FCC to scrutinize cell phone fees, carriers undaunted

Colorado Springs Business Journal, Jun 13, 2008 by Joan Johnson

Increasing irritation about cell phone contract termination fees is causing some service providers to revamp their policies and either drop or minimize the fees.

The outcry has even reached the ears of the Federal Communications Commission, which held a hearing yesterday to discuss the issue.

But, barring sweeping legislation that bans contract termination penalties, the fees don't appear to be going away any time soon.

Speculation from carriers about what the results of the FCC hearing might be is broad.

Some cell phone company representatives say they have no fear that the outcome will affect their business. Others say they're hoping for some type of national regulation. Some simply refuse to comment.

Verizon Wireless spokesman Bob Kelley said his company lowered its early termination fees two years ago and now offers contracts that pinpoint customer concerns, such as no-contract, pre-paid service.

"We were the first company to introduce a pro-rated, early termination fee in November of 2006," he said.

That policy change reduced the early termination fee by $5 a month.

Kelley said changes like that have helped Verizon keep customers. He said the company has had a better customer retention level than its competitors for 14 straight quarters.

AT&T followed suit last month and lowered the early termination fee by $5 per month for one- and two-year contracts. Previously, the fee was $175 regardless of when the contract was terminated.

AT&T spokesman Mark Siegel declined to comment about the FCC hearings, but said termination fees allow businesses to offer high- tech phones at low costs. He said AT&T offers no-contract, pre-paid plans if the customer pays full retail price for a phone.

Sprint representatives said they plan to convert their billing platform this year. As it is now, Sprint's standard early termination fee is $200.

"Once this conversion is completed and our other systems are properly set up and adjusted to support a prorated structure, we will move forward on introducing prorated early termination fees, which will reduce the early termination fee over the life of the contract," said Sprint Nextel spokeswoman Kathleen Dunleavy.

She said Sprint supports the idea of a national policy that sets guidelines for contract termination fees.

"Regarding FCC involvement in the early termination fee issue, we have long advocated for the strengthening of the national regulatory framework which would protect consumers from a confusing patchwork of state regulations and put into place one national policy governing wireless rates," Dunleavy said. "We believe this is in the best interest of consumers and wireless carriers."