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Wireless Firms Face Pressure On Termination Fees

AT&T follows Verizon; will prorate its fees by $5 per month

By Mark Huffman
ConsumerAffairs.com

May 27, 2008 

But now the Federal Communications Commission has signaled its intention to regulate that fee. FCC chair Kevin Martin says the government agency will look for a way that's both fair to consumers and the telecom companies.

Early termination fees are a growing source of consumer frustration. Some have resorted to lawsuits, claiming the fees are illegal.

Consumers have long taken issue with the wireless firms' practice of starting a new contract any time the consumer made any change to their account, including the purchase of a new phone.

"I purchased a cell phone with Cingular in November 2006 because the phone I had at the time was broken," Tiffany, of Whittier, California, told ConsumerAffairs.com. "The sales representative that sold me the phone let me know that because my phone was broken and my contract was not up, that they would not start a new contract with me."

But Tiffany said that after she canceled her AT&T contract and switched to Verizon this month, she was hit with a $175 early termination fee. The customer service rep, she says, told her that by getting a new phone, she had agreed to extend her contract to November 2008.

"I expressed my confusion and requested information with my agreeing to such a contract. He told me that they don't need my signature on a contract to prove that I agreed to it," she said.

AT&T this week introduced a lower early termination fee, saying the charge will be lowered by $5 a month for every month remaining on one and two-year contracts.

AT&T said it would lower the early-termination fee it charges subscribers by $5 per month during a one- or two-year contract. AT&T spokesman Mark Siegel said the prorated fee policy is "fair, flexible and is the right thing to do."

The new AT&T policy went into effect Sunday. Verizon began prorating its early termination fee in 2006.

Some wireless carriers have said they wouldn't object to an industrywide standard for mobile phone contracts. But industry analysts say wireless firms would likely fight any move to totally remove early termination fees, since they serve as both a way to keep the customer base stable and provide a lucrative profit center.

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