In Early Termination Fee Hearing, FCC Chief Regurgitates Wireless Industry Proposals

The FCC held hearings today to discuss early termination fees (ETF) for wireless carriers, the ~$175 charged if a customer exits contract before the contract is up. FCC Chairman Kevin “Golden Child” Martin’s proposals largely mirrored those offered by the carriers themselves last month. Here’s what he said today:

  • ETFs should be relative to the phone’s cost; a $5 phone should have a lower fee than a $50
  • ETFs should go down month by month
  • Contract lengths should be “reasonable” (whatever that means)
  • Extended a contract shouldn’t refresh the ETF (no shit, they’ve already recouped the cost of the cellphone)
  • People should be able to get their first bill and look it over before the ETF goes into effect

Cellphone companies are eager to push for federal regulation so it can preempt state regulation and get them off the hook for various multibillion dollar class action lawsuits over ETFs. It’s easier to control one body than 50. In my opinion, ETFs should be abolished and consumers should be able to purchase unlocked cellphones directly from manufacturers that they can port to any compatible carrier.

FCC chief lays out plan for cell phone fees [Washington Post]

Comments

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  1. Darkwish says:

    Like the Capital One slogan – “What’s in your wallet?”

    I’d have to say the cell phone companies are in his.

  2. CaptainConsumer says:

    I think the money falling out of his pockets at the hearing was in poor taste

  3. ffmariners says:

    Not perfect, but if all those are enacted… that will be a good day for consumers. A step in the right direction, per se.

  4. savvy9999 says:

    Just wondering, does the FCC chief serve at “the pleasure of the president”… meaning, when Obama is POTUS in January ’09, then we’ll have an FCC head that isn’t up the asses of the companies he/she is supposed to regulate?

  5. teh says:

    “ETFs should be relative to the phone’s cost; a $5 phone should have a lower fee than a $50″

    Does this imply that if I purchase my own phone I am exempted from ETFs? Somehow I doubt this will be the case.

  6. Nothing about locking cell phones, huh? That’s as anti-consumer and monopolistic as ETFs.

  7. Trai_Dep says:

    Which we now know because of today’s earlier Consumerist article, Martin doesn’t have to deal with since he’s a gov’t employee. I’ll bet if Martin faced a $175 loss out of his OWN pocket, he’d be singing a different tune.
    Jeezus do empathy-free hypocrites bug me…

    Although, it has to be said, these are good initial steps. Initial.

    I’m also leery of how various terms are defined in practice: “reasonable”, “fair cost”, etc.

    I’d be okay with EFT-laden, “free” phones, so long as they were one of several options, with easy-to-understand, prominent terms, with no term resets unless a new, discounted phone was purchased. Then it’s a matter of preference (or buyer stupidity). But this?!

  8. Trai_Dep says:

    @savvy9999: FCC members are appointed for fixed, staggered terms. So, no.

  9. TheKingBoar says:

    I’m fine with ETF’s because I don’t want to pay for the whole cost of the phone. If you don’t like ETF’s, fine, just be prepared to fork over $200 for even the cheapest phones and more for the expensive ones. I like these new ideas, but anyone who thinks ETF’s should be abolished is crazy. Even as common as they are, cellphones are still really expensive.

  10. HIV 2 Elway says:

    I would love to get rid of my cell phone. The $200 ETE is starting to look like a viable option.

  11. raisitup says:

    @savvy9999: your screen name indicates you’re savvy, but do you really think what you just said is true? when the next president comes in we’ll get more of the same, it’s just going to have different icing.

  12. Coder4Life says:

    Contract Length – 1 Year Maximum
    ETF – Not Pro-Rated
    Phone – Eligible for low price purchase every year

    If they decide to keep 2 year contracts
    Contract Length – 2 Year
    ETF – Pro-Rated
    Phone – Should be eligible to repurchase at low price every 2 year.
    Should not have to resign a contract at end of 2 year, only if they want a low price phone.

  13. SkokieGuy says:

    Gee, a department of goverment, the FCC, who’s policy suggestions closely mirror those of the organization they are regulating, who’da thunk it?

    Wow, what will happen next, the Department of Energy meeting behind closed doors with the oil industry?

    Yeah, you’re going to find lots of industries accept softball legislation over the balance of the year. Better to let new regulations be set now under Bush’s corporate whoredom than to risk what might happen under a Dem press & congress.

  14. esd2020 says:

    @Trai_Dep: True, but I believe the next President can appoint someone to the next opening and then designate that person the Chairman.

  15. I think these are reasonable terms with a couple of exceptions. ETFs should be directly tied to a cost output by the provider (i.e. no $ spent by provider for equipment, setup, etc. means no ETF), and that the fixed, reasonable time should be tied into the proration of ETFs such that at least 5% of the ETF is waived for each full month of service (i.e. contract lenght maxes out at 20 months).

  16. Bladefist says:

    The ETF is in a contract between a private party and an individual. Why the FCC is holding meetings on this is beyond me. We are already seeing ETF’s be reduced in cost, and pro-rating is happening. Do you think this is because of the government? Or free market / competition?

    I can’t believe I am paying these peoples salaries to sit around and debate something they should have 0 control over.

    If you don’t like the companies ETF, go with another company. There are plenty with 0 ETF. The best way to regulation corporations is by not giving them your money.

  17. @raisitup: what an uplifting comment.

  18. ARP says:

    I’m OK with an ETF if the phone was subsidized. I get they need their money back. But if I bring my own phone or I elect to pay full price so I don’t have to pay ETF, I should have that right and no ETF should apply.

  19. Nothing wrong with regurgitating the industry’s proposal if it’s fair. I’m with ffmariners. It’s not like this modest improvement will end the war.

  20. SkokieGuy says:

    How about no EFT’s because no contract and you actually pay what the phone is worth?

    The problem is created by phone purchases subsidized by the carrier in order to generate long term commitments.

    If we paid the going rate for the phone, had no contract, then potentially (in my make-believe world) cell phones might actually have to compete on service to maintain customers, rather than keeping them trapped by contract.

  21. @Bladefist: The ETF is in a contract between a private party and an individual. Why the FCC is holding meetings on this is beyond me.

    The wireless spectrum is a public good. By being allowed to use a piece of it, they agree to be regulated by the FCC. You’re not going to convince me that it’d be better to let anyone broadcast on a particular frequency.

  22. Bladefist says:

    @Michael Belisle: That’s a good point. But I think both of our points can co-exist. If Bobs Cell phone service has a $2,000 ETF, why can’t we let the consumers shut him down? It’s pretty simple. I think most Americans ask about the ETF, and I just don’t see any point to regulating it. Just me.

  23. Trai_Dep says:

    @raisitup: Yup. Because there’s NO difference between 98-year-old McCain and Obama. Just like there was NO difference between GW Bush and that other guy who won the Nobel Peace Prize. While working a side-job.

    Yeesh. People like you really do deserve the stunted lives you lead.

  24. Trai_Dep says:

    @esd2020: Really? I didn’t know that. Thanks!

  25. Bladefist says:

    @Trai_Dep: I think he is 71. Barrack Milhouse Obama is going to fix everything. Even ETF’s.

  26. Trai_Dep says:

    @Michael Belisle: Thank you. You beat me to it. :)

  27. Trai_Dep says:

    @Bladefist: I think it would be fair if the companies offered a platter of options, from full-freight purchase of unlocked phones thru the EFT-laden ones (but resetting only if another phone was purchased, and amortized fairly). With the details described simply and accurately.
    Then let the market decide, with consumers making the best decision for them.

    Win/Win.
    But I think that we’re a far distance from that happy medium. For now.

  28. Bladefist says:

    @Trai_Dep: Well, like you, I am also a victim of ETF’s. And I hate them. Like you. But, I learned a valuable lesson, and I learned to either go a route with no ETF’s, or be absolutely sure I’ll finish out the contract.

    I see the snowball effect here. There are millions of private contracts out there. I can make a contract with you to build my deck, and if you don’t finish it, I’m not going to pay you. How long until the government is regulating that also?

    This is why I come to consumerist. Tell me who has the best deals, tell me who is god awful, and I’ll go to the good one, eventually the God awful one will be hurting. *Cough* Sprint.

  29. awolcfh5150 says:

    The government is filled with worthless douchebags who do nothing but try to control our lives and feel they are gods. I hope they all get AIDS and die of a horribly excrusiating death! Just my opinion though :)

  30. JohnMc says:

    All the concerns about the ETF’s and nobody notices the 800 gorilla in the room.

    You sign up for service. As part of the deal you get a discount on the phone at time of purchase. Say you did a 2yr deal. What actually happened is you acquired a $200 for $70 and the balance is buried in your rates for the term of the contract. At month 25 has anyone ever seen their RATE go down?

    The point is at month 25 you the customer are still paying the same rates as if the wireless company was still recapture costs on the phone. So from there on the differential is pure gravy to them. Until you of course go and cut a deal on a new discounted phone.

    Want to end all this junk? Convince the FCC they need to enjoin the Carterphone decision on Wireless carriers. That is you can buy your phone where ever you want. Will you pay full price up front? Yes, but only for a short while. When the costs of the phone are unveiled from the contract price the MFR’s will start dropping the prices. Your rate per call should also drop as the carriers are not doing the telephone dance and must compete on service and rates.

  31. Tiber says:

    @Bladefist: Though I’m probably less hesitant to use the hammer of regulation than you, I do agree that regulation should be the last resort. Unfortunately, capitalism has a weakness where everyone can be successful by being equally bad, especially if you’re a multi-billion dollar company rather than Bob’s Cell Phone Service. They’re a bit harder to shut down.

    Still, I can get behind this. Customers get a fairer deal (read: less of a rip off) and businesses only need to follow one set of rules rather than 50. Everybody (sort of) wins.

    Meanwhile, I’ll stick to my pay-as-you-go phone and wait for the FCC members to be replaced by people who are if nothing else better at hiding the fact that they’re in big-businesses pockets.

  32. saury316 says:

    @teh: @teh:

    I totally agree… if we have our own cellphone dont want theirs’, there is no “phone cost” that they are recouping..so no ETF?

  33. zentec says:

    @Bladefist:

    The problem is that there will never BE a Bob’s cell phone company. The large telcos buy up competitors or use shill companies to win auctions. In the absence of a real free market, regulation is the only way to keep things fair for the consumer. One-by-one, decent small providers are being picked-off.

    I’m not upset about ETFs if the phone is subsidized. I *am* upset that any time I want cell service, pretty much the only way to get service is under a contract. *That* needs to be changed. Likewise, why is it that Verizon won’t let me add services to my 4 year old plan without moving to a new plan that, surprise!, requires a minimum of a 1 year contract? That’s for phones that are at least two years old.

    Switch providers? I called AT&T and told them I had 4 GSM phones I wanted to activate under a family plan and guess what, the CSR told me that I needed to be under contract.

    There is no purpose for the contracts other than to lock-in customers and provide no recourse when the company is unable or unwilling to provide contracted services. This needs to change.

  34. @Bladefist: But I think both of our points can co-exist. If Bobs Cell phone service has a $2,000 ETF, why can’t we let the consumers shut him down?

    That’s a fair point, but the regulation limits the market to an oligopoly. Virgin Mobile may have no ETF, but they’re just a Mobile Virtual Network Operator. They buy minutes wholesale from companies like Bob’s Cell Phone Service. Some of your money ends up in his pocket no matter what you do.

    Although I’m sure it could be done, it’d take a whole lot of wishful thinking to shut down AT&T. I suspect the threat of regulation was part of what led to AT&T’s change of heart.

    Barrack Milhouse Obama is going to fix everything.

    Since you brought it up, don’t you mean Barack Hussein Obama? The only time rational people complain about using his middle name is when someone like Ann Coulter (where’s she been lately?) adds an extra flourish on the “Hussein” to arouse paranoia, like saying “B. Hussein Obama”:

    It also makes no sense to use his full name, except if you’re trying to play on some people’s prejudices. Nobody talks about Ronald Wilson Reagan or William Jefferson Clinton any more than necessary.

  35. Trai_Dep says:

    @Bladefist: But they’re not unfettered markets, bro.
    It’d be like if the US Gov’t said that two other companies and me were the only builders in the country that could build patios. Then the three of us offered you a take-it-or-leave-it contract that drastically curtailed your options.
    They chose to enter a highly-regulated market (due to the business model being based on the use of an incredibly scarce public resource). They can’t whimper about “interference” now. You see that, right?

  36. baristabrawl says:

    Buying direct from the manufacturer? What is this nonsense? Why…in my day we just paid for EVERY minute we used and we were happy to have phone service. Silly monthly allowances and unlimited minutes!

    But seriously…choice would be good.

  37. mike says:

    Overall, I don’t think this law is perfect but it gets us a step closer. Yeah, we could try to get it perfect but it probably wouldn’t pass and then we would be right where we started.

    I’m up for celebrating the partial victory. I agree with Bladefist partially. I agree that the government should not have to do this. However, if companies fail to provide a reasonable service to it’s customers, the government then has no choice but to regulate it.

    Sure, I wish a company would be more people-minded instead of profit-minded. But times being what they are, we’ll have to live with it.

  38. Bladefist says:

    @Michael Belisle: Hillary Rodum Clinton? George W Bush? I think middle names are fair. Actually, though, i didn’t say that to make you think of Hussein, I said that, because he reminds me of Milhouse off Simpsons.

  39. Bladefist says:

    @Michael Belisle: Also, my Hero, Mark Levin calls him that. But I think he does for a different reason.

  40. @Bladefist: You mean Hillary Diane Rodham Clinton.

  41. Bladefist says:

    @Michael Belisle: Never heard that. She has 4 names?

  42. Bladefist says:

    @Michael Belisle: OH, and Ann Coulter. Man, come on, she is Ann Coulter.

    Couple things about her:
    1) The media is way too hard on her. They make fun of her looks, they paraphrase her to make her look stupid. If you actually read her blog, she isn’t nearly as bad as you would think

    2) I’m not really a fan of hers anyway. She goes overboard.

  43. TechnoDestructo says:

    That “relative to the phone’s cost” thing sounds kind of counter to their interests. Is that supposed to be relative to what it costs the phone company, or what it costs the consumer?

  44. @Bladefist: Rodham is her maiden name.

    I thought you were using Milhouse because because some conservatives are whining that they’re “not allowed to use his middle name”. Some conservatives have been coming up with humorous alternatives.

    Your hero is Mark Levin? He sounds like an angry old man.

  45. Bladefist says:

    @Michael Belisle: Well, there is definitely a lot to be angry about. He is going to be pissed tonight, talking about the Supreme Court ruling today. Which he absolutely should be.

  46. @Bladefist: Maybe Ann Coulter has fallen into disfavor now that Michelle Malkin has out Coultered her. Coulter is totally sane and reasonable compared to Malkin. I keep wondering who decides it a good idea to put her on the air.

  47. Bladefist says:

    @Michael Belisle: Both Parties have embarrassing people. If democrats don’t know who theres are, I’ll help, Keith Olberman And hmmm, Barrack Obama

  48. @Bladefist: Oooh, I hadn’t seen that ruling yet. Good thing the administration tried to avoid that inevitable fate by storing them on Cuban soil… oh wait. We can pick up the discussion on detainee treatment some other time, maybe in the moving-truck disaster thread.

  49. Bladefist says:

    @Michael Belisle: Ya we are fantastic at hi-jacking threads.

  50. dequeued says:

    @Bladefist
    I hate seeing republican’s knee-jerk reactions against regulation, no matter what the context.

    You can’t seriously compare the cell phone companies with private contractors who build patios.
    A better comparison would be to compare the telcos to companies like Halliburtan, or the great rail monopolies of last century.
    The telcos have it easy with sweet government contracts and subsidies, right of way, and all sorts of other unnatural advantages.
    I have NEVER heard a republican call for the regulations that protect the telcos to be removed, only the regulations that protect the consumer…

    You guys do the same thing with Net Neutrality.
    Lets see, a public network built with tax dollars; I know! lets hand it over to private corporations so they can butcher it into a home shopping on demand drm laden cesspool!

    I actually used to be pretty conservative, but the last straw was when I heard an old man who has less technical knowledge than an 8 year old girl lecture me about the economics of the internet.

  51. Bladefist says:

    @dequeued: Whatever man. I know it’s takes a little bit of courage to call up your cell phone customer support, and argue out of an ETF by saying your calls are dropped, and you never have source. I know it’s hard. And you need your government to regulate that, so you don’t have to do anything.

    “I actually used to be pretty conservative…” I hear that all the time. Doubt its true. Also it doesn’t make you right. In a previous life I was JFK, so now my conservative opinions should mean more.

  52. Bladefist says:

    source = signal. dang it.

  53. Trai_Dep says:

    Guys – can you take this to Red State or Little Blue Footballs or something? :)

  54. Bladefist says:

    @Trai_Dep: You would miss me too much. Admit it.

  55. Invalid_User_Name says:

    I will give $500 (okay, no I won’t) to anyone who can tell me WHY it is ALWAYS that the govt guy is always echoing whatever the industry’s position is? Why? Why? Why? They do it with with the banks, the insurance companies, the cell phones, blah blah blah. ALWAYS.

  56. drftjgoj says:

    The alternative is to just pay for the phone in full.

    I for one like the idea of subsidized phones. ETFs are one of the ways cell phone companies recoup the costs associated with subsidizing the handsets. Whats the big deal? I happen to the FTC’s proposals are pretty fair, considering their costs involved in getting you that phone for next to nothing.

    I see some political trolls have taken the comments over, so maybe this is better left to some other time.

  57. TechnoDestructo says:

    @Invalid_User_Name:

    Two reasons:
    Campaign contributions
    Industry-government revolving door

    The industry-government revolving door thing…there isn’t a lot you can do about that in instances where regulators need to be knowledgeable of the industry they’re regulating. You’re always going to need people from the industry in government, and those people will have nowhere else to go other than the industry if they leave the government.

    Well, maybe not. There is one approach that makes sense. That all final decisions be made by someone not in that industry, but everyone working under that person be from that industry. They do something like that at the Defense Language Institute. In the schools for the various languages, all the teachers and department heads and such are teachers of that school’s particular language. The head of each school, however, is a teacher of a different language.

    Cronyism still exists, but that has got to seriously limit it.

  58. RetailGuy83 says:

    @Bladefist: Ann Coulter to Keith Olberman? wow. I’ll give you Keith Olberman for O’Rilley, maybe go on a strech and give you Rush. Ann Coulter for Michel Moore though, and you’ve got yourself a trade.

  59. @RetailGuy83: I’m not sure what your post is trying to say, but yesterday I started watched a clip on YouTube of Bill O’Reilly interviewing Michael Moore during the Fahrenheit 9/11 days. It was unwatchable, like watching two blubbering idiots argue out of their ass.

    Hillary Clinton on O’Reilly, however, was totally different. I didn’t agree with everything she said, but damn she was good. I can see why conservatives were saddened when she lost.

  60. MrEvil says:

    Seriously, you have to have your head lodged squarely up your posterior if you think the cell phone market in this country is a free one. With VZW buying out Alltel (and with the current administration having never met a monopolistic merger it didn’t like) Our choices for anything resembling national coverage are: Cow Manure sandwich, dogdoo sandwhich, or just plain shit sandwich. Do you REALLY think that eating shit at the end of the day is really a choice? Sure there’s prepaid alternatives, but I’m talking post-paid only here.

    Plus, due to the FCC being the gatekeepers, Bob can’t just go out and start Bob’s cell phone company, except out in Bumfuckistan where nobody lives and the big national carriers have no interest.

    As long as the feds are the gatekeepers determining whom can and cannot start a cell phone company through licencing frequencies. The few licencees better start liking regulation.

  61. Bladefist says:

    @Michael Belisle: That was a fantastic debate. I honestly think Bill destroyed her in the debate, however, I did finally see that she is intelligent, I just so happen to disagree with her.

    We were saddened that she lost, not because we like her, but because if she won the election, it would likely just be another Bill Clinton term. Whereas we see Obama as a radical, and he scares us.

  62. Elvisisdead says:

    @Trai_Dep: Not true. Anyone who is appointed (Schedule C) can be removed at any time for any reason. It happened when Reagan cleared out the Inspectors General in the 80s and put in his “Junkyard Dogs”. It happened with FEMA.

    Essentially the standard is for certain positions that the appointed is allowed to ride out their term as long as they play ball. If they don’t play ball, then they will be “taking opportunities to spend more time with their family”. Appointed officials serve at the leisure of the POTUS, but senior level require confirmation by the Senate to keep him in check.

  63. jamar0303 says:

    On topic- Tell me why ETFs aren’t pro-rated already? Also, tell me why on every single provider in the States that offers prepaid and postpaid service, the prepaid user is treated as second-class? On T-Mobile I can’t get full access to internet (and minutes are priced weirdly), on AT&T internet is so expensive that it’s cheaper to roam with my China Mobile SIM (texting is just about there with the last rise), and the CDMA providers…

    These things are what’s wrong with the US cellphone industry. I know in China this is most likely because the government dictates things (it’s kind of eerie how both GSM operators have the same rates for voice, although the similarities end there) but from my point of view it looks a heck of a lot better than what America has going on.

  64. jamar0303 says:

    @MrEvil: Well, for me I can get a prepaid SIM from China Mobile and use that to roam in the States. With the last texting rate hike there’s practically no difference in texting rates between local and roaming, and data is just about there (well, there’s unlimited, but I don’t use that much). Plus China Mobile has great customer service (oh, and I get the coverage of AT&T and T-Mobile- no need to choose).

    Of course it all falls apart if you start looking at voice- not worth it if you talk more than an hour a month.

    From a consumer’s point of view, mobile service in China is roses and sunshine compared to that of the States. Why?

  65. cloudedice says:

    I wish they would get rid of ETFs and their stupid phone subsidies. Doing so would enable the companies to make the monthly plan cheaper. Unfortunately for us it’ll never happen, because it will also increase competition since there is no incentive to stick with the same company month-to-month.

  66. RetailGuy83 says:

    @Michael Belisle: @Bladefist: Sorry, could have been more clear. Point was made that Keith Olberman was like the “Ann Coulter of the Left” I dont think Keith is that far out there, more in the range of Billo or Rush. However, Micheal Moore is a complete loon more in line with a “Ann Coulter of the Left” title.

  67. dizzydj says:

    I completely understand where the carriers are coming from.

    Take Alltel’s Blackberry Pearl. Full retail is 479.99, and on a 2 year contract you get the phone for 79.99 after rebates. That $400 we took off of the retail cost so you would get a top-of-the-line phone for not much out of pocket. a $200 ETF is VERY understandable.

  68. Bladefist says:

    @RetailGuy83: I think Keith is just an idiot. His views are pretty left, but he isn’t a radical leftist like Obama. But I included Keith in the mix because if you watch his show, and you really listen to what he is saying, you can tell he is an idiot. Or his writers are. He starts his joke with something true about republicans, and his punchline ends with something false about republicans. And it’s kinda funny, but then I noticed it, and I don’t think its funny now. That with his ratings, I believe him to be an embarrassment for whomever he affiliates himself with.

  69. Xerloq says:

    Only thing I have to say is the government should GTFO of private contract negotiations. The only “regulation” I want is open-networks, e.g. any GSM phone on AT&T’s network.

    The biggest problem is the vertical integration of service/equipment provider. Remember when you had to buy your landline handset from the local Bell?