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AT&T Changes Contract PolicyWill lower termination fees, stop requiring contract renewal to change plans |
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By Martin H. Bosworth October 16, 2007
Instead the company will pro rate the fee depending on how many months the customer has left on their contract. Also, AT&T will no longer require customers to renew contracts when making changes to their wireless service plans. The new policy goes into effect in early 2008. "Customers have told us they do not like one-size-fits-all approaches," said Paul Roth, president of AT&T's wireless sales and marketing division. "They are right, and that is why we have made these important changes." Contract termination fees and upgrade fees have long been a sore point with wireless customers, who often pay anywhere from $175 to $250 to cancel a contract before its expiration date. Although industry representatives claim the fees are necessary to subsidize the costs of handsets, the fees are largely viewed by consumers as measures designed to retain customers and prevent them from seeking better deals elsewhere. First moveVerizon Wireless became the first cellular carrier to pro rate its termination fees over the life of the contract in March 2006. The popularity of the Apple iPhone, which could only be purchased with an exclusive contract from AT&T, led to hearings in Congress where critics said the termination fees hamper consumer choice. The House hearings singled out AT&T's fee as especially steep, given that Apple covered all the costs of creating the iPhone. The hearings led two Senators to introduce legislation in September 2007 that would require the prorating of termination fees for contracts and restrict any fees charged consumers to those mandated by law, as well as giving customers 30 days notice to cancel their contracts. FCC chairman Kevin Martin, who normally takes a hands-off approach to telecom regulation, announced that the Commission would investigate termination fees not only from wireless carriers, but from Internet service providers and the cable industry as well. And the California Supreme Court recently permitted a class action lawsuit against T-Mobile over its contract and termination fees to go forward, signaling a major shift toward consumers in the debate over the fees. Verizon's planVerizon, Perhaps feeling the heat from growing consumer and Congressional discontent with burdensome contracts, announced similar changes Oct. 2, changing its policy so that its customers can make changes to their service plan without extending their contracts.New and existing customers will have the option to change their voice and data calling plans -- selecting current plans with different minute allowances or text messaging and data use options -- without changing the end date of their contract. Verizon says the new policy is part of the Verizon Wireless "Worry Free Guarantee." Last year, Verizon Wireless became the first major carrier to pro-rate its termination fees. Two Senators have introduced a bill that would require 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. Report Your Experience
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