The FCC is scheduled to hold a hearing today regarding the fees wireless customers pay when they want out of their service contracts. Called early termination fees (ETFs), customers are typically charged $175 in order to break a contract. Service providers say the fees are necessary to recoup the subsidized price of handsets, while consumer groups have charged that the fees are unfair and anticompetitive.
The hearing today is expected to focus on an FCC proposal that would give customers a 30-day grace period after signing up for new service, in which they could end the contract with no penalty fee. The FCC also has proposed prorating contracts based on how long a customer has left on his or her contract.
Along with the proposed updates to the fee’s structure, the FCC is also suggesting that ETFs be regulated federally. Currently, states have some say over contracts and fees, though they can’t regulate services rates.
Frustrated by the various service fees, consumers in several states have launched class action suits against carriers, challenging early termination fees. If the FCC decides to federally regulate ETFs, carriers would be safe from such suits. FCC Chairman Kevin Martin has said he is in favor of federally regulating ETFs.
In a released statement, a representative for the National Association of Regulatory Utility Commissioners (NARUC) called on the commission to find a “cooperative Federal-State approach,” saying that it will “yield the optimal outcome that best serves both consumers and the public interest.”
Following the issue, the Associated Press uncovered e-mails from executives at a wireless provider showing that it did not charge the government the same fees it charges consumers, acknowledging that “the government will never, never accept such penalty amounts.” The internal e-mails were from Nextel, now part of Sprint Nextel, and were part of a class action suit levied against the carrier in California.