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Cellphones United States

FCC To Hold Hearings On Early Termination Fees 184

Isaac-Lew sends word of an article in the Washington Post reporting that on June 12 the FCC will hold a hearing regarding cellphone early termination fees. The Commission may look at early termination fees for TV and Internet service as well. The wireless carriers are taking a Bre'r Rabbit approach toward possible FCC regulation of early termination fees — the FCC's intervention would pre-empt a number of class-action lawsuits going forward against Verizon, Sprint, and others. These suits, stemming from state regulations, could cost the carriers billions. "...the carriers have renewed a lobbying effort in recent weeks to persuade the FCC on a legal definition that would stave off the state lawsuits on cancellation fees. On May 6, 2008, Verizon Wireless chief executive Lowell McAdam and the company's chief lobbyist, Tom Tauke, met with [FCC Chairman] Martin, urging him to adopt a federal policy, according to FCC records."
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FCC To Hold Hearings On Early Termination Fees

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  • by Slashdot Suxxors ( 1207082 ) on Saturday May 31, 2008 @02:32PM (#23611303)
    because they left early and everyone had to pay 200 dollars.
  • by milsoRgen ( 1016505 ) on Saturday May 31, 2008 @02:34PM (#23611323) Homepage
    Early termination fee's are ridiculous, I can understand an earlier time when the costs of building the cellular network were to be thought of. Now it would seem they like their little cash cow, must help them subsidize the latest shitty phone. It's a shame it's taken this many years for it to finally get some government attention.
    • by Robert1 ( 513674 ) on Saturday May 31, 2008 @02:47PM (#23611411) Homepage
      I'm not sure what you're getting at. In Europe when you want a new phone you have to shell out several hundred dollars, there are no free phones or discounts. The phone companies here give them away for free*.

      *Of course the price of the phone is rolled up into the price of the service you get - that's why new phones need a 2 year service plan because after 2 years you will have paid off the cost of phone. It is also why when you renew your contract you get a new phone, since you have paid off the old one and are making payments on the new one.

      If there were no cancelation fees then the company would have no way to make up its initial gift of a several hundred dollar phone to you if you decided to stop paying the monthly fee for it.

      If the FCC strikes down cancelation fees then the price of phones will suddenly increase several hundred bucks. This isn't necessarily a good thing for the market since almost everyone I know tends to go for the free phone or the 50 dollar phone when getting a new plan - no one is willing to spend several hundred dollars. At least, not in a lump sum up front.
      • by Anonymous Coward on Saturday May 31, 2008 @02:56PM (#23611493)

        If the FCC strikes down cancellation fees then the price of phones will suddenly increase several hundred bucks. This isn't necessarily a good thing for the market since almost everyone I know tends to go for the free phone or the 50 dollar phone when getting a new plan - no one is willing to spend several hundred dollars. At least, not in a lump sum up front.
        What I would like to see is:

        A) The "free" phone would be require the contract and have it clearly stated (not buried in the contract) that this will include both an increased monthly cost and a early termination fee. The termination fee should be the amount you haven't paid off yet. Ie, keep it for year and a half and cancel, you only have to pay the remaining balance.

        B) The option to buy a phone upfront in full, and have a monthly discount (compared to the "free" phone cost). As it is with most companies you can't do this. Even if you spend hundreds on a phone, you have to fight with them to get service without a multi year contract if you're able to get service at all. Even then you pay the same monthly cost as the person with the "free" phone.

        I'd like to have the choice. Personally, I'd take B. What I have now is a "free" phone, but I read through the contract you have the choice to not renew it after the 2 year term. I took that option, though it took a lot of arguing with them over it. I still pay the same amount even though it's a three year old phone, but at least I can cancel it whenever I want.
        • Re: (Score:2, Interesting)

          by Anonymous Coward
          These are not market forces at work. These are the evil carriers at work.

          I paid $550 (including shipping, handling, and taxes) for an unlocked smart phone, for which the local carrier charges $700+taxes without a contract. $499+taxes with a 3-yr contract. I know for a fact that the cost to the manufacturer is around $200.

          It has built-in GPS receiver but can't save map data on the flash card and display the location on that map. Why? because the carrier my case wants to upload maps from their server and char
      • by JohnWhitney ( 707445 ) on Saturday May 31, 2008 @03:08PM (#23611567)
        When I was using Sprint as my carrier, and asked them to change my phone number be local to the new location that I had moved to, they told me they wouldn't do it without signing me up to another year-long contract.

        This is not subsidizing the price of anything. It is only used to lock me into their service and line their pockets. Since I was done with the contract I had with them, I decided I'd rather switch to a new carrier than be treated like that. They got MUCH more willing to work with me when I told them I was cancelling... to late for them, though.
        • by Tanktalus ( 794810 ) on Saturday May 31, 2008 @05:06PM (#23612451) Journal

          Apparently you did that wrong. What I've been told is that I should never talk to the service people at a cell phone company. Instead, always ask to be put straight through to their cancellation department. For whatever reason, they're MUCH more willing to negotiate than the regular service folk.

          Personally, I haven't done that. I just can't be bothered. If your front line isn't authorised to make the customer happy, this customer will take his business elsewhere. I don't play games with my business, so if you want to screw me over, well, screw you.

      • by Adambomb ( 118938 ) on Saturday May 31, 2008 @03:11PM (#23611597) Journal

        no one is willing to spend several hundred dollars. At least, not in a lump sum up front.
        Most of the people i know here in canada fit what you describe there.....until they end up in a situation where the phone fails or is lost or stolen. Cellphone theft is the biggest cash cow in terms of the devices market for the providers.

        They'll change their minds if they end up paying for a few months worth of contracted service that they cant use. If they never run into that, well its a moot point and they'll probably continue happily with the contracts. If you know you're going to use the service for the length of the LTC and that you can deal with replacing the phone in the event of the unforseen, AND read your damned contract then there really is no problem with this. The problem there is no one is willing to wade through pages of fine print to check every possible caveat situation (which isn't exactly a fault but neither is it transparent and honest).

        Another thing is that there are a lot of contracts with clauses that i'm fairly sure are illegal (in canada at least, i'm not sure how things would work in the US there) such as disclaiming liability for the actions of their customer service representatives in its entirety (at least it was in certain companies contracts when i was doing cell phone customer service back in 2004-2006). I honestly wonder how many of these "contractual obligations" would actually hold up in court given a good attourney with the balls to bring it to the big boys.

        And to the complaint people have that such actions would increase the price of cellphones. YOU'RE ALREADY PAYING THAT PRICE FOR THE CELLPHONE. It's simply rolled into the costing of the service, and MUCH harder to check the true cost effectiveness of the two (device and service). If providers had to advertise contractless prices primarily and list contractual bonuses seperately, it would make things much more transparent. There is no reason they cannot keep the ETF's out of the contract if they do not provide the device, and if its quite clear in the contractual bonuses that there is a penalty fee if one DOES subsidise a device.

        Also remember that if you activate your own phone on a contracted plan, the ETF is still the same regardless of whether they provided you with a phone or not (ie if you take a contracted 'special offer' and upgrade your plan with the phone you already have). Granted people can just get a new one with the new contract to not have the liability for no reason, but that seems rather wasteful if the previous device does everything the client wants already.

        People always say that you should read your contracts, but to be quite honest the majority of contractual ETF cases i ran into were situations where the customer did not even know they had a contract. If they accept a plan over the phone, are told it comes with a contract, and the notes on the account state that the user was advised of the fee (whether they were or not) good luck trying to prove it. And good luck trying to subpoena the call recording without a harsh capital investment in either time or money.
        • Most of the people i know here in canada fit what you describe there.....until they end up in a situation where the phone fails or is lost or stolen. Cellphone theft is the biggest cash cow in terms of the devices market for the providers.

          Do they not have insurance in Canada? Mine is 2.99 a month and covers loss, theft, or virtually any type of damage. I've used it three times and it's painless and simple.
          • Re: (Score:3, Interesting)

            by Adambomb ( 118938 )
            As far as i remember, two of the major carriers (Bell and Rogers) had trialed lost cellphone insurance and had the services disappear. I am unaware of any third party cell phone insurances in canada, and a quick google search left me needing to do a longer one which i can't do at work.

            The fact that such services were discontinued speaks volumes, whether they were too incompetant to properly price the insurance based on the risk probabilities or whether it was intentional to cash in on the ETFs or subscripti
          • by mrmeval ( 662166 )
            The phone is a refurbished piece of shit that costs $30 on ebay but you get to pay $50 for it.

            This was Chachingular.
          • Do they not have insurance in Canada? Mine is 2.99 a month and covers loss, theft, or virtually any type of damage. I've used it three times and it's painless and simple.
            Wow, you're lucky. Mine costs $7.99 a month, and if you have to use it, you have to pay a $99 deductible, which is more expensive than the phone costs on ebay, plus they give you a refurb which is even cheaper. I don't have insurance anymore, after I found this out. Four months of not paying insurance and I can afford to buy a phone off o
        • by vux984 ( 928602 )
          until they end up in a situation where the phone fails or is lost or stolen. Cellphone theft is the biggest cash cow in terms of the devices market for the providers.

          How is that the carriers fault? If you buy anything on a payment plan or on a credit card and then lose it, you still have to pay for it.

          And to the complaint people have that such actions would increase the price of cellphones. YOU'RE ALREADY PAYING THAT PRICE FOR THE CELLPHONE.

          Nobody disputes that. But few people want to pay $350 for their cel
      • by imageboard ( 1038004 ) on Saturday May 31, 2008 @03:12PM (#23611599)

        In Europe when you want a new phone you have to shell out several hundred dollars, there are no free phones or discounts.
        This is news to this European who has not paid for a handset for ten years.
      • by guruevi ( 827432 ) on Saturday May 31, 2008 @03:12PM (#23611605)
        Well, maybe we'll get market forces at work for cell phone prices. In Europe, you CAN get unlocked phones that cost $25, $50 or $100. The cost of production to store of the iPhone was initially about $250 and should currently have gone down greatly everything else is just markup. However, I still can't get an unlocked phone in the US (even the simplest ones without any fancy stuff like bluetooth or 3G) for less than $150 if I buy it with my carrier. The Blackberries can easily cost more than $500 if you don't want to get locked in. Getting an open source phone that has lower production rate and more components (bluetooth, 3G, touch screen) is cheaper than that.

        I would like a cell phone market where you can go to the mall, go into a cell phone store and order what you want, then go into your preferred carriers store and get what you want. Off course the prices should reflect that, knowing AT&T, Verizon or Sprint, they're just going to maintain the prices for subscriptions and jack up the prices of the cell phones.
      • Re: (Score:3, Informative)

        I'm not sure what you're getting at. In Europe when you want a new phone you have to shell out several hundred dollars, there are no free phones or discounts. The phone companies here give them away for free*.

        It really gets on my nuts when people do this - the UK is part of Europe, and I can currently walk into *any* high street mobile phone shop (Orange, O2, Link, Carphone Warehouse et al) in the UK and within 10 minutes walk out with a contract and a free or subsidised handset.

        Check out the following Orange UK store handset page - note the text at the bottom which says 'The prices shown here are a guide based on an average plan costing £35 a month. The price of your phone or device may change a

      • If there were no cancelation fees then the company would have no way to make up its initial gift of a several hundred dollar phone to you if you decided to stop paying the monthly fee for it.
        The only phones that cost several hundred bucks are the fancy ones - mine was $300. I could've gotten one for $80 that was ok or probably cheap one for $50.
      • by ciscoguy01 ( 635963 ) on Saturday May 31, 2008 @03:42PM (#23611853)

        I'm not sure what you're getting at. In Europe when you want a new phone you have to shell out several hundred dollars, there are no free phones or discounts. The phone companies here give them away for free*.
        But how does the cost of the service compare between europe and the US?
        I bet it's lots less in europe than it has been here. Or until just recently.

        Here in the US they are essentially charging us monthly for the *free* phone, since no phone is really free.
        The free phones are just a mechanism to keep you signed up for long contracts. The carriers keep a stranglehold on the equipment to keep you having to either pay an outlandish price for a phone with no contract or to sign up for a new contract to get it free or at a pretty small discount.

        I would guess the free phones and other sales expenses, kickbacks, etc. are costing us at least 20% of our monthly bill, and after two years if you didn't get another free phone, they don't lower your bill. They keep the extra money.

        If there were no cancelation fees then the company would have no way to make up its initial gift of a several hundred dollar phone to you if you decided to stop paying the monthly fee for it.

        If the FCC strikes down cancelation fees then the price of phones will suddenly increase several hundred bucks. This isn't necessarily a good thing for the market since almost everyone I know tends to go for the free phone or the 50 dollar phone when getting a new plan - no one is willing to spend several hundred dollars. At least, not in a lump sum up front.
        The best thing to happen is to have the cellular carriers not sell you or give you your phone at all!
        You could then buy it in a bubble package at Walmart.
        Motorola, Samsung, LG, Nokia would have sales reps calling on Walmart, Target and other retailers selling them phones in huge volume to sell us without any bundling, and there would then be significant competition.

        As it is now the cellphone manufacturers have only a few customers, the carriers.

        How much do you really think it costs Motorola to make a free phone at a plant in Mexico? $4-$6 for the really cheap ones that are given out free. Maybe $25 for the really fancy ones.
        As usual the problem can be solved by letting market forces work, getting cellphone manufacturers duking it out to sell you your phone through regular retailers, and having cellphone carriers duking it out to sell you your service. And you can then use whatever phone you want.

        One GOOD thing that has happened in the last year, the IPHONE came out.
        Until then cellphone manufacturers were making phones the *carriers* wanted.
        Now, we are finally getting phones that *we* want.
        But ATT was dragged kicking and screaming to the IPHONE.
        Verizon wouldn't make the deal and give up the control. They lose!
        • by Tony Hoyle ( 11698 ) <tmh@nodomain.org> on Saturday May 31, 2008 @03:51PM (#23611921) Homepage
          You could then buy it in a bubble package at Walmart.
          Motorola, Samsung, LG, Nokia would have sales reps calling on Walmart, Target and other retailers selling them phones in huge volume to sell us without any bundling, and there would then be significant competition.


          What, you can't do that in the US? In Europe we can walk into any supermarket and walk out with a contract free phone 5 minutes later. They're not free but they're fairly cheap - competition keeps the prices down.

          One GOOD thing that has happened in the last year, the IPHONE came out.

          Previously, you signed up for a longish contract and you got the phone free.

          With the iphone, sign up for a longish contract and you pay full price for the phone.

          I fail to see why this is a good thing.
          • What, you can't do that in the US? In Europe we can walk into any supermarket and walk out with a contract free phone 5 minutes later. They're not free but they're fairly cheap - competition keeps the prices down.

            Essentially you cannot, except for prepaid phones.
            You can't buy any phone like that to use on Verizon or Sprint (CDMA).
            You *can* buy a cheap ($20) Tmobile GSM Prepaid phone that you can then use on a Tmobile regular plan if you like by discarding the prepaid SIM that comes with it.
            There are s

          • by maxume ( 22995 )
            There are contract free bubble pack phones in most supermarkets in the US. The per minute fees (~$0.12-0.20) aren't viable for people that use more than about 200 minutes a month though (and both outgoing and incoming count as minutes, etc., etc., etc.)
            • Yes, there are. No contract, prepaid, carrier locked, dramatically more expensive to use.
              Clearly not the same as a cellphone with competitive rates. Not if you use it much that is.
        • The cost to make something is not always the only cost associated with that. Sure, the materials may cost $19 and then the assembly and electricity to product it, say another $7. However, who pays the engineers who come up with the design? Who pays testers or programmers who make sure the phones work?


          R&D actually costs money.

        • by SeaFox ( 739806 )

          The free phones are just a mechanism to keep you signed up for long contracts.

          If people are stupid enough to want a new phone or lose their existing one every two years they have no one to blame but themselves.

          The carriers keep a stranglehold on the equipment to keep you having to either pay an outlandish price for a phone with no contract or to sign up for a new contract to get it free or at a pretty small discount.

          Some carriers will give you the unlock code for your phone after a period of time has passed

      • by sadr ( 88903 )
        However, if the cancellation fees are pro-rated for the term of the contract, then the carrier isn't hurt by subsidizing the phone. However, most carriers today charge you the full fee if you cancel 23 months into a 24 month contract.

        Also, the FCC could restrict the cancellation fees to when you DO get a new phone. Extending your contract, even on a "special rate" shouldn't extend a cancellation fee.
      • by slamb ( 119285 ) *

        If the FCC strikes down cancelation fees then the price of phones will suddenly increase several hundred bucks. This isn't necessarily a good thing for the market since almost everyone I know tends to go for the free phone or the 50 dollar phone when getting a new plan - no one is willing to spend several hundred dollars. At least, not in a lump sum up front.

        Right; I'm not willing to spend several hundred dollars in a lump sum up front. That's because I'm paying hidden monthly fees for the phone already.

      • by Crazy Taco ( 1083423 ) on Saturday May 31, 2008 @04:41PM (#23612283)

        *Of course the price of the phone is rolled up into the price of the service you get - that's why new phones need a 2 year service plan because after 2 years you will have paid off the cost of phone. It is also why when you renew your contract you get a new phone, since you have paid off the old one and are making payments on the new one.

        That's all well and good in theory, but that isn't even remotely how things happen in practice. Cell phone companies actually use these plans to protect themselves from free market competitive forces and to secretly overcharge people for services and products they've already paid for. I can (and will) back that assertion up with examples in the next few paragraphs, but let me say first I hope those lawsuits suck tens of billions of dollars out of these cell phone companies, because they've easilly gotten billions in ill-gotten gain. On to the examples:

        When my wife and I got married December 2006, I was three months away from a new phone and and ending a two year contract. We went to Verizon and asked to consolidate our two phones into one family plan. They did this, but then without telling us extended our contract by a full year. All we wanted was consolidated billing: we kept our same phones, our same numbers, etc. Nothing changed. But they extended our contract by a year, and suddenly I'm continuing to pay off my already paid off phone, I didn't get a new one, I'm told leaving will cost me a 200 dollar termination fee (for what, I might ask, since my phone is paid off), and getting a new phone will cause them to extend my contract by two years.

        But it gets better than that. My wife and I found we weren't using all that many cell phone minutes, so we went back a few months later to lower the minutes on our plan. They secretly extended our contract again without telling us. Meaning once again I'm paying for a paid off old crappy phone, I still didn't have a new one, and I was going to get charged an early termination fee (for no justifiable reason) if I quit.

        So that's how these things really work in practice. They do nothing but screw over the consumer in what really is an entirely illegal way. Obviously, if I had known in either case my contract was going to be extended, I would have said no way (I didn't find out about those secret extensions until months after the second incident). What it comes down to is this: I was unknowingly placed by Verizon into a contract I never agreed to, and then was charged an early termination fee quitting it! That is the definition of unethical, I'm not the only one they did this to, and the judge can't take away enough billions from them to satisfy us (or make up for what all these cell phone companies have done to American consumers).

        • Re: (Score:3, Informative)

          by jc42 ( 318812 )
          What it comes down to is this: I was unknowingly placed by Verizon into a contract I never agreed to, and then was charged an early termination fee quitting it! That is the definition of unethical, ...

          And it used to be illegal. Time was when contract law required a valid signature by both parties to be valid.

          But welcome to the New! Improved! world of American corporate law, where you can find yourself liable for the terms of a contract that you've never seen and never signed. Big corporations can just cre
      • They call the phone 'free' when you still pay for They do it purely for marketing and its misleading and ridiculous
      • by Technician ( 215283 ) on Saturday May 31, 2008 @07:54PM (#23613479)
        At least, not in a lump sum up front.

        How many phones does the typical person have in a drawer, locked to some provider they had a falling out from?

        This may be the end of locked phones. Pick up a phone that you like, not just what they push this week, and pick up a SIM card from your favorite carrier. This iPhone dilemma of nice phone, carrier sucks would end. Service would improve to reduce churn.

        You are no longer forced to buy a new phone to change carriers. Why is this a bad thing? As a trend this way, one of the cell stores has a sidewalk sign board advertising unlocked phones for sale. This may be the beginning of a good thing.
      • If the FCC strikes down cancelation fees then the price of phones will suddenly increase several hundred bucks. This isn't necessarily a good thing for the market since almost everyone I know tends to go for the free phone or the 50 dollar phone when getting a new plan - no one is willing to spend several hundred dollars. At least, not in a lump sum up front.

        Explain how "Pay as you Go" phones are only $50 then. All it means is that people would have more basic phones (i.e. not everyone would have a camera phone.) That, and people would continue to use their phones for more than two years.* I, myself, have been using the same phone for the past 3 years, despite living in the US, and the vibrate function has been broken for nearly 2 of those 3 years.

        *One could also argue that by continuing to use the same phone for more than 2 years, consumers would be throwi

      • I'm not sure what you're getting at. In Europe when you want a new phone you have to shell out several hundred dollars, there are no free phones or discounts. The phone companies here give them away for free*.

        If they want to rent or lease cell phones then they should rent or lease cell phones. Don't tell me the phone is only $50 then try to recoup the cost by marking up service and then charging me $200 to cancel my service. Just say the phone costs $250. It's called honesty, the marketing guys won't un
      • What if you already have a phone? I'm with Cingular and I owned a phone that I wanted to add to my existing plan with them, as a new line. I called up and they said the only way they could add a new line was by my signing a 2 year contract. I already had the phone so the early term fee I would be hit with if I wanted to cancel this line is just pure profit for them.

        What bugs me most is they do it on a per-line basis. I have three lines so for me to switch companies it would cost me $600 in early term fees
    • Maybe your economic education was different than mine, but when government regulation steps in this is not "Market Forces At Work". If the market was demanding this, people wouldn't be getting free phones with a contract renewal. Instead they would buy their phones elsewhere and not have to deal with termination fees.

      The 'free' phone, contract extension, termination fee model has worked because the market likes it. Now we have a few people that still want their free phones, but don't want to have to p
      • The other side of that argument is what is involved with that "free" phone. Verizon camera phones lock out picture transfers that don't go through their website, or loading your own ringtones instead of paying for theirs, or loading your own music files. The phone companies view that lockin as a revenue stream, they prefer it to you buying your own phone.
        • So go elsewhere for your phone, or flash it with the generic firmware.

          I've never heard of a provider locking out ringtones or blocking picture transfers (which since half of those go via bluetooth would be rather difficult).

          I did have one phone where they'd disabled the VOIP client.. took 10 minutes to reenable it.

           
          • So go elsewhere for your phone
            Did you mean go elsewhere with my phone? If a provider can't get a signal to my phone where I live and work, the provider's plan is useless to me.

            I've never heard of a provider locking out ringtones or blocking picture transfers (which since half of those go via bluetooth would be rather difficult).
            Blocking OBEX transfers is not difficult if the provider turns off OBEX in the phone's firmware.
      • Re: (Score:3, Interesting)

        by DarkOx ( 621550 )
        I agree the terms of the contracts might suck, but the market aparently is willing the to accept them in exchange for the service. A cell phone is not a requirement for basic health/surviaval and I don't think can justifiably be regulated the way watter and power often are.

        No one cellular carrier has a monopoly either I one though they could make more money by offering contract terms the demand side of the market would view more favorable they would leverage the advantage and do it. They don't so the peo
        • No one cellular carrier has a monopoly
          This is true of major cities. But if your phone must get a signal everywhere, even in Bufftuck, Vermont, it's often Verizon or nothing.
      • Maybe your economic education was different than mine, but when government regulation steps in this is not "Market Forces At Work". If the market was demanding this, people wouldn't be getting free phones with a contract renewal. Instead they would buy their phones elsewhere and not have to deal with termination fees.

        1. When the gub steps in and strikes down something that's anticompetitive, it isn't market forces, but it does allow them to operate.
        2. The market doesn't demand anything. People demand it and companys supply it. Given the startup costs associated with being a cell phone provider, it's rather difficult to start up a new place whose main gimmick is that there aren't any cancellation fees, and if it became successful, the incumbents (who probably contract out cell tower usage) could simply stop their cancellat
      • Re: (Score:3, Insightful)

        Market forces don't work very well if there is a large disparity is power between the participants (same for the principle of freedom of contract).
      • The 'free' phone, contract extension, termination fee model has worked because the market likes it.
        No, it's worked because that is basically the only option other than pay-as-you-go, which are even more expensive. It's kind of like the airlines. As soon as one adds a surcharge, takes away a service, etc., all the other ones follow suit. It's not free market if the "competitors" all have the exact same terms.
    • As long as the fee is not hidden in any way, what's the problem? The customer signed a contract, and the fee is the penalty for getting out of the contract. I don't see anything evil here. There are plenty of monthly contracts and pay as you go plans out there, so no one is forcing you to commit to an annual contract. Oh wait, you wanted that latest shitty phone for free, didn't you..... Seems like it's your problem and no one else's in that case.
  • I always buy my phones third party, generally out of the country. Even with a weak dollar, I prefer to buy my phones in Dubai or Asia - they're usually available in the States in a few months, but I like my cell phone toy. My iMate Ultimate has been awesome and hasn't crashed once, unlike almost every telcom-provided PDA phone.

    Nonetheless, the subsidized cheap/free phones people want make sense. It's like a simple credit extension by the provider: people get free phones every few years, and the provider gets their money back and then some over the life of the contract.

    The FCC has no right to butt into this portion of the market. I'd love to see a "Non-subsidized" contract price, but my company handles all my employees' cell phone accounts, so we already get a nice reduction in our monthly price because we never take their free/cheap cell phone deals. So that option IS there, you just have to negotiate with the right department and not a retail store.
    • by poptix_work ( 79063 ) on Saturday May 31, 2008 @02:43PM (#23611399) Homepage
      I have never accepted one of their free/reduced priced phones (I prefer to buy online as well, provider selection + disabling of functionality sucks) but you still get forced into a contract. I see no problem with allowing the early termination fees for people that take advantage of free/reduced price phones, you should not be forced into a contract when you bring your own phone though.
      • I agree whole heartedly.

        When a customer ends their contract VERY early, the fee may not even cover the true cost of the phone.
        • When you terminate doesn't matter to the provider. You're tied to a 12 or 18 month minimum contract (I believe in the US you have 2 year ones as well).

          Take this N95 deal - free N95, 12 month contract, £17.50/mo for first 5 months, £35/mo for the the other 7. Total cost of contract £332.50 (calculations from dialaphone - haven't verified them).

          No matter when you terminate O2 get exactly the same amount of money out of you. The phone is probably worth about £250 of that and the rest
      • by dada21 ( 163177 )
        But the contract's early termination fee is NOT just about subsidizing a phone, it is also about being a part of the costs of expanding the network to cover the needs of the customer.

        If 10,000 customers sign up in a given area, and the cell provider doesn't have significant coverage in that area, there is a high burden of cost over the time that the customer is signed up: finding land, leasing land, providing towers, maintaining towers, etc. That $200 or so you'd pay is probably close to the realistic guid
        • Congratulations, business involves risks. As risks go, this is fairly minor and can be absorbed by a national company easily. The cost of signing a customer up is low, on average - the burden is mostly based on current demand, which is fairly stable over time.
        • That $200 or so you'd pay is probably close to the realistic guideline of cost+profit for providing service to you, given that you will likely use your phone within a given region more often than not.

          Which almost makes sense, except that they're charging you $200 not to provide service. It's a "termination" fee, not an "activation" fee (which they also charge you when you establish service.)
        • YOu can't just keep hiring and firing based on current demand but on expected future demand.
          Citation needed. There exist employment agencies that specialize in short-term placements [wikipedia.org].
      • Why not? I think it's perfectly reasonable when you sign up with a carrier to have a 1 year contract. After that most contracts go month to month, and you only get in trouble if you take advantage of their 'free' phone offers. There are inherent costs associated with acquiring and setting up a new client on a phone network. Why shouldn't the carriers be able to at least ensure that they can make up those costs with an initial contract?
        • Why not? I think it's perfectly reasonable when you sign up with a carrier to have a 1 year contract. After that most contracts go month to month, and you only get in trouble if you take advantage of their 'free' phone offers

          Unfortunately, that's not the case. Sprint claimed I had a 2 year contract after I bought a phone full price, and then switched to Cingular.

          Of course, they're not willing to document why they think I have a 2 year contract, and I'm not willing to pay them the $150 fee until they do.

          So t
      • Like the iphone, for example.
      • Re: (Score:2, Interesting)

        by Lunatrik ( 1136121 )
        I use sprint, and I brought my own phone - with no contract. Just took alot of chatting with the representatives (and a lot of call backs to get a good rep).

        In fact, I now regularly get offers to reduce my bill 5-10% if I will lock in to a 1/2 year contract. Perfectly reasonable offer, IMHO, but the fact I had to jump through so many hoops to be in such a situation is egregious.
      • Ya know, I was on Tmobile a couple years ago. I had my phone unlocked.
        I called up AT&T Cingular, went into their stores, went online.
        I told them I had my own phone and I wanted service from them with no contract.

        There was no way to get that from them. It was impossible. If I ported my number, got a new number, whatever.
        There was a 2 year contract.
        I asked "Why, not like you are giving me a subsidized phone?" They had no answer.
        There was no way to establish service with ATT without a 2 yea
      • Re: (Score:3, Interesting)

        by maggard ( 5579 )

        Every major US carrier has a monthly plan. They're generally not well-advertised, and are primarily intended for those with poor credit, but they're available.

        The problem is the sheeple who honestly think that a mid-market cellphone costs US$50. They're the ones who buy that US$250 phone for US$50 (along with a 2-year contract!), the next day drop it in water / drive a truck over it / simply lose it, and then get infuriated when their carrier declines to sell them another US$250 phone for $50 (and doesn't

    • My only real issue with Cancellation fees are when you AREN'T getting a subsidized phone. I had my Treo for 2.5 years, I changed jobs and suddenly I needed significantly more minutes. I called them up, they had no problems getting me set up with a new more expensive plan, all was well. After 4 months of incorrect billing I called them and they found there was an error in the way my new plan was set up, it was fixed, all was well. Except when they made that change, they restarted my 2 year contract witho
    • Re: (Score:3, Informative)

      by Adambomb ( 118938 )


      Just in case there are those who do not know, in canada at least the providers always have a uncontracted phone price. These prices tend not to be advertised much though, and many of the salesmen are comissioned based on contracts not the devices themselves.

      Be sure to ask. Repeatedly. And with different agents.
    • I can't get a "no-phone" plan. I don't get a discount because I supply my own phone! But my "plan" is just out of the penalty fee phase. I can't change the plan without getting into ANOTHER penalty fee phase. (certain features can be added or removed, but there are limits -- and my carrier won't tell me what those are).

      If I replace my phone, I get into another penalty period. If I don't... I pay the same amount; but without the penalty period. And that's it.

      I want to see a "no-phone" rate...

      Yes, I would lik
      • Just ask for a sim-only contract. They're usually quite cheap and have no miminum contract. I have one - £15/mo with reasonable number of minutes and unlimited texts. I can't imagine you can't get the same where you are.

        • Tony

          Even though I am in London right now (for the next week), my home base is Canada (Toronto). My carrier does NOT offer that service -- they would much rather I buy a phone from them. I don't have much choice for carriers; the "competition" doesn't even offer sim card support for their phones.

          Completely disgusting.

          I am looking for service at £50/mo with reasonable minutes, unlimited web access, email delivery and send. I don't want to be locked into a "contract" with a £200 penalty. Based on a
        • Just ask for a sim-only contract. They're usually quite cheap and have no miminum contract. I have one - GBP 15/mo
          You said GBP. True, one can get a SIM-only contract at a discount in countries that have the pound sterling or euro. But this isn't generally the case in countries that have the U.S. dollar as legal tender. This article is about such a country: the United States of America.
  • Maybe regulations should be made to change the way phone contracts are signed?

    I don't think we should be able to call the FCC and cry about not liking contracts we signed, but maybe there should be rules about having initials next to every item on the contract (like the termination fee
  • by gadabyte ( 1228808 ) on Saturday May 31, 2008 @02:52PM (#23611461)
    don't like termination fees? don't sign a contract agreeing to pay them if you leave. duh. it's not like you have some inalienable god-given right to a cell phone. hence the contract.

    i don't think this should apply to dropping service if the cell carrier isn't holding up their end of the bargain (crappy coverage, non-functioning hardware, refusal to address issues, etc) - then, by all means, the customer should have full right to leave without ANY penalty. but if the customer is leaving because they want the sweet phone on the other network, or just because they feel like it...maybe they should have thought of that before signing.
    • Re: (Score:2, Redundant)

      by pak9rabid ( 1011935 )

      don't like termination fees? don't sign a contract agreeing to pay them if you leave. duh. it's not like you have some inalienable god-given right to a cell phone. hence the contract.

      Easier said than done when none of the competitors offer anything w/out a contract. In this day in age, going w/out a cellphone simply isn't a choice for most people. I tried to go as long as humanly possible without a cell phone (I absolutely HATE phones), but eventually had to cave in due to social, school, and work-related issues..not to mention with pay-phones disappearing nowadays, it can be a pain in the ass to make a phone call when you're in unfamiliar territory.

      • by hassanchop ( 1261914 ) on Saturday May 31, 2008 @03:35PM (#23611799)

        Easier said than done when none of the competitors offer anything w/out a contract.


        Hmm. Let's examine this.

        http://www.wireless.att.com/cell-phone-service/go-phones/ [att.com]

        AT&T Go phone. No contract.

        http://www.t-mobile.com/shop/plans/default.aspx?plancategory=4 [t-mobile.com]

        T-Mobile. No contract.

        http://www.verizonwireless.com/b2c/store/controller?item=prepayItem&action=viewINpulsePlanDetail [verizonwireless.com]

        Verizon. No contract.

        http://www.boostmobile.com/ [boostmobile.com]

        Boost Mobile (owned by Sprint-Nextel). No Contract.

        Did I misunderstand you when you said "none of the competitors offer anything w/out a contract." because that ALL of the (major) competitors, and no contracts. There are literally dozens of options for cell service without a contract.
        • You're right...what I meant to say is easier said than done when none of the competitors offer anything without a contract without gouging their customers. There's a catch to getting a pay-as-you-go plan..you're paying a premium for this "privilege".
          • http://plans.boostmobile.com/unlimited.aspx [boostmobile.com]

            Check that out. TBH, it's an extremely good deal at $55 a month for unlimited talk, text and wireless web. Definitely not gouging.
            • Hmm, that's actually not too bad. Too bad I'm under a 2 year contract w/at&t :p
              • by rhizome ( 115711 )
                Too bad I'm under a 2 year contract w/at&t :p

                To be sure, even the existing usurious cancellation fees should work out to only about 3-4 months of service (depending on your plan). It'd be a small price to pay for not giving them your money for the next year and a half anyway.
                • Yeah, but I also value my credit score :). I've actually been pretty happy w/at&t's wireless service since I've been a customer of theirs (5 years or so). Can't say I've ever experienced any outages or other nastiness, unless I was in BFE or something. Never any unexpected surprises on my bill either..granted I try to avoid talking on my phone as much as possible..I worked tech support for about 6 years while I was in school which attributes to my phone loathing.
          • by p0tat03 ( 985078 )
            What? All of T-Mobiles plans are available prepaid without a contract - these aren't pay-as-you-go, these are full-fledged plans just like the contract ones.
        • Hang on a sec. If I buy my own phone and don't wish to subsidize a new phone via a contract, then I have to pay MORE money every month? WTF?
      • I tried to go as long as humanly possible without a cell phone (I absolutely HATE phones), but eventually had to cave in due to social, school, and work-related issues..not to mention with pay-phones disappearing nowadays, it can be a pain in the ass to make a phone call when you're in unfamiliar territory.

        No kidding, I feel exactly the same way. It is gotten to the point where the cell phone is completely necessary, just like roads, water, gas, and electricity. Under the old wired system, we used a net

    • Re: (Score:3, Insightful)

      by Anpheus ( 908711 )
      Unfortunately the cell phone providers are providing what is by many considered an essential service, it is at least in the business world. This means they are negotiating from a position of power. Furthermore, there really is no negotiation. You never get to determine terms, you merely accept one of a few choices of contract and all that it entails. No negotiation and an unfair position for the two parties make, from what I understand (IANAL,) a weak contractual foundation.

      NYCL out there to correct me?
      • you merely accept one of a few choices of contract and all that it entails.

        That's negotiation. You select your carrier and the terms they offer. Businesses do not operate on individually-crafted contracts. It would take too much time and cost far too much money. The problem with people with a little knowledge of the law is that you're incredibly dangerous. Words don't mean what you take them for granted to mean.

        Standard form contracts are how mass transactions occur, even between businesses. You even get situations where two businesses enter into contracts and exchange form

    • by JohnWhitney ( 707445 ) on Saturday May 31, 2008 @03:24PM (#23611705)
      Well hell, why don't we apply this to ALL areas of life, instead of just cell phones?

      Gas station chains that only sell gas to if we agree to enter into a contract to only buy gasoline from their stations, and you agree to buy a minimum of 50 gallons a month! Don't like termination fees? Don't sign a contract agreeing to pay them if you leave. It's not like you have some inalienable god-given right to drive a car. Hence the contract.

      I have my own cell phone. I currently use a pay-as-you go system, precisely because I don't want to be force into multi-year contracts, and I typically only have my cell phone for emergency purposes. But let me tell you, I pay significantly more per-minute than those with a contract (about $0.25 a minute, plus fees).

      In an ideal world, a competitor would come along to service my needs. In the real world, there are very few companies with the money to buy the spectrum necessary for cell phone use, and those that have have all gotten together and decided that all of them will use this lock-in method. That leaves me with no choice but to pay exorbitant rates for their service without a contract.
      And as I said in a post above, I've had providers attempt to lock me into a one-year contract for the mere privilege of changing my phone number after I moved, so don't give me garbage about this contract being used to subsidize the price of phones.
      • But you are forgetting that the gas company will give you a brand new car (a $25,000 value) in exchange for your signing that 5 year agreement. And I am sure that you will have no problem paying $3000 a month for the car plus up to 50 gallons of gas per month. (Gas in excess of 50 gallons will cost $20 per gallon. Some plans may offer rollover gallons). You can also buy insurance for a replacement car should yours be stolen or broken. The cost of the insurance is only $1,000 a month. If you use this insuran
    • Re: (Score:2, Interesting)

      by gujo-odori ( 473191 )
      I hear you about the carrier not keeping up their end of the bargain. I canceled T-Mobile because their coverage went in the toilet and got stuck with cancelation fees even though my reason for canceling was that my T-Mobile phone had become about as useful as a brick.

      Last year I moved from southern California to the SF area to take a new job. I'd been a T-Mobile customer for four years at that point. Their coverage in SoCal was top-notch and I'd never experienced a drop call in four years. Their customer s
    • Re: (Score:3, Informative)

      by ciscoguy01 ( 635963 )

      don't like termination fees? don't sign a contract agreeing to pay them if you leave. duh. it's not like you have some inalienable god-given right to a cell phone. hence the contract.

      Yea, well, the cellular companies and their contracts, all done on the phone, little except perhaps your original one done in writing. Like the parent said, they renewed his contract "without his knowledge". They do that all the time.
      Then later they try to stick you with termination charges even though your contract might h

  • by SamP2 ( 1097897 ) on Saturday May 31, 2008 @03:12PM (#23611601)
    If it becomes illegal to charge a penalty for early termination, I imagine they'll change the scheme to something like this:

    - The "free" phone that is given to you in exchange for signing a 3-year contract, instead becomes a "lease"
    - You must give a "deposit" in exchange for the lease. The deposit is equal to the cost of the phone that they would sell it for, should you choose to buy it without a contract
    - They'll conveniently offer you an instant loan to cover the cost of the lease. So you don't have to shell out those $300 bucks, you just "owe" them to the company.
    - Each time you pay your plan, part of the money is used to cover that deposit loan. If you finish your 3-year contract, the owed amount becomes 0, and you get to keep the phone.
    - If you leave early, they charge you the remainder of the loan.

    They'll just wrap it all in the same kind of contract you sign without reading anyways, and for most customers it won't be any different in how or how much they pay, compared to the current system. But from the legal perspective, it suddenly becomes a whole new ball game.
    • by Fulcrum of Evil ( 560260 ) on Saturday May 31, 2008 @03:55PM (#23611963)
      Sounds great to me. I get unlocked phones off amazon that I can't get in the USA, so that'd drop $10-$20 off my bill.
    • Re: (Score:2, Insightful)

      by jeremycole ( 1076439 )
      No one participating in this examination thinks that the fees will go away completely and still get to keep the free phone concept. That's just silly. What you've described actually sounds like exactly what *should* be happening. As it is now, they charge the extra fees per month (in the form of markup), but nothing gets "paid down" on your loan, and if you cancel even a day before your contract is up you owe the full amount of the "loan". As a bonus, since the plans are priced suitably for the companie
    • That won't work for the phone companies. They can't just use their current percentage take on the phones and convert it to a lease because of the usury laws in the United States. You're just not allowed to charge that kind of interest, so they have to bury it in as part of the contract.
  • Is this to decide whether early termination fees need to be abolished or highly regulated, or to determine if they're OK as is? (or could it go either way?)

    I could see this hearing poised to set a very good, or a very bad, precedence.

    • by SeaFox ( 739806 )
      I think the carriers are shooting for the fees to be declared legally legimate so you can't sue using a state's consumer protection statue. The amount of the fees will of course be a part of this as well, and I'm sure the FCC will say that "whatever the current fees are" is around the right amount, which would make the carriers quite happy.

      I don't think they will make any decision that fees should be abolished thanks to the arguement about handsets being subsidized by the contract, but they may just put a s
  • Sure, I can buy an unlocked phone and bring it to AT&T.

    Assume I bought a $300 phone that would have been $50 with a 2 year contract.

    Well, great! No commitment. Just one (big) problem: I don't get any sort of pricing commitment. The whole reason the ridiculous discounts work is because the discounts provided are just put in the cost of plans! If I don't get any sort of discount, why bother?

    A further disincentive against buying your own cell phone? The different standards and activation. Sure, AT
    • by Mr2001 ( 90979 )

      Sure, AT&T may be GSM as well as TMobile, but Sprint & Verizon are CDMA... and some refuse to let off network cell phones on. Verizon won't activate ESN's that are not from their own phones.
      Verizon will - it's Sprint that won't.
  • Just apply some common sense. If the early termination fees are to recoup the subsidized phone cost, then:
    • the fee cannot exceed the cost of the phone,
    • if the phone is returned in a resalable state, its fair trade-in value can be applied against the fee,
    • the fee is prorated based on how much time is left in your contract (if you're halfway through a 2-year contract, you've paid half the subsidy cost so the termination fee should be halved),
    • if I bring my own phone, there is no subsidy and hence no early t
    • by Renraku ( 518261 )
      The problem with subsidizing phones is this.

      The cell phone manufacturers forbid companies to sell their new hardware for less than a certain amount. A phone might cost them $50 to make, but you know that they're going to sell it to you for $400. Or actually, $50 + two-year contract..which means the cell company can pay it off in like two months. You don't believe that phone actually costs $400, do you?

      Its collusion, plain and simple. I could have a contest to win a $100,000 car..and if Uncle Scam's Car
    • People just want reasonable cancellation fees. $50, $100, or even $200 can be reasonable, but most carriers in my area charge $20/month x remaining months, so that means $600 if you have 30 months left which is outrageous. Long live Virgin!
  • by nick_davison ( 217681 ) on Saturday May 31, 2008 @03:59PM (#23612007)
    The argument is:

    Phones are expensive. We give you what works out to be a $250 discount to help you cover that cost. We recoup it at $10/month during your two year contract. So, if you cancel early, we have to recoup what was essentially a loan.
    My question has always been:

    So, when people don't ask for that discount, when they bring their own phone or when they're happy using the phone you've already collected the cost back on...

    Where do you list your $10/month cheaper plan that doesn't have this tied in?
    Quoting from the Smithsonian's National Zoological Park [si.edu]: 250,000 tons of toxic material have been dumped in to landfills by 700 million "retired" cell phones in the U.S. alone. In addition, mining the coltan used to coat components in then, has devastated lowland gorilla and African elephant populations.

    My phone's about to come out of its two year contract. It's still perfectly functional and will likely see me through several more years just fine. I'm guessing a lot of others are in the same boat. As it stands, with no discount for already having a phone making a lie of the cost reclamation argument, most people are likely to get a new one that they consider "free," tossing their old one. Were they able to save that $10/month, how many more would be tempted to save money and, even unintentionally, end up saving a lot of damage to the environment?
    • by SeaFox ( 739806 )

      Were they able to save that $10/month, how many more would be tempted to save money and, even unintentionally, end up saving a lot of damage to the environment?


      The wireless carriers' highest duty is to increasing profits for their shareholders, so thinking about the Earth is not allowed. Saving the planet is not important enough compared to adding an extra 5 to the dividend. /sarcasm

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