Bill Introduced To Limit Early Termination Fees

from the terminate-this dept

Thu, Dec 3rd 2009 8:14pm — Mike Masnick

Some Senators have introduced a bill that would limit early termination fees from mobile operators, saying they couldn't charge more than the subsidy they provided for the phone itself, and that the rules for any early termination fee needed to be quite clear. Not surprisingly, the mobile operators and their lobbyists are saying this is "unnecessary" because (due mainly to gov't pressure, not competition, as they claim) the operators have already made the ETF process less ridiculous by going with pro-rated fees based on how long is left on a contract. Of course, if it's true that the law is unnecessary, then it's not clear why they're against it...

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Filed Under: early termination fees

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AJ, 3 Dec 2009 @ 8:44pm

then it's not clear why they're against it...

Just because a law is unnecessary, it does not mean that you simply introduce it. That is what starts building up bureaucracy and redtapism in law
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Anonymous Coward, 3 Dec 2009 @ 8:46pm

Re:
True, but something tells me that the mobile lobbyists could care less about the effectiveness/efficiency of the political system.
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Anonymous Coward, 3 Dec 2009 @ 8:47pm

My "Contract"
My contract with AT&T basically states (in the fine print) that if i terminate early, even if Ive used the same phone for 2 contract renewals, that i would have to pay the prorate for the time remaining on the contract, AND the original retail price of my phone (even though its over 4 years old now.

now, heres the kicker with my AT&T crap. Even if its at the end of my contract, and i decide NOT to renew, they will charge me a fee for ending my service. So basically, im damned if i do, damned if i don't.

I didn't have this crap of a problem when it was Cingular.
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vilain (profile), 3 Dec 2009 @ 8:55pm

Same crap on Verizon
I switched to Verizon when Cingular took over AT&T Wireless. I didn't get a top-line phone and got minimal service. I've also resisted getting the latest phone ever 2 years. They keep nagging me to sign up for another contract but I'm now on month to month and have no termination fee (written before they started charging you for leaving regardless). I won't get an iPhone or a Droid or any other smart phone because of the termination fee. Is it unreasonable to want to stay out of servitude to these guys?

In their eyes, no. Tough nuts.
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CAS, 3 Dec 2009 @ 9:20pm

Re:
I agree - I hate this argument because it sounds like the "don't worry about government spying if you have nothing to hide" argument.
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IDEA, 3 Dec 2009 @ 9:38pm

how about when they break contracts they pay me
how about when they break contracts they pay me, as it stands its ok for a legal entity to breech and not get penalized but i do?
OH i get it i as a poor unlawyered person have to learn the legal system ( months and months ) then sue them with cash out of my pocket and hope they dont have or use sme technicality or i make good forbid a mistake in court.

YEA something damn well does need be done.
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Kyros (profile), 3 Dec 2009 @ 10:57pm

I dislike Mike's closing argument, it seems along the lines of the flawed "If you have nothing to hide" arguments. I do however hope quite dearly that this bill passes, and I'm still surprised none of these companies have been taken to court for price gouging.
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Chunky Vomit, 4 Dec 2009 @ 12:09am

I'm against legislating something that isn't a problem. My initial reaction here is that this isn't much of a problem, but perhaps i'm out of the loop on current termination fees.

At the turn of the century, I was a buyer for Alltel. The $200 termination fee didn't over the phone subsidy for even the cheapest of phones. My friends indicate to me that this still isn't the case. Today's current WARPU (Wireless Average Revenue Per User) dictates that a customer must remain for 24 months just to make break even - this comes from one of my friends who is still in the biz. This statistic was floated around when I was in the biz too - and back then they featured mostly 12 month contracts (the 24 month contract became popular when port-a-number became mandatory).
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Harshal (profile), 4 Dec 2009 @ 2:24am

Indian Telecom Scene Rules
After reading the posts and story above, I think you guys are living in medieval times as slaves. In India there are no such contracts since almost all phones are not bought through the telecom companies and are hence not subsidized. The low call rates, cheapest in the world, more than make up for the non-subsidized handset market. Call rates are only headed further south with more competition arriving.
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DS, 4 Dec 2009 @ 4:10am

So again, the gov't is going to stick it's nose in private industry under the guise of "protecting consumers". Just like they "fixed" credit cards, right? Right after the gov't had the bright idea that credit companies needed to have their hands tied with regards to their ability to penalize and collect from deadbeats, other rates went up, cards that didn't have yearly fees suddenly did, and good luck getting a credit card with a fixed rate now.

I'm sure if this bill passes, you'll see the same thing with cell contracts.
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Anonymous Coward, 4 Dec 2009 @ 4:15am

the subsidy is a lie!
I'm on a Verizon contract and I Wanted a droid, since my Voyage is a complete POS, constantly turns off, touch screen doesn't work... Verizon refused to allow me to "upgrade" because my time wasn't up. So I said fine, I'll just buy the phone ( it was like >$500 to purchase at the time). I then asked about plans, and there was ZERO, none, zilch, nada, nupin, NOTHING different with the price of the plan if I had bought the phone over "subsidizing" the phone.

SO yeah, this whole termination fee because of "the subsidy" is bull crap. Its simply a way to grab more money and deter people from switching to a different carrier.
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hardly about deadbeats, 4 Dec 2009 @ 4:22am

example of early termination abuse
BCE ( bell canada ) decides ot on masse temriante everyones 3 year contracts after only a year

so under law we have the right to say no and you cant give me early termiantion right?
not according to BCE
they stuck it too me and i taped that they knew it was wrong and then gave me a credit of it back then went the following month and STOLE IT OFF A CREDIT CARD AND STOLE MORE THEN THEY SHOULD HAVE

this is why this needs ot be addressed
maybe they should have paid everyone a early termination fee
for there breech of contractual law

most people they do this too are too poor and not educated enough to launch a lawsuit over 100$
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Steve R. (profile), 4 Dec 2009 @ 5:10am

Corporations Have a Choice - They Coose Poorly
It's simple, if you don't want government interference point the finger of blame at the corporations and demand that they clean-up their disingenuous business practices. They have the free will to act ethically. If they don't regulate.
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Jon B. (profile), 4 Dec 2009 @ 6:29am

Re:
Agreed. Why not be against an unnecessary regulation? I'm usually against solving problems that don't exist and creating solutions that do nothing.

I bought a Droid at $200, retail is $550 without contract. I'm not sure if my early termination fee is the standard $175 or the higher $350 for some smartphones (their wording was very ambiguous when I got it). Either way, this 'law' wouldn't do anything about that already-ridiculous $350 termination fee since it matches the subsidy.
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Jon B. (profile), 4 Dec 2009 @ 6:33am

Re: the subsidy is a lie!
No, that's what the subsidy is. It's a subsidy because the price of the plan is the same either way - it's just subsidized along with the contract.

If the price of the plan were lower without the subsidy, then it wouldn't be a subsidy - it would be a payment on the phone.

Not saying that would be a bad idea, but that's not the way they currently work.
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Leonardo, 4 Dec 2009 @ 6:58am

Termination Fees
The primary purpose of termination fees is for the business benefit of the wireless carrier to keep customers regardless of the customer's preference or view. For example, Verizon termination fee starts at $180 is supposed to be pro-rated down by the amount of time lapsed in the contract according to the 2007 settlement reached with the Federal Gov't but Verizon still gamed it to their advantage: even if there is still 5 minutes on the contract, $80 is still owed. And Verizon will not waive the fee even if the user has died. The "gotcha" in the Verizon contract is if you respond to any upgrade, any tiny change in plan, promotion etc, guess what? Your term on the plan restarts again so in effective the contract is a "slave" contract and unless you want to buy your freedom, you are stuck regardless of the quality of the service- there is no out. Given these facts unfortunately YES there has to be regulation on this "contract sharking" of the public- the phone is a necessity not a luxury you can live without.
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Anonymous Coward, 4 Dec 2009 @ 7:13am

Senators introduce all sorts of legislation that has no hope of getting anything other than perhaps a first reading. It's called "playing to the crowd at home". The senator introduces a bill that has no support (except for one person to second it, often the junior senator for the same state), and it is assigned a number and added to the role, where it dies. The bill isn't important (and likely never to get passed, that isn't the intention) but rather it is an attempt to garner points for the next election cycle.

"Senator X is tough on crime, tough on big business, and tough on the things that matter to you!". Basically, he introduced unpassed laws that would have criminalized sex in the back of moving ambulances (illegal in one state now), the cell phone termination fees, and moved to triple welfare payments and lower the requirements to get in. None of those ever get passed, but the senator uses them next time to show he is on "your side".

Reports like this should be ignored until the bill actually comes up in the house or senate, and actually is getting debated, otherwise it's just political gas passing at it's finest. Mike knows this, but why miss a good moral outage story? ;)
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Chris Rhodes (profile), 4 Dec 2009 @ 7:22am

Don't See the Point
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Chris Rhodes (profile), 4 Dec 2009 @ 7:24am

Re: Don't See the Point
(Hurray for pressing enter too soon!)

I don't see the point of more legislation. If you don't like the terms of the contract . . . don't sign it?
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syzygy (profile), 4 Dec 2009 @ 9:25am

Re: My "Contract"
With Verizon, and I'm sure this is the same with AT&T, once your 2 year contract is up, you automatically switch to a month to month plan. Since the two year term covered the subsidy of the cheap/free phone, you are not required to sign a new contract. Obviously the carrier wants you to sign a new contract, but you certainly are not required to. I had the same phone for almost 5 years, and after the 2 year contract, I could have canceled at any time without a fee.
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Will, 4 Dec 2009 @ 11:04am

Re: Re: My "Contract"
It is the same for At&t. I've been with them for 4 years and I am on a monthly only contract.
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Sean, 4 Dec 2009 @ 12:17pm

Re: Indian Telecom Scene Rules
That's what makes this whole argument a little silly. You can chose not to subsidize your phone and therefore have no early termination fee.

People expect to buy a $500 dollar smartphone for $100 with no consequences.

Verizon heavily subsidizes their phones. In the past you could get a subsidized phone with a 2-year contract, cancel your service and ebay the phone for a profit even after the ETF. So they upped the ETF. Makes sense to me.
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Sean, 4 Dec 2009 @ 12:29pm

Re: Re: Don't See the Point
Hey, you and your common sense are not wanted here! You'll be allowed back when you've brought your sense of entitlement.
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Anonymous Coward, 4 Dec 2009 @ 2:17pm

Re: Re: Indian Telecom Scene Rules
That's what makes this whole argument a little silly. You can chose not to subsidize your phone and therefore have no early termination fee.

Last time I checked with AT&T you couldn't. Even if you already had your own phone they still wanted a 2 year contract and early termination fee on their regular plans. And they didn't discount the plan any for you already having a phone either.
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Anonymous Coward, 4 Dec 2009 @ 2:25pm

Re: Re: Don't See the Point
I don't see the point of more legislation. If you don't like the terms of the contract . . . don't sign it?

That might have some merit in a free market situation, which the mobile phone market is not.
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Chris Rhodes (profile), 5 Dec 2009 @ 12:44am

Re: Re: Re: Don't See the Point
Considering (A) there are a number of choices available for carriers offering subsidized phones through contracts, (B) you can always just shell out the money for the phone up front and go month-to-month without a contract anyway, and (C) there are several mainstream pay-as-you-go options, I'm going to go with my previous opinion: No legislation required.

Don't like Verizon's ETF? Don't sign with Verizon. Or buy the phone yourself and pay month-to-month.

(Curiously, despite your unsupported insistence that the mobile phone market is not a "free market", your solution seems to involve having the government dictate a "reasonable" ETF to the carriers, and we know that nothing makes a market more free than when the government determines prices by fiat, right?)
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Philip (profile), 5 Dec 2009 @ 2:22pm

Not completely necessary...
I'm with the mobile phone operators in that this is not unnecessary, except on one part. Cell phone service contracts are becoming as cumbersome as credit card contracts. I agree, it's often hard to see all these extra ETF fees or what is being charged for what reason.

What this bill SHOULD do is not worry about capping anything (that is what competition is for), but rather focus on making these fees more apparent for the consumer - make a "required diagram" like all credit card contracts have that clearly lists out all the fees, how they are charged and why. This would make it easier for a user to see $350 and decide not to sign. These days people just assume the fee is there, buried, and assume it's something like $150 or $175. Little do people know, it's gone up throughout the years. Requiring cellphone companies to display a clearly readable chart, listing these extra fees, would assist in the consumer confusion AND help lower the ETFs through competition when consumers starting seeing the real costs.
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Anonymous Coward, 5 Dec 2009 @ 10:42pm

Re: Re: Re: Re: Don't See the Point
Considering (A) there are a number of choices available for carriers offering subsidized phones through contracts,

A very limited number. I wish I only had to compete with 4 or 5 other people in the job market; I'd be very wealthy.

(B) you can always just shell out the money for the phone up front and go month-to-month without a contract anyway,

No, that isn't true, you can't.

(C) there are several mainstream pay-as-you-go options,

At much higher rates than if you *did* get a phone. What a deal.

Don't like Verizon's ETF? Don't sign with Verizon. Or buy the phone yourself and pay month-to-month.

Last time I checked with AT&T, you still have to sign a contract with ETF on anything but a pay-as-you-go plan, even if you buy your own phone. I don't know why you keep saying otherwise, but it isn't honest.

Curiously, despite your unsupported insistence that the mobile phone market is not a "free market",

It isn't. It requires gov't permission to operate and that permission is limited to a very few.

your solution seems to involve having the government dictate a "reasonable" ETF to the carriers, and we know that nothing makes a market more free than when the government determines prices by fiat, right?

It's already gov't regulated. A free market would be preferable, but the only thing worse than a gov't protected market is an unregulated gov't protected market, which what you're arguing for.
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Chris Rhodes (profile), 6 Dec 2009 @ 9:24am

Re: Re: Re: Re: Re: Don't See the Point
No, that isn't true, you can't.

Verizon (the very company people are bitching about here) offers a monthly plan with no contract. (I'm month to month right now, in fact. I won't be in a week or so when I get them to subsidize a new Droid for me, but then I have no problem with the huge ETF . . .) Looking at the other major carriers' plans, they all allow you to choose a plan with no contract. T-Mobile's month-to-month is lower than their with-contract, in fact.

Also, in the future, before you accuse someone of dishonesty, make sure you've done your homework first. Thanks.
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