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.

Filed Under: california, early termination fee, etf, liquidated damages, subsidies
Companies: sprint