The Federal Communications Commission has sent letters to AT&T, Google, Sprint Nextel, T-Mobile and Verizon Wireless looking for answers about the rationale for early termination fees.
Early termination fees are levies paid when a consumer ends a mobile contract early. In a series of letters, the FCC said:
We recognize that there may be various rationales for ETFs. At the same time, these fees are often substantial (and in some cases are increasing) and have an important impact on consumers’ ability to switch carriers. We therefore believe it is essential that consumers fully understand what they are signing up for—both in the short term and over the life of the contract—when they accept a service plan with an early termination fee.
The letters to carriers aren't all that surprising, but the one to Google is notable. The FCC wants to be "adequately informed" about the equipment recovery fee that Google charges related to the Nexus One. Google's fee, $350, is in addition to any fees imposed by T-Mobile.
Google’s introduction of the Nexus One handset presents consumers with new options for obtaining mobile wireless service, from a new entrant in the wireless phone market. The Commission welcomes new choices for consumers and new entry into the market because it recognizes that robust competition benefits consumers by accommodating the wide variety of consumers’ communications needs.
At the same time, where new options may subject consumers to substantial ETFs, potentially from more than one entity, the Commission has a special interest in ensuring that consumers have a clear and complete understanding of the rates, terms, and conditions on which the communications services are being offered and the rationale for those rates, terms, and conditions. The combination of ETFs from Google and T-Mobile for the Nexus One is also unique among the four major national carriers. Consumers have been surprised by this policy and by its financial impact. Please let us know your rationale(s) for these combined fees, and whether you have coordinated or will coordinate on these fees and on the disclosure of their combined effect.
In response to the queries, the CTIA said:
While we understand that the FCC's Consumer Task Force is only looking into the issue of early termination fees, we hope that there is a recognition by the FCC that these fees are part of the rate and rate structure that allows wireless carriers to, among other things, subsidize phone purchases. Additionally, consumers of all of the carriers that received letters from the FCC have multiple options when it comes choosing plans and devices without early termination fees. About 20 percent of Americans have chosen a prepaid plan without a contract. It is also important to note that consumers can avoid ETFs by completing the contract terms.