Court Makes Sprint Pay $73 Million Early Termination Fee
from the see-how-that-feels? dept
You know that awful feeling you get when your mobile operator tells you there's a huge "early termination fee" for canceling your contract early? Yeah, that's probably about how Sprint executives feel now that Sprint may need to pay $73 million for its ETFs. A closer look at the details shows that it really would just be refunding $18.25 million and then reversing charges on another $54.75 million in ETFs that hadn't been paid. People absolutely hate ETFs, and even Sprint acknowledged this last year when it noted that its eventual WiMAX network won't have ETFs.However, there is a reason why such ETFs exist: it's basically to recoup the subsidy that mobile operators pay to give you your super cheap mobile phones. And, those ETFs were in the contracts offered to customers, so it's difficult to see why such things are really a problem. The actual ruling sheds some light on this, as it notes that in 80% of the ETFs, it was actually Sprint terminating the contract and then still charging the ETF -- which, as the ruling points out, is basically Sprint trying to get "liquidated damages." Then, the problem is that it does so in violation of a specific California law that requires a more accurate calculation of liquidated damages, beyond "the ETF is $200 no matter what." So, this isn't the end of ETFs by any means, but might mean that they need to be a bit more fair going forward.
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Filed Under: california, early termination fee, etf, liquidated damages, subsidies
Companies: sprint
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cheap phones, it's 'because they can'. The phones
are already cheap (economies of scale and comparison with
prices for handsets in countries with actual competition will bear this out), they are just inflated in price and
then reduced.
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Re:
5 years ago I bought the cheapest phone they had and got a pay-as-you-go plan. It was 95 Euros, or about $120 for the cheapest one available.
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That doesn't change the fact that Sprint mischarged but you should at least come with some legitimate info.
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Wha, wha, what?!!!!
Come on - the ETFs ARE designed to prevent people from just buying cheap phones and getting out of their contracts early in which case the carrier has lost money.
Carriers ALWAYS subsidize their phones - they make the money back either through ETFs or the actual service plan people subscribe to.
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Sprint Bad
Additionally, the logic behind the early termination fees is highly flawed. It should be only for actual damages. If a renter breaks a lease and the landlord finds a new renter in a couple of days, the old renter is only on the hook for the days the apartment was actually vacant. So if one breaks a cell phone contract and returns the phone, there should be no early termination charge as the phone company can re-sell the phone to a new customer.
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Re: Sprint Bad
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Re: Re: Sprint Bad
Also, just because the phone is "old" doesn't make it worthless. When we ditched Sprint, we were able to sell our "old" phone, which I believe was over 4 years old at the time of sale.
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There must be a better business model for $ell phone companies, maybe, they sell the phone to you at cost, in turn you agree to x amount of service, with maybe a small (much less then 200$) deposit if you quit early, and the longer you're a customer, the cheaper the ETF gets.
I agree these phones aren't that expensive, they are marked up 300-400%(if not more) to make you think you're getting a deal.
With cell phone quickly replacing home phones, you'd think these companies would be re-thinking things.
If a company has good service and fair prices, they shouldn't have to worry about people living, unless they are moving out of area or money troubles (which if its money problems, they aren't gonna get the ETF any way, at least any time soon... hmmm eat or pay ETF).
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There are too many manufacturers for that to be the case IMO. If somebody could really sell a phone for a third of what the competition is charging and still make a profit, they would do it. Unless you think all the handset makers are colluding. Which is possible but doesn't seem very likely to me.
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bullshit
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Re: bullshit
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Re: bullshit
Fortunately, I worked for an IT company that was also an indirect dealer, and they were able to get it fixed for me.
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ETF is just a ball and chain
for customer retention.
An aside, i don't know why phone manufacturers feel obligated to use carriers to sell their phones anymore. When the phone was super expensive it made business sense, but now?!? Sell the phones independent of carriers, carriers won't have this phone subsidy excuse to inflate prices and keep dumb fees like ETF.
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Reverse ETF?
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Re: Reverse ETF?
Read your contract carefully. In fine prints, it will say that the carrier is entitled to change the terms of the service. In Canada, two major carriers just announced that they will start charging incoming text messages. Nothing their customers can do.
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Re: Re: Reverse ETF?
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Re: Re: Reverse ETF?
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ETF's suck and so does Sprint now.
It gets worse,
Previous to that I had activated an old phone we had upgraded away from (it worked fine once I bought new battery) for a relative of mine to use on our family plan. The CSR on the phone told me that since I was activating an old phone there would be no additional contract or ETF required. I figured that since I didn't sign anything it was the case.
He Lied.
When she decided to get a phone through her work they made us pay a full ETF after 15 months even though they couldn't prove that I agreed to a 2 year contract or ETF. They just kept insisting that that was always the way it was.
Sprint USED to be the best damm company, Ever.
I was a Sprint long distance customer for a long time & due to the exceptional quality of their customer service I bought into their wireless service as soon as it became available in this market.
Sadly since then they have turned completely to shit, and the day my current contract runs out they are never going to see another dime from me, Ever. Ever. Ever.
By the way, I tried and tried to find some other way to say what sprint has become but as a long term customer that remembers the good times, I can honestly say that that is the only possible description.
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Re: ETF's suck and so does Sprint now.
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Re: Re: ETF's suck and so does Sprint now.
And while you may be right I'd hope that someone in the cell phone biz will figure out that Proper Cust. svc. = Loyal Customers who are less price sensitive.
Case in point, I pay a Premium ISP for Premium service, Customer Service & Support. Yes I pay more than someone that has Comcast but I get more too.
Thanks (I think)
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A bit more fair
* "Free" phones are actually financed, with a few dollars added to each monthly bill for this purpose. (This is typical with broadband modems and the telcos like it fine there!)
* If the phone gets paid for fully, it's yours to keep; the monthly bill drops by those few dollars.
* If the contract is ended by either party before that point, the customer can either pay the balance and keep the phone, or return it. (If it's not in good condition, the customer is charged for the repair or the remaining unpaid portion of the phone's price, whichever is smaller.)
Fair enough? (Too fair for any self-respecting telco to ever even consider, I'll bet! Even though returning the phone doesn't get you any money back with the above suggestions.)
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Re: A bit more fair
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Another Problem with ETFs
Even if you read the fine print and know what a crappy deal signing a new 2 year contract is, if you lose your job or suddenly get popular, you may not have much of a choice.
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Re: Another Problem with ETFs
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I'd like to see...
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Can't have your cake and eat it too
$4 a phone? What are you smoking? The packaging and transportation from China costs more than that!!! Most phones are minature laptops these days. The gravy days of telecom are over, they are all struggling to survive, that's why they are buying each other up.
Look at it this way, you sign up for internet access from your cable company; they give you free installation of cable and a free computer as long as you sign a contract stating that you pay monthly charges for 2 years. And next month, Direct TV comes to you and says I'll give you newer free computer to switch to us; sell the one you have on Ebay, break the contract with the cable company, screw them they charge too much anyway. Then go to court to make it illegal to charge early termination fee so you can get out of the contract YOU SIGNED!!!! American Justice? Freedom? Is this how we want to run our country? If you are self employed do you want to get screwed like that? If you don't want a contract, go to a pre-pay program and pay for you phone up front!!!!!!!!!!
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Re: Sprint bad
This doesn't torpedo what I said earlier (re: rent-to-own, "A bit more fair"); if the phone's a year and a half old, it's also mostly paid off, so the phone company isn't on the hook for as much if they have to eat it, and they can offer it to a new customer cheap. Who might buy a phone that's used and over a year and a half old? Someone on a budget for whom it's cheaper than a new one and adequate for their needs.
If the phone's nearly new, which is when the company would still not have recouped most of its costs, then it's also more desirable to potential new customers. If there's no newer model for that make yet, and it's in good condition, they can just wipe its memory and offer it as if new, assuming they include in their fine print that "new" phones may be slightly used or genuinely new.
There's certainly no justification for charging much more than cost for the phones, one way or another, or (especially) for renewing the ETF period in cases where the phone wasn't replaced with a new one.
In the special case of the iPhone, the high prices may be genuine costs -- there's an exotic new hardware component (the multitouch screen) that might not be cheap to manufacture yet, and it probably has a relatively speedy CPU and a relatively large amount of memory compared to a typical recent-model cell phone, and those cost.
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Money for travellers from class action lawsuit
________
jackspar.
California Treatment Centers
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Free...
Seriously, do it!
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Re: Free...
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ETF Without Phone
Because those contracts aren't negotiable.
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FREE!
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Re: ETF
Yes the ETF are subsidizing cost of equipment. As I look at one of the most basic phones available at my company, the wholesale cost we pay as a billion dollar company is $109.99 to the manufacturer. This phone has no camera, no bluetooth, nothing but make and receive calls. How many people do you think want to pay $150 (standard retail mark up from cost) for that???? In a country where everything is measured in what I have to pay today, this would not fly.
I do agree that if you provide your own equipment you should not have to sign a contract or pay an ETF. This is a great idea.
So my ideal company would be prorated ETFs as Verizon, ATT&T and other carriers have now implemented and no contracts for brought in equipment.
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ETFs
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Sprint Puts Positive Spin on Losses
Sprint has lost nearly a million customers this quarter. According to the article, Sprint did this to improve the "quality" of Sprints customers.
The Times writes: "But the customer losses left some analysts pondering what Sprint’s prospects are. “It’s fine to say you are getting rid of undesirable customers, but that means you have to make significant growth someplace else to make up for it,” said Walter Piecyk, an analyst at Pali Research who covers wireless companies. “It’s a company in perpetual decline.”"
What is missing from Sprint's comments on their decline??? IMPROVED CUSTOMER SERVICE. Its fine to want quality customers, but I don't think quality customers will stick around if they are treated poorly. Seems that Sprint only wants zombies as customers.
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Prepaid
You can't complain about the contract AFTER you signed it.
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Typical Flawed Assumptions ( like a broken record )
Cell phone companies often change the terms of their contracts with little or no notice. In fact, in California at least, the cell phone industry has lobbied heavily to maintain the ability to change the terms of your cell phone contract at will.
The absurdity of thinking that one party has to maintain the terms of an agreement, while another party engages the government to manipulate contractual obligations should be obvious, even to a ditto-head.
That...along with numerous other tactics, such as:
So, in conclusion, the 'it's in your contract' logic is not well reasoned, shallow summation of the reality of dealing with cell phone companies.
...furthermore, It should also be painfully obvious that the termination fee has nothing whatsoever to do with recouping the costs of cell phones provided to consumers. Any pre-schooler who has ever accompanied their mother to the grocery store, realizes that the so called 'suggested retail value' of these cell phones is simply a random number, plucked out of the air, by the marketing department...
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etf amount
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threats
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