FCC Probes More Cell Phone Termination Fees

After Verizon, regulators now seek answers from Sprint, Google, AT&T, T-Mobile.

ByABC News
December 22, 2009, 1:04 PM

Jan. 26 , 2010— -- The Federal Communications Commission today expanded its investigation into early termination fees (ETF) charged by wireless carriers and is now looking closely at whether consumers are adequately informed about ETFs charged by AT&T, Google, Sprint and T-Mobile.

The agency sent letters today to the carriers asking them to answer a long list of questions about the fees, after launching a similar probe into Verizon Wireless' practices in December.

"These fees are substantial (and in some cases are increasing) and have an important impact on consumers' ability to switch carriers," reads the letter, signed by the FCC's head of consumer affairs, Joel Gurin and the head of wireless telecom, Ruth Milkman. "We therefore believe it is essential that consumers fully understand what they are signing up for."

The letter goes on to ask carriers to explain why ETFs are charged, how customers can avoid them and how widely vendors advertise them.

This letter is just the latest salvo in a battle that has raged for years against ETFs in many industries. Regulators log thousands of complaints each year about ETFs, making it one of the thorniest topics for consumers, according to government data. Consumer advocates claim that large corporations, including cell phone providers, satellite TV companies and gyms lure customers with attractive introductory rates -- and then slam them with unreasonable penalties when they try to end the relationship.

"Complaints about early termination fees have peaked in the past year," says David Butler, a spokesperson at the Consumers Union. "The level of frustration among consumers is boiling over."

Companies argue that the fees are a fair way to cover the costs of pricey equipment or installations offered to customers at the start of a long-term contract.

"Because of the two-year contract, Sprint and its competitors are able to offer more devices at a lower monthly rate, making wireless more affordable," says Sprint spokesman John Taylor, pointing out that Sprint prorates its ETF after the fifth month until it hits $50 at the end of the contract.

Consumer advocates dispute this logic, pointing out that fees often exceed the cost of a new phone. They say the fees simply hold customers hostage.