updated 09:10 am EDT, Wed May 21, 2008
FCC Deal for Early Cancels
The Federal Communications Commission is exploring a deal that would cap early termination fees (ETFs) on cellphone contracts in exchange for leniency in ongoing lawsuits, according to information gleaned from alleged sources by the AP. FCC officials are reportedly discussing rules suggested by Verizon which would require that carriers pro-rate their ETFs based on the length of a customer's stay with the service, preventing charges that can run up to a typical $175 even if a customer leaves a service one month before the end of a given contract.
This proposal would also mandate trial periods, with customers able to back out of contracts penalty-free before the first 30 days of service are over, or else within 10 days of receiving a first bill. Such a move would let customers back out of service if they find themselves already unhappy with the terms or the quality of the service. Customers have often complained of having to pay such fees even when poor reception makes phone service nearly unusable in certain areas.
In exchange, however, the FCC would reportedly step in to nullify lawsuits by customers that are underway in several states and would pass control over any such future concerns to the federal level by restricting states from allowing lawsuits over these matters.
The FCC has declined comment, though the claims suggest that Verizon's rival carriers are aware of the proposal and would agree to the terms.
Verizon's plan is controversial as it essentially sanctions existing strategies for softening ETFs by both itself and other carriers. The company already discounts the fees to a minimum amount, while AT&T, Sprint, and others have already promised to implement similar pro-rating schemes for their own customers in 2008. The gestures are widely believed to be an attempt to head off a Congressional bill that would codify the terms into law.
ETFs are typically used to keep customers locked into contracts and recently drew increased criticism with last year's launch of the iPhone in the US, which saw many customers outside of AT&T forced to pay extra to switch carriers and obtain the Apple phone. Others in turn have pointed to the mandatory two-year contract for the iPhone as penalizing customers who grow dissatisfied with either AT&T or the phone itself by imposing an ETF for leaving in favor of another carrier.