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Early termination fees – an issue for mobile radio?

Senator Amy Klobuchar swearing to pay her Verizon ETF if she switches to an iPhone (just kidding).

Senator Amy Klobuchar swearing to pay her Verizon ETF if she switches to an iPhone (just kidding).

Four United States Senators are on the warpath over the Early Termination Fees that  wireless services charge if you duck out before the completion of the contract. Their Cell Phone Early Termination Fee, Transparency and Fairness Act would bar carriers from charging ETFs that exceed the price break on the phone you get for accepting a two-year (or more) contract. So if you buy a two year deal with a $150 discount on the device—that’s how high the ETF can go. The bill has been launched by Senators Amy Klobuchar (MN), Senator Russ Feingold (WI), Senator Jim Webb (VA), and Senator Mark Begich (AK).

“Early Termination Fees are budget-busters,” their press release declares. “In the wireless phone business, the combination of long term contracts and substantial early termination fees – that range from $150 to $350 – have the effect of keeping customers from switching providers, even when those customers are dissatisfied with their service or move their work or home to areas with inadequate service.” The proposed law comes in the wake of Verizon Wireless’ move to boost their ETFs from $175 to $350 for smart phones.

This issue is significant for mobile radio. As consumers turn to their smart phones for radio services, the affordability of those phones will become more and more of an issue. The wireless providers counter that they’re pro-rating ETFs down as the contract progresses, but if they’re charging $350 and the pro-rate drops by $10 a month, it’s still a pretty high termination fee at the end of a year. As new smart phones come on the market, radio lovers are going to want to switch devices if they think there’s a better deal with more applications. High ETFs will squelch competition in this crucial area.

Klobuchar’s bill would also . . . ”

  • Require wireless carriers to pro-rate their ETFs for consumers who leave their contracts early so that the ETF for a two-year contract would be reduced by half after one year and pro-rated down to zero by the end of a contract term.
  • Require wireless carriers to provide “clear and conspicuous disclosure” of the ETF at the time of purchase.
  • Require monthly billing statements to clearly state the pro-rated fee customers would be charged if they terminate their contracts before the end of the next billing cycle.”

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