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FCC steps up investigation of mobile early termination fees

The FCC has begun a more extensive probe of wireless ETFs, evident in a letter they sent to AT&T, Google, Sprint Nextel, T-Mobile, and Verizon Wireless yesterday. The letters, written by the FCC Consumer Bureau Chief, Joel Gurin, and the Wireless  Bureau Chief, Ruth Milkman, requests each company to provide information relating to facts and data on “the consumer experience in the wireless termination fees” with the purpose of “gather[ing] information about whether customers are adequately informed about [insert company]’s Early Termination Fees (‘ETFs’) for wireless service.”

The letter states that the existing ETFs are “substantial” and that the FCC believes that “it is essential that consumers fully understand what they are signing up for.” It also states that there is a growing concern over the fact that “there is no standard framework for structuring and applying ETFs throughout the wireless industry,” and that companies with no ETF policy actually exist.

Requesting each company to provide proof of how they publicize ETFs to consumers, the letter continues on to pose twelve specific questions:

1. Do your ETFs apply to all service plans or only some? If so, which ones?

2. What is the amount of the ETF for each service plan where ETFs apply? If there are different ETFs for different plans, what is the rationale for those differences?

3. How much of a discount on handset purchase is given in return for a customer accepting an ETF? Does the amount of the discount differ by device, and, if so, how?

4. Does the ETF itself vary by device (e.g. higher ETFs for advanced devices)? If higher ETFs apply to a certain class of devices, exactly how is that class defined?

5. Is it possible for consumers to buy a handset from you at full price to avoid an ETF? If this is possible, can consumers buy unsubsidized handsets online, as well as at brick-and-mortar stores?

6. Do monthly service rates and terms differ: (1) between consumers who assume a term commitment and accept an ETF, and those who don’t, and (2) between customers who purchase an unsubsidized device (either from your company or a third party), and those who purchase a subsidized device? If so, how do they differ, and what is the rationale for the difference? Can customers easily determine the impacts of their decisions and their rates and terms?

7. Are ETFs prorated so that the customer’s liability decreases over time? If so, what is the exact schedule by which they are prorated?

8. If a customer renews his or her contract without buying a new headset, does his or her monthly service fee change in any way?

9. How long is the trial period during which consumers can cancel their service without an ETF penalty? If they cancel, can they return the handset? If they return it, will they receive a full refund, no refund, or a refund minus a restocking and/or refurbishing fee?

10. When do consumers receive their first bill under your service plan? How does the trial period relate, if at all, to receipt of the first bill?

11. Are there consumer fees or charges in addition to ETFs if consumer buy handsets and/or service plans from online phone dealers, such as Amazon, LetsTalk, and Simplexity (d/b/a Wirefly), or from a service provider, if a customer does not complete the contract term? If so, what are they, and what are their levels, terms, and conditions? Do the fees or charges affect the ETFs and if so, how?

12. Press reports and public statements from wireless companies have attributed ETFs to several different factors. What is the rationale for your ETF(s), and how specifically do the structure and level of those ETF(s) relate to that rationale?

This investigation comes as no surprise for those of you who followed the initial inquiry into Verizon Wireless’ ETF policy earlier this month or the letter written by a number of public interest groups urging the FCC to continue its investigation into ETFs and accidental wireless usage. It will be interesting to see what this turns up!

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