U.S. mobile operators, , in letters sent to the Federal Communications Commission earlier this week, defended their use of early termination fees and explained how they are informing consumers about their policies.
In January, the FCC asked each of the four major wireless carriers, AT&T, Verizon Wireless, Sprint Nextel, and T-Mobile USA, along with Google to detail how they inform customers of their fees in statements on corporate Web sites, in brochures and sales scripts, and in monthly bills. The companies had until February 23 to respond. Earlier this week, they filed their answers to the FCC's questions.
In general, the responses were not surprising. AT&T defended its use of early termination fees (ETFs) by stating that without them, consumers would have to pay more up front for phones. It used the popular Apple iPhone as an example.
AT&T subsidizes the cost of a 16GB iPhone 3GS by about $400 if customers sign a two-year contract. The ETF is $175. If customers don't want to be subject to an ETF and they don't want a contract, they have the option of buying the phone at the full retail price of $599.
"Customers clearly understand that they have choices," Robert Quinn, AT&T's senior vice president for federal regulatory affairs said in the letter. "While the vast majority of AT&T's subscribers choose term commitments and discounted or free handsets, AT&T has millions of month to month and prepaid subscribers. Still, overwhelming consumer demand for such bundled discounts drives carriers to make even highly sophisticated and costly devices like smartphones and Netbooks available at steep discounts, even from the moment they are introduced."
Critics, such as consumer advocates, say early termination fees are excessive. They believe carriers use these fees to stifle competition and generate revenue. Several class action lawsuits have been filed over the issue. And Congress and the FCC have looked into the issue. Operators have responded to the pressure. And today every major wireless carrier in the U.S. prorates its ETF so that the fees decrease over the life of the contract. Operators are also now offering cell phone subscribers the option to buy phones without a subsidy and no ETF.
Wireless operators have already settled several of the class action lawsuits. And companies seem to be bending to pressure from the government.
Verizon Wireless has come under fire recently for doubling its early termination fees on certain devices. In November, Verizon Wireless announced it was increasing its $175 early termination fee to a whopping $350 for "advanced devices," such as smartphones. The FCC sent a letter to Verizon in December asking the company to explain why the new fee is necessary and how it will be implemented.
News Source:- http://news.cnet.com
<< Back to news...