Monday, May 31, 2010

The FCC's Advice on On ETFs of Wireless Contracts

The recent increase in early termination fees more mobile phone contracts of AT&T and Verizon Wireless has moved the Federal Communications Commission to issue advice addressed to cell phone consumers. The FCC has released a set of guidelines to help educate consumers on early termination fees.

The FCC hopes that this set of guidelines will ensure that consumers make informed decisions and avoid any extra charges when purchasing a contract mobile phone.

Here are the Federal Communications Commission guidelines on early termination fees:
  • When signing up for a new cell-phone service, make sure you are fully aware of any “early termination fees” (ETFs) that may be associated with the contract you are signing. The salesperson may not mention an ETF, so be sure to ask.
  • Ask how much the early termination fee will be and how it is prorated. Prorating means that the amount of the ETF you are responsible for decreases month by month. But different carriers prorate different plans in different ways. For example, one $240 ETF might decrease by a steady $10 a month over two years, while another high ETF might drop by only $5 a month until the last four months.
  • Ask if it would be possible to buy a handset at full price and avoid an ETF.
  • Think before you make any changes in your contract, such as buying a new phone or more minutes that your carrier might offer. This could trigger a new two-year contract with another ETF.
  • Ask about the trial period during which you can cancel the service without an ETF penalty. This is typically 14 to 30 days. Also ask whether you will get your first bill before the trial period is up – and if not, whether you can find out about your costs during the trial period in another way.
  • If you use your phone sparingly, consider avoiding the whole ETF issue by buying a pre-paid phone. These phones do not involve a contract.
That's it. Hopefully, these guidelines will lessen the number of mobile phone contract disputes. However, I'd prefer to have the FCC impose stricter policies tha would prevent carriers from implementing fees that are unfair towards consumers.

Monday, May 24, 2010

AT&T to Increase ETF for Smartphone Wireless Contracts

AT&T has become the second major US carrier to increase its ETF in the last several months. Verizon decided to increase its charge for early contract termination for mobile phone contracts last November. Now, AT&T is set to ramp up its early termination fee next month.

The folks at WSJ blew the whistle in this upcoming change in AT&T wireless contract policy. The carrier plans to almost double the fee for terminating a contract for its smartphones and laptops. New contracts signed for smartphones and laptops next month will carry a hefty $325 which will fall by $10 for each month a customer stays in his/her contract. The previous fee was set at $175.

On the other hand, AT&T decreased the fee for its feature phones. Perhaps increasing the fee for these devices will be too much.

The early termination fee for AT&T feature cell phones will be $150 and will fall by $4 for each month a customer stays in his/her contract. The previous fee was also set at $175.

This decision is sure to catch the ire of the FCC. The commission recently questioned carriers about their practices and stated that competition has "dramatically eroded and is seriously endangered by continuing consolidation and concentration in our wireless markets."

Well, see how the market reacts to this new development. Tune in to this blog for more news and updates on US wireless contracts for mobile phones and other devices.

Monday, May 17, 2010

ETFs Effective in Preventing Consumers from Switching Carriers

If you've followed this blog, then you'll be familiar with ETF or early termination fees. This penalty is charged to consumers who want to opt out of a wireless contract before its expires.

I recently read a stud showing that a significant number of consumers who are dissatisfied with their carriers chose not to switch to another service provider to avoid paying the heavy early termination fee.

The Government Accountability Office (GAO) recently made a study on cell phone complaints and the ways that the Federal Communications Commission (FCC) deals with those complaints. One of the interesting findings of this GAO study show that 42 percent of consumers who wanted to switch carriers decided not to because they did not want to pay an early termination fee.

The research also show that ETF or early termination fees is one of the one key reasons for consumer dissatisfaction.

This illustrates the restrictive aspects of charging these fees. A representative said that, consumers should not be chained to their wireless provider for years through exorbitant early termination fees.

And I agree with him. Thankfully, congress has responded with legislation like the "Cell Phone Early Termination Fees (EFT) bill" to protect consumers from the unfriendly fees from wireless contracts.

That's it for this post on the crippling effects of wireless contracts. Stay tuned for more on this and other related topics.

Tuesday, May 11, 2010

AT&T Wireless Contract Customers Decreasing?

We've recently posted a report showing that prepaid services are starting to dominate the wireless phone industry. Well, here's another clue indicating that wireless contract customers are in decline. According to AT&T's 1st quarter report, the carrier only signed 513,000 new wireless contract--or postpaid--subscribers.

While half-a million subscribers may seem to be a huge number, this figure is down 43 percent from AT&T's new contract customers from the previous year. The carrier expected to add around 600,000 contract customers.

This trend indicates that new customers will likely sign up for prepaid service rather than contract services going forward. However, the impact of this trend may not be as alarming as it seems.

Consumers that sign wireless contracts are valuable to carriers because they pay more. A decrease in their number may seem to be bad for business. However, contract customers are expected to continue to spend more each month on service so the impact of the loss in growth will not be significant.

AT&T will also make adjustments to its prepaid offering in an attempt to take advantage of this new wireless phone service trend.

That's for this wireless contract update. Stay Tuned for more news and updates on this topic.