Now Hear This Electronic Newsletter, October 18, 2007 Posted
by Bob at 10/17/07 03:16 PM
In a surprise announcement, AT&T said this week it will begin prorating the early termination penalties it slaps on customers who try to leave the company before their service contract is finished. Verizon, the country's other dominant cell phone company, began prorating its early termination penalties earlier this year.
Unfortunately, early termination penalties are just one of the anti-consumer practices employed by the U.S. cell phone industry to keep customers from shopping around for a better deal. Nearly all cell phones are locked by wireless carriers so they can't be used on another network. Useful features such as GPS capabilities or photo sharing technology are routinely disabled by the wireless companies, more often than not because they compete with similar services the cell phone providers want to sell to customers.
Neither Congress nor the FCC have shown much interest in reining in these anti-competitive business practices in recent years, but it finally appears that might be changing.
The Cell Phone Consumer Empowerment Act of 2007, introduced late last month by Senators Amy Klobuchar (D-MN) and Jay Rockefeller (D-WV), would help discourage some of the more egregious tricks used by cell phone companies to keep their customers from shopping around for a better deal.
The legislation would require all cell phone companies to prorate early termination fees and force carriers to provide consumers with better information about the service they are buying -- for example, accurate coverage maps and information regarding dropped calls.
In one of those coincidences that don't seem concidental at all, AT&T announced it would begin prorating its early termination penalties just a few hours before a Senate hearing on the pending legislation held Wednesday. (Consumers Union's Chris Murray testified in favor of the bill at the hearing. You can read his testimony here.)
Interestingly, AT&T did not offer any specifics on exactly how it will prorate the penalties.
In an ideal world, no cell phone company would impose early termination fees. Their sole purpose is to keep consumers from freely exercising their right to shop around for the best deal for them.
Prorating the fees is better than nothing, but the way Verizon has chosen to prorate its fees is still stacked against consumers. Verizon reduces its $175 early termination penalty by $5 for each month a customer is under contract. That means a customer who decides to cancel a two-year contract in its final month would still owe an early termination penalty of $60.
The Cell Phone Consumer Empowerment Act of 2007 would require all cell phone providers to truly prorate their early termination penalties. In the case of Verizon, a customer who cancels their two-year contract in the final month would owe only $7.29. Canceling halfway through a two year contract would mean a consumer would only have to pay half the penalty.
This is as it should be, and AT&T and Verizon should adopt a true prorating process like the one called for in the legislation on their own. Other cell phone companies should follow suit.
It would be more than simply a good political move. It would be honest and fair.
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Consumer Groups Seek Relief from Anti-Competitive Cell Phone Practices; Say AT&T and Verizon Pro-Rating Termination Fees Not Enough
comments
(4)
1
Posted by Joe at 10/18/07 02:31 PM
Presuming the cell phone empowerment act passes, the next step is to require that phones be portable. Corporate thievery has been in place for too many years. As a Michigan resident, I chose not to pay for costly long distance service on my land line which is AT&T. Instead, I use an AT&T calling card and pay .03 per minute anywhere in the U.S. except my own state. That's about
.09 per minute. No good reason why I should have to pay more per minute to phones as close as 12 miles, but only have to pay .03 to any other state. What they're saying (without saying it) is if I don't want to pay them a fixed amount, they'll get me on toll calls knowing that is where most of these calls are terminating. More legal corporate greed.
2
Posted by Joan at 10/18/07 02:51 PM
I totally agree that there shouldn't be any
early termination penalties but, in this imperfect world, prorating is better than nothing. However, Verizon's idea is laughable.
The consumer has become the indentured servant.
3
Posted by Beverly Kurtin at 10/18/07 09:00 PM
The biggest problem facing most Americans is that they do not bother taking their contracts to a lawyer to be read. Now I have to admit up front that I'm involved with a company that makes it possible for people to inexpensively access their rights, but it still amazes me to stand around in a phone store and watch the people buying new phones. THEY DON'T BOTHER TO READ THEIR CONTRACT! They just sign it.
Despite the fact that I did have my law firm look my contract over, a company still tried to pin me to the wall and I wound up "owing" them $600 because I cancelled ONE DAY EARLIER than I thought I could.
Now if there is anyone there who thinks I paid the money is crazier than I. However, the company reported me to the credit repositories. Big deal.
Now I use Virgin only. I can change my plan at will, even cancel and there is no charge for so doing. I also use Vonage. So guess what, kids? I don't pay any of the outrageous taxes and charges that traditional phones charge for; ditto for Virgin.
So THERE, I have NO termination penalties and I just hope that the "regulators" don't find out that I'm not paying those taxes, etc.
4
Posted by Ku at 10/21/07 04:15 PM
My suggestion to avoid early termination fees: Buy an unlocked GSM phone from someone on the Internet (e.g., ebay, Amazon, et al.) and a SIM card for a prepaid GSM service.
The SIM card stores all of the information regarding your account and service. When you want to change handsets, take the SIM card out of the old phone and put it in the new phone. No problem, as long as you buy an unlocked multi-band (at least tri-band, preferably quad-band) phone. Web stores often call these 'world phones'.
Both T-Mobile and (ugh) ATT provide GSM service in the US; many carriers worldwide (although, notably, not Japan) do as well.
