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FCC, Congress May Limit Cable, Cell Phone Termination Fees

Rising tide of consumer discontent rocks industry's boat

by Martin H. Bosworth
ConsumerAffairs.com

September 12, 2007 

"This issue may be broader than just the wireless industry, and I think the commission should look at what the implications are across the different platforms," Martin told reporters before the FCC's monthly meeting Tuesday. The commission may investigate early termination fees before the end of 2007, Martin said.

Martin's comments come just days after two Senators introduced a bill designed to reform the contracting and billing procedures of the wireless industry to favor consumers.

The "Cell Phone Consumer Empowerment Act of 2007," sponsored by Senators Amy Klobuchar (D-MI) and Jay Rockefeller (D-WV) would mandate that carriers prorate termination fees, to be reduced by 50 percent after the first year of a two-year contract.

The bill would also prevent wireless carriers from charging fees for service beyond those expressly required by local, state, or federal law, and to expressly notify customers if any service request or upgrade would trigger a contract renewal, as well as giving customers 30 days' notice to cancel the contract.

“Early termination fees are a family budget-buster," Klobuchar said when announcing the bill.

"Families should be able to terminate service without outrageous fees; know if their cell phone will work on their drives and in their home and office; and understand what to expect in their monthly bills once you pile on charges and fees. It’s a simple matter of fairness.”

Industry view

Not surprisingly, CTIA, the wireless industry lobby, opposes the bill. CTIA head Steve Largent said that the new legislation would "increase the cost of wireless service and reduce the number of choices available to American consumers."

"This is hardly evidence of an industry in need of regulation and in fact, suggests just the opposite," Largent said. "More Americans are choosing wireless communication than ever before and are increasingly more satisfied with their service."

Largent's rosy opinion of the industry aside, contract termination fees in general, and wireless termination fees in particular, have been a regular source of complaints to ConsumerAffairs.com and to consumer protection organizations.

Protests over Verizon Wireless' steep contract termination fees led the carrier to prorate its fees, the first of the major carriers to do so.

The issue of punitive fees and unclear contracts has been on Congress' radar for some time, with the release of the iPhone--and its exclusive AT&T contract, complete with a $175 termination fee--leading to hearings in the House Telecommunications subcommittee over the lopsided agreements customers have to agree to in order to get wireless service.

FCC chair Martin, who has long been an ally of the telecom industry and in favor of regulations that challenged cable companies' dominance in the market, may have made his announcement hoping to preempt the Klobuchar-Rockefeller bill from becoming law.

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