The U.S. Federal Communications Commission should abolish early-termination
fees because they're unfair to customers, two mobile phone customers and a state
regulator said Thursday.

Early-termination fees, or ETFs, charged by wireless carriers are "unique
and frankly predatory," Molly White, a corporate consultant from Portland,
Oregon, told the FCC.

"I do not sign time-sensitive contracts and agree to early termination
fees with any other utility with whom I do business," said White, who had
to pay an ETF for her personal phone service when former employer Nike provided
a mobile phone to her. "The cellular industry appears to have built an
elaborate system of additional fees, early termination clauses and hardware
purchase requirements, all with the intentional appearance of offering the consumer,
me, a deal, while ultimately locking me into a long-term service agreement."

A second mobile phone customer, Harold Schroer, asked the FCC to take action
on ETFs, but also requested that the agency not end class-action lawsuits against
the carriers in exchange for abolishing ETFs, as has been proposed by FCC Chairman
Kevin Martin. In late 2007, after two senators introduced legislation that would
regulate ETFs, Martin said he wanted to examine ETFs charged by mobile carriers
and broadband providers.

Schroer, part of a class-action lawsuit against Verizon Wireless, told the
FCC that the 4 million Verizon customers represented in the lawsuit paid about
US$500 million in ETFs.

"We are seeking a refund of every penny of that money," said Schroer,
a resident of New York state. "I never signed a contract [with Verizon],
nor was I ever requested to sign a contract."

In 2003, Schroer cancelled a Verizon contract extension that was recommended
by a sales representative, and he refused to pay the $175 ETF. Verizon then
reported him to credit agencies, resulting in higher interest rates on credit
cards and in him being turned down for new credit, he said. Bill collectors
harassed him, he added.

Schroer complained to the FCC, but staffers there told him the agency had no
authority over New York contract law, he said. "When I came to this commission
for help, you sent me away," he said. "When I'm now about to get my
day in court somewhere else, the commission purposes to step in and prevent
me from doing that."

The FCC shouldn't take half steps such as requiring that ETFs be prorated based
on how long the customer has had service or requiring that wireless carriers
give customers more information about pricing plans and fees, said Anne Boyle,
the chairwoman of the Nebraska Public Service Commission. Instead, the FCC should
prohibit wireless carriers from offering plans with ETFs, she said.

Wireless carriers would benefit from the elimination of ETFs, Boyle said. "For
some time, the wireless industry has ranked among the highest in the nation
for consumer complaints," she said. "Many [complaints] are related
to misunderstandings, misstatements and confusing, non-negotiable contracts."

Other witnesses at the hearing said ETFs help subsidize the cost of mobile
handsets and allow customers to get cheaper rates than pay-as-you-go plans.
"Term contracts allow the consumer to take advantage of bundled services
at competitive prices and the latest devices they choose in exchange for a commitment
to keep the service for usually one or two years," said Tom Tauke, Verizon's
executive vice president of public affairs policy and communication.

Verizon would support an FCC policy governing ETFs as long as the agency also
took away the "patchwork" of state regulation on the fees, Tauke added.

Verizon would support an FCC policy that set reasonable ETFs, required more
information be provided about ETFs, that they be prorated and have test-drive
periods, Tauke said. "While we continue to question the necessity of some
of these provisions, we nevertheless believe that an FCC-adopted national policy
... is workable for the wireless industry," he said.

Verizon has listened to customer demand and began prorating ETFs in November
2006, Tauke said. The carrier also allows customers a test-drive period for
new service, usually 30 days, and customers who cancel service within that time
period are not charged an ETF, he added.

But one witness questioned the assertion from some wireless carriers that ETFs
cover the costs of subsidizing mobile handsets. Lee Selwyn, president of the
Economics and Technology consulting firm, said his calculations show that mobile
carriers subsidized an average of $14.33 per handset in 2006, while ETFs were
in the $150 to $200 range.

Selwyn, who testified last month on behalf of customers in a class-action lawsuit
against Sprint Nextel in California, said Sprint lost less than $10 per customer
when customers ended their contracts early.

Wireless providers have long used handset subsidies as a marketing tool, Selwyn
added. "Over time, as the volume of handsets being manufactured mushroomed
and the product costs plummeted, the magnitude of such subsides diminished to
the point where it has all but disappeared," he said.

IDG News Service

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