Bill aims to limit wireless early termination fees; Do we need this?

Bill aims to limit wireless early termination fees; Do we need this?

Summary: Washington lawmakers, upset with the way the wireless industry is handling early termination fees, have introduced a bill to set a limit on those fees.


Don't get me wrong: I'm no fan of mobile phone early termination fees - but I understand why they're in place. In a nutshell, the wireless carriers are able to sell expensive smartphones at affordable prices because they are subsidized. If you bail out on the contract early, the carrier loses money - and, of course, they are not in business to lose money.

Today, Senator Amy Klobucher (D-Minn) introduced a bill that would set limits on these fees, according to a post on the Hillicon Valley blog. Kolbucher, along with Sens Russ Feingold (D-Wis.), Jim Webb (D-Va.) and Mark Begich (D-Alaska), called the fees "budget busters" and said they are unfair to consumers.

The controversy sparked after Verizon Wireless said it planned to double the early termination fee to $350 on some smartphones. Shortly after, the Minnesota Senator sent letters to Verizon executives and the FCC, calling the move "anti-consumer and anti-competitive." She said the move was proof that the wireless industry is incapable of policing itself and making its practices more competitive and consumer-friendly.

But Verizon Wireless disagrees and is quick to point out that consumers don't have to subject themselves to these fees. Instead, they can choose to not sign a contract and pay full retail price for the phone itself, which of course is usually significantly higher than the cost of the subsidized phone and the early termination fee combined. Customers can also choose to sign a one-year contract and pay a price somewhere between the two-year-contract price and the full retail price.

I never said they were good options. But there are options.

Here's the thing, though. I've been reading some posts on this subject as well as some reader feedback and I'm getting this sense that some consumers feel that they have some sort of God-given right to a low-cost, full-feature smartphone that offers unlimited Web access, texting, tethering, video and more on a powerful 3G network.

As much as I'd love something like that, I also know that a feature-rich smartphone is a luxury, one that I can either afford or not. If I want an iPhone, I'm going to have to pay - not only for the device but also the rates that AT&T sets. Same goes for Verizon and Droid, Sprint and the Pre and so on. This stuff does not come cheap.

With that said, I think the idea of early termination fees needs some tweaking and revisiting. I hate the idea of Verizon's fee hike for early terminations of smartphones, though I do appreciate the fees being reduced for every month of service - that's the way it should be.

While there needs to be a better way, I suspect that government's heavy hand is not the solution.

Topics: Verizon, Government, Hardware, iPhone, Smartphones, AT&T

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  • Actually, all I really want

    The choice I wish I actually had:

    Pay full-price for my handset of choice at time of signup. No contract.

    But here's the kicker.

    Lower @#$%ing monthly rates.

    If I'm paying upfront for my phone vs the guy who is paying $200 for a $600 phone, my useage rates should work out to be $400 cheaper over 2 years (at a minimum, since they're not "loaning" me money with the subsidized hardware).
    • Lots of things you can't without some sort of bundling

      Buy a PC, it's going to come with Windows
      whether you want it or not. That all-or-
      nothing deal lowers the cost for the majority
      of people who do want Windows at the expense of
      the few percentage of people who don't. Of
      course, those people can always build their own
      computer, though this frequently isn't an
      option in the case of laptops. But most
      laptops and retail computers are subsidized by
      crapware which you can free yourself from if
      you reinstall any OS.

      If you buy an optical drive, it almost
      certainly comes with DVD playback software.
      That means you're paying a few dollars for
      software you don't need every time you buy an
      optical drive.

      There are endless example of products that
      contain things some of us don't need, but
      that's just how it goes. It's not practical to
      have thousands of different configurations and
      • How much does it cost to make an Iphone -- less than 100 bucks?

        Yeah.... phones dont cost 600 they sell for 600

        Early termination fees should be banned.
        • Market

          The phones sell for 600, because that is what the market will deliver. You are either gonna pay more up front, or pay to get out..up to you. If you want a cheap phone with no termination fees, start up a company, hire some engineers, and have them make a phone and a network for you. You do not have the right to have cool stuff.
          • Not completely true

            The market is somewhat twisted right now. Sort of like buying furniture, no one pays retail for furniture (unless it's a warehouse club), there is always a "sale". I recently bought a Env3 for my son. Without a contract they sell for $400+. Let's be real, if we didn't all play the free/cheap phone game the retail price would be about $150-$200 at most.

            That being said, the government has no place regulating companies fees of this nature. You can walk into most stores, buy a "per minute" phone and walk out the door. If I want to enter into an agreement with a company, no matter how "stupid" the government thinks I am, it is not the governments business. Unless, either party commits fraud, which is not the case here at all.
          • I appreciate your perspective,

            on one side, yes, common sense would have us believe that the phones are way overpriced with the current games. On the other hand the buyers and sellers must agree at some price and in the long run that is the equilibrium. If the seller opts to not sell it cheaper, that is their call.
          • Amen

            Those people who don't like early termination fees have an excellent option right now - pay as you go cell service. Cricket and Boost Mobile offer good service (I've used Boost Mobile for years with no problems at all, and it uses the same network as Sprint and Nextel) at very competitive prices, with a wide variety of phones you can buy up front for not very much money. And with pay as you go - guess what, no overage fees!

            I wouldn't buy an iPhone if they cost $10, because I'd have to go with AT&T as a provider - been there, done that, glad I'm out from under.
          • Why is it someone always says "That's how it is" ???

            Always, it's about a free market. At least that's what the poster will say - too bad it's just not a realistic representation of reality. The cell phone marketplace is anything BUT free. Termination fees, high monthly service fees, etc., etc., and because the companies involved are billion dollar or larger behemoths that even government will have difficulty reigning in when they misbehave because of their vast wealth and capacity for lobbying only for THEIR best interests instead of those of the public, it's no surprise that this market, and so many others, are not even close to the kind of free market we really DO have the right to.

            A truly free market has to be largely free of monetary influence over authority, and that is; sadly; just not the case. That's why people have adopted what sometimes appears to be an "entitlement" attitude. There ARE some things we ought to be entitled to: ... like being able to acquire technology without some billionaire standing over the tollgate and charging whatever the market will bear. That action, regardless of the market in which it takes place, will always be morally and ethically ocrrupt, so be very careful in thinking that everything that appears to be an entitlement mentality is merely a liberal democrat with a big mouth. Truth is, there really DOES need to be a limit on wealth, lest it fester the very corruption we see on a daily basis...

            For those that recoil from this and start going down the path of questions like "What about freedom?", I'll just remind you of quetions like "What about responsibility?". After all, freedom without responsibility is chaos. That's what all the debt this country has ammassed amounts to, and we, the people, didn't have much we could do about it, save "call or write your representative". The reason so few actually do it is because there's no USEFUL feedback. Unless you give up your life and go become your own lobbyist, you get little or no response beyond a form letter. Is it any wonder people are sick and tired of the same old crew in Washington being so unresponsive? Think about it all... you might be surprised at the conclusions you reach.
        • An iPhone is not a phone alone.

          The proof that an iPhone is much more is the iTouch, which has no phone capability. What it does have is an incredible operating system and set of dedicated apps that put the whole world in your hand. In addition it has web connectivity and GPS capability. Have you priced those?

          I think an iPhone costs more than $100 [my mp3 player cost $80] but it's your fantasy to let's say that's all the hardware costs. [b]What's the cost of the software?[/b]
          • Ahem.

            My cheap (got it at Target on sale for $20) Motorola cell phone with Boost Mobile has GPS built in, with a graphic navigation app available at extra cost per use; web connectivity; text messaging, GPS-aware features such as Boost Loopt to allow me to locate friends with the same phones... lots of cool software.

            It doesn't have the coolness of the iPhone, but I don't have to deal with AT&T to use it, either.
          • Perfect example

            of someone who realized a balance between what they want and need and have found a way to get it.
        • It takes an army...

          Hey, it takes an army of people to design and market these things. That's the part that costs the big bucks. Plastic and silicon are cheap.
      • Garbage

        You can buy a computer with Linux, you don't
        have to buy one with Windows.

        As for bundled software with a computer, if I
        can't buy the computer without bundled
        software I immediately uninstall that software
        and install the software I want. I also plan
        on the possibility that I won't be able to
        fully uninstall that bundled crap. I may have
        to format the hard drive and install only the
        software I want.

        If I buy anything that's bundled I'm doing
        despite the bundling, not because of it.
    • T-Mobile is doing that.

      If you don't get a subsidized phone, you can go without a contract at a lower monthly cost.

      If you get a subsidized phone, you have to sign a 2-year contract at a higher monthly cost. If you do the math, you find that it actually costs more over the 2 years to buy a subsidized phone.

      Whether or not you want to go with T-Mobile is a completely different discussion.
      • TMobile rocks for me

        would never let it go... has the fastest and best
        3G GSM coverage in the nation.
        • While I like Tmobile its 3G coverage is not the best

      • Unlocked Phone

        So how do I go without a contract at a lower monthly cost when I go with T-Mobile?

        I checked Central Florida for 3G coverage and I do get it for my apartment and college, although I'm with Sprint.
        Grayson Peddie
        • Unlocked vs no contract.

          To go with T-Mobile just go to your local T-Mobile store/kiosk and look at the plans. They offer lower priced contract-free plans if you don't also get a subsidized phone. That is to say that you can get the same phone and either pay more upfront to outright buy the phone, or you can save on the upfront costs but pay more for your plan on a 2 year contract.

          As for unlocking, you have two choices. One, you can buy an unlocked phone from someone other than T-Mobile since all phones sold by T-Mobile are locked. I bought my current phone at the Nokia store in New York City. Alternatively you can buy a locked phone from T-Mobile and later get an unlock code from them. I believe that T-Mobile will give you the unlock code after 90 days, but only if you as for it.*

          *My memory may be out of date or inaccurate, but they did at one point allow people to unlock their phones.
    • That only works if

      you keep the phone. If the retail for the phone is $600, you pay $200 for it with a 2-year contract, what is to stop you from selling it on eBay the next day for $400 and riding out the contract with another phone? You can do that now, but you pay the same rate as everyone else.
      Real World
    • And

      Make it so if I pay full price for the phone. It will work on any service provider. Not just the one I got it from