RE: One way to avoid termination fee's
By MrBlastman on 6/12/2008 10:15:49 AM , Rating: 3
Hmm, somehow I don't think that'd would woooooorkk mmmmkay. *sips coffee*

So the fractional pennies will never be found?

Depending on what sort of company you set up, you very well could be liable for the default. Either way, I wish you the best of luck with that and if you need an attorney at some point, I'm sure there are plenty on billboards who will be willing to help you with your case afterwards.

By Elementalism on 6/12/2008 10:27:44 AM , Rating: 2
Well lets say the track record on this is pretty high.

By Samus on 6/13/2008 3:12:27 AM , Rating: 2
I negotiated with Spring a few years ago when I canceled to pay half my termination fee. I think it was 75 bucks, not totally unreasonable.

By littlebitstrouds on 6/12/2008 10:08:50 AM , Rating: 5
Right when I graduated college, I still had my nextel phone. I was traveling to NYC and never recieved a call, or voicemail until I got back to PA, 14 hours later. It resulted in me missing two serious auditions and a meeting with a prominant casting director which I never got to meet with again. I propmtly canceled my Nextel account and picked up another provider, and have never had that problem again. Problem is, I had to pay $400 for early termination. What the?

The problem for me isn't the cancelling fees. It's the absolute lack of protection for the consumer that certain service industries seem to get away with. If a product doesn't do what it's supposed to, how am I resonsible for getting rid of it for something that does? A major flaw, imo, in a lot of service contracts.

RE: Insane
By Suntan on 6/12/2008 1:01:12 PM , Rating: 2
I'd have to agree.

Look at the double standard that people hold manufactured goods to vs "services".

You're probably going to win a fat load of cash because that power drill maker didn't "reasonably foresee that the plugged in power drill would be used as a hammer" (yeah, it was really a case that was decided for the widow of the idiot that fell off the roof after being electrocuted by the plugged in drill). However, a company can completely fail to deliver what they advertise, but you often have little recourse except to not use their service in the first place.


RE: Insane
By hcahwk19 on 6/12/2008 8:06:51 PM , Rating: 2
You should not have paid that $400. The contract you signed works both ways. You not having the trouble you did in NYC amounted to a breach by Nextel, and you are not responsible for the fee.

My dad's company had the same trouble with Nextel. The two phones we had would not work at the office behind our house, yet if we drove a mile down the street we had full signal. We called them several times, and all Nextel told us was that the problem was with our phones and to reset them, though we told them it was a tower problem. Well, we did that several times, and after 5 business days with no service at the office, we called them up and told them we were canceling the contract. They told us to pay $400 termination fee for both phones ($800 total). We told them to get their fees from someone else, because they were not providing service in their published area.

In the end, we went to verizon, have been with them ever since, and have never had service problems.

Nextel called us back the week after we canceled and admitted that the problem was with the tower down the street, like we told them all along.

How about...
By BMFPitt on 6/12/2008 11:06:13 AM , Rating: 2
Why isn't there one company out there that will come up with a plan that doesn't come loaded with phone subsidies? How about I use the phone I already have, and you charge me $5 less per month? It seems like you should be able to make the same amount of money that way, and grab a lot of market share given that pretty much everyone already has a phone.

RE: How about...
By iceolate on 6/12/2008 12:07:34 PM , Rating: 2
There is one, at least here in California, in the Bay Area, Sacramento area and Los Angeles. Its called MetroPCS. No contracts, you pay month to month, not more than $50 (for a plan with unlimited everything) and you buy your phone right from the start (which cost of phone includes your first month). They don't have the greatest phone selection, but it has improved. They have surprisingly good customer service too, although I've rarely had to use it. Only problem is that their coverage can be a bit poor in certain areas (it varies drastically across San Francisco), so I do experience a lot of dropped calls. Overall though, its better than dealing with cut-throats like Sprint.
Now if only these other providers had better pay-as-you-go no contract, unlimited plans (or at least a reasonable amount of minutes for $50 a month or less). It must be because they actually do pull in a huge amount of revenue from overage and cancellation fees. That, and they are probably in bed with the phone manufacturers (such as Apple & AT&T in the U.S.).

RE: How about...
By Alexstarfire on 6/12/2008 1:54:23 PM , Rating: 2
Yea, I was going to mention MetroPCS too. They suck IMO though. Have to use their cell phones to get their service, from what I understand anyways. If I'm wrong on that then let me know. Cause from what I remember they don't use SIM Cards, though I could ask my friend on that since he has a MetroPCS phone, so they only work with themselves. To me, that's just another lame way to keep you locked in to the company as well. Their phones aren't cheap at all.

Open the books
By boomhower1820 on 6/14/2008 1:45:16 PM , Rating: 2
Since the phone companies are arguing that they need to recover the the subsidy they provided on the original purchase how about this:

Make them provide what the amount of the subsidy is. Then prorate that amount for the length of the contract. So if the subsidy is is $200 and you have completed 70% of your contract then the fee would be $60.

Yes there are problems, mainly they would have to disclose how much the phone actually costs, I would imagine this is not something they want to do because as others have eluded to it is not nearly as much as they want you to believe.

Already happens
By FITCamaro on 6/12/08, Rating: -1
RE: Already happens
By Brandon Hill on 6/12/2008 9:28:44 AM , Rating: 2
Alltel doesn't prorate the contract -- that's for sure. I'm seriously thinking about getting an iPhone 3G, but I'd have to break my 2-year contract with Alltel. I called them up to see how much it would be to break the contract: $200.

No prorated fees, nothing, just a flat $200. I still may cough it up though -- I did sign a contract afterall. After selling my 32GB iPod touch, my existing phone, paying the ETF, and purchasing a 16GB iPhone 3G, I should still come out with minimal rear-end reaming.

RE: Already happens
By HVAC on 6/12/2008 9:52:23 AM , Rating: 2
In any event, contracts work both ways and the FCC should be looking at the common practices and policies of a regulated industry. If the FCC determines that the common industry practice is against the public interest or the industry's long term interest, they should say something.

RE: Already happens
By FITCamaro on 6/12/08, Rating: -1
RE: Already happens
By littlebitstrouds on 6/12/2008 10:13:36 AM , Rating: 2
Because some companies can crap on consumers and the industry all follows. Where is the consumer left in this equation? Monopoly industries might not be run by one company, but a certain few companies hold a tight grip on the industry standards regardless. This is the problem with a lot of service industries.

RE: Already happens
By Curelom on 6/12/2008 10:53:48 AM , Rating: 2
An excellent example would be cable/satelite providers

RE: Already happens
By Mitch101 on 6/12/2008 10:43:54 AM , Rating: 3
My only guess is that you can have a land line telephone and use either landlines or a voip service so why not with cell phones.

Seems a bit of a waste to have phones that will only work with a specific carrier and I have bought great phones that didnt work well with the carrier I was with. It would have been nice to just change carriers without having to purchase another phone.

RE: Already happens
By Cygni on 6/12/2008 1:31:37 PM , Rating: 2
Who is the FCC to decide this? Well, they are the FCC. Thats who they are.

Their charter is to regulate all radio frequency use and interstate telecommunications in the United States. Consumer protection is a key, if not THE key, part of that regulation.

RE: Already happens
By tastyratz on 6/12/2008 2:04:43 PM , Rating: 2
yup... that's kind of the point they exist for.

The industry needs to be regulated with consumer interest because if the big providers simply just run free people wont just stop using cell phones, were at the mercy.

Its kind of like those useless emails that go out saying "nobody buy gas today lets teach them!"
instead everyone fills up the day after.

RE: Already happens
By lexluthermiester on 6/12/2008 9:28:52 AM , Rating: 2
in the event of a terminated contract after that time, the applicable fees would be prorated down based on the contract's time remaining.

Again, many companies already do this.

That is incorrect. Not one carrier in the US prorates their early term schedules. This may be confirmed by going to any carriers web site and reviewing the contract terms, which are[and are required by law to be] available for review by the general public.

RE: Already happens
By FITCamaro on 6/12/2008 9:59:01 AM , Rating: 2
Verizon offered it starting in fall of 2006. Plus they let you change your contract without extension and the 30-day test drive.

AT&T has also started allowing it.

RE: Already happens
By RamarC on 6/12/2008 9:29:47 AM , Rating: 2
i just wish the major carriers would seperate phones from service. stop subsidizing cell phones and let us buy/use any phone. it would simplify their business model and imho make their businesses more profitable.

RE: Already happens
By JustTom on 6/12/2008 9:57:39 AM , Rating: 2
If doing so would really increase the phone companies’ profits how come not a single one does so? Linking phone cells with service contract is a good business model since it ensures a steady stream of income. If the phone companies sold phones they'd need to compete with cut rate e-tailers on the e-tailers turf and would sell far fewer phones. Also, by subsidizing phone prices it makes expensive phones much more palatable to the average consumer who is not going to consider that the money he or she saved on the phone is recouped in higher fees.

RE: Already happens
By Elementalism on 6/12/2008 9:51:59 AM , Rating: 1
Likewise the cell phone explosion we see wouldnt happen if the phone companies didnt subsidize the costs of the phones. In other words the phone companies want us to subsidize their business growth plans by locking us into their program's. It is a brilliant plan when you think about it.

A recent analogy would be the HD-DVD vs Blu-Ray format war. Toshiba sells at a loss or in other words subsidizes the costs of the players to see growth which will return profits in the future. If they were a phone company they would have you sign a contract for the low cost player that says you can buy a Blu-Ray player for 2 years or you pay 200 bucks. A win win for Toshiba.

The phone industry is the only place I see this practice done. Every other industry will sell their product at a loss to grow the business but the costs are incurred by the company doing the selling, not its customers.

RE: Already happens
By samir80 on 6/13/2008 4:34:51 AM , Rating: 2
In India no contracts u buy ur own cellphone and we still have
300 million cellphone really its not necessary to subsidize cost of cellphones.

RE: Already happens
By Chaser on 6/12/2008 10:32:32 AM , Rating: 2
I don't want some mumbo jumbo to make a phone price appear cheaper. Nor do I believe people should hop around from company to company.

Just give me the real price. Not some double speak, fine print, numbers game to artificially lower the price of the phone. The cell phone companies want you to stay with them of course. Not to mention these ambiguous plans they set up to pounce on you with ridiculous additional fees when you exceed your minutes or text charges. So each month they can keep you then each month they have more opportunities to get more money from you. Most everything is in their favor with their stupid fees, activation, cancellation, and not to mention overages with their goofy plans you have to watch over like a hawk. So this notion of "well you signed the contract, you agreed. Deal with it?" I guess we'll see what the FCC thinks about that since they have started a review process.

RE: Already happens
By UNHchabo on 6/12/2008 12:50:20 PM , Rating: 2
This is why I bought a pre-paid phone. I barely use it, and I don't have a contract. If I don't want the phone anymore, I let the phone expire, and throw it out.

RE: Already happens
By Reclaimer77 on 6/12/08, Rating: -1
RE: Already happens
By heeros1 on 6/15/2008 2:20:03 PM , Rating: 1
I have to agree with FITCamero, and I don't know why he was rated down for this.

I use T-mobile, and when I bought the phone, I had 14 days for a full refund. Even if I don't like it, to get the phone cheaper, I'll have to sign a contract. You ether pay full price for the phone, and get the service on top of that, or you get the phone discounted and pay the same for service.

One thing that I WOULD be looking forward to would be the proration of the cancellation fee. I like that idea a lot.

"Nowadays you can buy a CPU cheaper than the CPU fan." -- Unnamed AMD executive

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