Why Cellphone ETFs Are Awesome For America

Here are the cellphone industry’s talking points on why early termination fees are the cat’s tits.

    “Early Termination Fees provide consumers with numerous benefits, notably lower costs for wireless services and products…

    • ETFs Help Produce Lower Overall Wireless Rates
    • ETFs Dramatically Reduce Economic Barriers for Wireless Subscribers
    • Wireless Consumers Have Several Rate Plan Options
    • ETFs Are Used By Numerous Businesses
    • Restricting ETFs Limits Consumer Choices and Increases Costs”

Here’s our talking points on why we dislike ETFs…


• Consumers aren’t made sufficiently aware at purchase about early termination fees.
• Consumers aren’t made aware of the relationship between the discounted phones they see in-store and the early termination fee.
• Cellphone companies never advertise that consumers can get a month-to-month plan.
• Only through informal channels do consumers learn about the possibility of purchasing a phone not directly from the company and then signing up for a month-to-month plan.
• Even when consumers have a legal right to exit contract without financial penalty, cellphone companies’ customer service reps will go to great lengths, including outright lying, to prevent them from exercising this right.

— BEN POPKEN

Industry Topics: Early Termination Fees [CTIA] (Thanks to Vinny!)

Comments

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  1. Citron says:

    Those reasons why ETFs are good have to be about the most asinie, contrived, things I’ve read in a long time.

  2. kenposan says:

    • ETFs Are Used By Numerous Businesses

    How, exactly, is this a benefit?

  3. Prosumerist says:

    It’s nice to be shackled to a 2-year contract that carries a $175 ETF when your phone was -$5 after rebate.

    ETFs are another in a long line of corporate extortion tactics. No surprise when America’s foreigh policy can be summed up as “Either You’re With Us or You’re Against Us”.

    Freedom of choice indeed.

  4. nweaver says:

    Actually, look at the price on the hot phones, and you realize the ETF is a deal if you go for the high end phones…

    From Verizon, A RAZR retails for $300-400 with no contract, or $50-100 with a 2 year contract.

    So even if you DO eat the EFT, you can come out ahead on the high end phones. This isn’t the case for the low end ($150 retail,

    (although if you get the RAZR, get the insurance, they have a tendency to break if you accidentally put it in your back pocket and sit down)

  5. BillyShears says:

    Restricting ETFs Limits Consumer Choices and Increases Costs

    Say what?

    Also, I downright resent that companies act like 1-year contracts don’t exist. They’re probably the happiest medium in the whole, sordid affair: They get your money for one year, and after that (relatively) short period of time, you’re more or less a free agent; you’re under no obligation to renew for any reason unless you want a new rate plan, promotion, or a heavily-subsidized, feature-laden new phone.

  6. Sudonum says:

    ETF’s are used in numerous businesses….like sporting event tickets. Sporting event tickets????? ETF?????????? WTF??????

  7. Anonymously says:

    “cat’s tits”

    That’s really uncalled-for, Ben. I have had a few cat friends and their tits aren’t all that great. Being poorly titted is a difficult thing to deal with and bigoted stereotyping being added to it doesn’t make it easier.

  8. Skeptic says:

    Consumers aren’t made aware of the relationship between the discounted phones they see in-store and the early termination fee.

    This is bit of a misnomer. EFTs are only nominally related to the hardware subsidy. My “favorite” aspect of EFTs is that they have no relation to the amortized amount of the subsidy. Been a customer for 23 months? Sorry, the EFT is still $150. This fact is indicative of EFTs being designed as a form of customer lock in not as a way of recovering hardware subsidies.

    At the very least, EFTs need to be amortized over the period of the contract as mitigated damages. But the idea that EFTs reduce “overall wireless rates” is patently false. To pay for the hardware, service providers increase their rates not decrease them.

    Restricting ETFs Limits Consumer Choices and Increases Costs”

    Costs to whom? If service providers are paying to subsidse the phone, then consumers are still paying the full cost of the phone spread out in the form of higher monthly bills.

    Wireless Consumers Have Several Rate Plan Options

    Yup, plans they can’t switch to because they are locked into a contract with an ETF.

    What a load of tripe…

  9. royal72 says:

    my foot in your ass provides consumers with numerous benefits, notably the pleasure of giving back to you, you greedy, thieving corporations who deserve nothing less…

  10. kidgenius says:

    Skeptic,

    With regards to the ETF being amortized. Verizon now has an amortized ETF.

  11. Skeptic says:

    “With regards to the ETF being amortized. Verizon now has an amortized ETF.”

    Well, that is an improvement. Now if we can just get a law to get the other carriers to do just that.

    In California, there was a group suing the carriers for their ETF contracts because they are essentially an unmitigated damages clause and in California you have a duty to mitigate damages. For instance, if I break a one year lease I’m responsible for paying the full lease but the owner has a duty to try and get a new tenant to reduce the damages–they can’t just sit on their butt for a year and take all of my money. The amount I pay has to be related to their actual damages. ETFs are generally not amortized or mitigated or related to actual out of pocket costs for the subsidy–if they were they would not only be amortized they’d vary in exact amounts from phone to phone. The real damage to the carrier is not the cost of your hardware but the cost of getting another subscriber to replace you once you escape–a cost they are not entitled to recover from you, their former customer.

    INAL, so feel free to jump in and correct my understanding if I’m off..

  12. Sorenso says:

    They must really smoke a lot of pot to think they do ANY good for us as consumers.

    I bet they really think we (consumers) are a group of ignorant, believe-anything people. It sickens me.

  13. Xkeeper says:

    Why isn’t this post tagged with “Bullshit”?

    Sorenso: They do. Oh god they do.

  14. Trai_Dep says:

    Notice how they’re trying to sneak in “ETF” to replace “Early Termination Fee”. Cuz it sounds less Darth Vaderish?

  15. mglasspo says:

    You know what, I actually have very little objection to early termination fees.

    For me, it’s a matter of a contract. You sign a contract with a company and you’re stuck with them for X years (or months or whatever). If you want to get out early, you need to pay them for their lost time.

    Usually, the money you need to pay them is less than you would have if you kept going with them.

    My contract WAS (I’m on month-to-month now) $40/month (or your usual monthly fee, whatever is lower) to a maximum of $200 for early termination. I don’t think that’s too horrible. It DOES make you do the math and wonder if it’s worthwhile for you to cancel.

    It also means that you need to do the research and pick the best cell phone company, phone and contract available to you. Which is a good practice to get in regardless.

  16. roman-sentinel says:

    I hope this is the appropriate forum for the following

    How about some feedback on this predicament:

    My father, 83 year old, italian immigrant, went to cingular on 11/7/06 with the intention of purchasing a phone which he could use anywhere outside of the USA (quad band)they sold him a phone which didn’t fit the bill.

    He returned the phone on 11.21.06. They sent him an invoice for early termination which he didn’t pay. I spoke with customer service sometime in 12/06 and they claimed they had no record of the return. Of course we have all the docs as well as the return credited on his AMEX.
    It has gone to Allied Interstate for collections. They’ve been calling several times a day and disturbing my parents who have had a perfect credit history all of their lives.

  17. Skeptic says:

    “You know what, I actually have very little objection to early termination fees.

    For me, it’s a matter of a contract. You sign a contract with a company and you’re stuck with them for X years (or months or whatever). If you want to get out early, you need to pay them for their lost time.”

    I don’t owe them for their “lost time.” I am not their bitch who owes them “time.”

    One of the problems with Early Termination Fees (kudos to trai_dep for pointing out that “ETF” is an evil attempt to sanitize the term) is that you can’t just shop around. The “competing” carriers all have very similar terms. These contracts are not contracts in the traditional “two parties come to a mutual agreement” sense. They are one sided to the point of near-parody and are, IMO, abusive.

  18. pronell says:

    For once, a picture of food that actually makes me hungry.

  19. r3m0t says:

    “Wireless Consumers Have Several Rate Plan Options”

    How the hell is this related to Early Termination Fees anyway?

  20. davidgc says:

    ETFs should be amortized over the period of the contract. The best though is to get rid of these contracts and just have “pay as you go”. This is the system used throughout the rest of the world and it works well from all that is evident. I recently purchased a Blackberry in Hong Kong and now I just buy a SIMM card from a local provider ( Rogers, in Canada, and T-Mobile in the US. I own the phone. This avoids the exhorbitant roaming charges when in one country or the other. Furthermore, when I am overseas, I just do the same thing and it works out well.

  21. mglasspo
    I do not believe I have an obligation to continue giving somebody my money if I have determined the relationship to no longer be benefecial to me. Contract or no contract. The whole ‘lost time’ philosphy eludes me. Just because a company has spent x amount of dollars to court me does not mean that once I agree to this courship that I am responsible for recovering the initial costs of gaining me as a customer. The best way to keep me commited to you is to empathize with me and not make me feel like I am trapped with you.

    The valid point that I DO see in your argument is that in order to receive a discounted service for an extended period of time it follows that paying the early termination fee would be reasonable.If and only if the new rate is different than the normal rate, maybe if it were some sort of promotional offer.

    Here is an ombudsman that I found for telecommunications disputes. I havent checked it out in too much depth but it seems professional and legit.

    Telecommunications Industry Ombudsman
    http://preview.tinyurl.com/3cryra

    crap. it looks like this is for australia. can anybody find their equivalent here in the states??

    Greg P
    Kudos for the snarky remark. You got it right on the nose. I’ve been attempting for some time now to point out the very same thing.

    pronell
    I actually went and made myself lunch immediately after seeing the picture of the bread.

  22. Kornkob says:

    The whole ‘lost time’ philosphy eludes me. Just because a company has spent x amount of dollars to court me does not mean that once I agree to this courship that I am responsible for recovering the initial costs of gaining me as a customer.

    Perhaps he meant something other than ‘lost time’. After all there are costs associated with network development, upgrade and support that they plan for and monetize based on their subscribership. It’s less ‘lost time’ and more a factor of the money they spend per customer to ensure ongoing services over time.

    This is why they should be offering a less expensive overall cost to their long term subscribers than to their month-to-month subscribers. By locking the customer in the customer should get a better deal and the company gets a predictable revenue flow and subscription base.

  23. Skeptic says:

    “It’s less ‘lost time’ and more a factor of the money they spend per customer to ensure ongoing services over time…By locking the customer in the customer should get a better deal and the company gets a predictable revenue flow and subscription base.”

    Er…my thought on that is Tough Sh*t. It’s not my job to be a predictable revenue flow. Besides, the customer base is so large that you don’t need Early Termination Fees to maintain a predictable revenue flow. Individual customers are mere drops of water in a receiver to the cell phone companies and they come an go in a fairly steady rate as a whole.

    It isn’t a matter of understanding why Early Termination Fees benefit the corporations. I think we generally get that. It’s a matter of whether they are fair and reasonable for the consumer. This is Consumerist.com not Corporatist.com.

  24. cynon says:

    I recently had to call Cingular about a very minor problem I was having. That was when I discovered that after I had purchased a new phone (about six months ago) — through a Cingular website — they had automatically signed me up for a two year contract. They said it was because I got such a great deal on the phone. However, I looked over and over again on the site at the time I bought the phone and nowhere did it say anything about me having to agree to a two year contract so I could get their good price. In fact, I bought the thing because I could get the price and not have to worry about a contract. I’d had no idea I was under a contract again.

    I was unhappy, of course, and even more unhappy when I discovered that just about any change to any plan or equipment will trigger a two year contract. They pointed out that since I changed my plan at the same time that I bought my phone, that would have triggered the contract as well. None of this was made clear to me, nor did I sign anything I recognized as a contract.

    It took a good 45 minutes of time that I didn’t have, but the very nice service rep (and she was very nice and very helpful) agreed to reduce the contract length to one year including time served (about six months).

    Still, assuming people know, without being told, that their contract is going to be extended no matter what they do, is kinda shady.

  25. mglasspo says:

    Holden Caulfield:

    If you believe that you only have to maintain contracts that are benfitial to you, then you have a skewed view on life.

    If you agree to pay me x amount (since obviously you did your research and I was the best deal) for a specified amount of time, you are expected to fulfill your end of the contract as I am expected to fulfill mine.

    We are both bound by that contract. Granted, usually the contract is skewed heavily in favour of the corporation that has lawyers to write things that give them great leaway, however if you read it, agree to it and sign it voluntarily, then you are bound by the terms of that contract.

    Unless the contract gives you an out (the ETF), you can’t just go and cancel the contract and go to the next cheapest provider because they lowered their prices later on.

    I’m not advocating cell phone companies here. I’m advocating contracts, which, when fairly and well written protect BOTH the consumer and the business.

    I agree that cell phone companies like to make you think you have to sign the contract, I agree that usually they provide poor service, but I disagree that it is a horrible injustice that they charge me $200 (max) to cancel my contract when I would really owe them $480/yr of service.

    The cable companies (I am speaking specifically about my cable company here) have tried a number of things around this area as well. First was the rental of digital cable boxes. Customers complained that the rental was unfair since they couldn’t purchase one of their own. Then the companies offered to sell the boxes as well. Customers complained that they were too expensive to buy, so the company offered to sell it at a reduced price in return for having a contract that guarantees the customer won’t leave the cable company.

    What I tend to advocate regularly is reasonable conduct. Both among businesses and customers. Both sides have to be reasonable to have a good relationship. This site is VERY good at pointing out when businesses are being unreasonable and unfair, such as the amusing and wonderful posts on trying to cancel the (verizon??) contract due to text messaging increases, where there seems to be a blatent disregard for the contract – but when customers aren’t happy with the contract they signed, they still blame the company.

    This is all my $0.02 of course. I don’t mean to offend anyone, if I have, I apologise.

  26. mglasspo says:

    cynon:

    I agree that this is very shady. If you signed a contract that stated that it would extend the contract “X” amount of time for y changes, then ok, fair enough, but if they hid that from you, then it’s an invalid contract.

  27. Cap'n Jack says:

    Okay, so they’re saying “We charge ridiculous ETFs, and pass the savings on to YOU!” That is effing retarded.

  28. cstatman says:

    I thought the phrase was “the cats SIX teats” meaning a good thing.

  29. mglasspo

    No, I completely understand what you are saying and I get the point you are making and it IS a valid point. I just have a slightly more selfish view of the world and have a thing against contracts. I am in favor of open ended contracts. The whole idea of a locked/closed contract just makes me uncomfortable and feels like too much of a forced commitment.