Early Termination Fees of Wireless Phone Contracts

Service industries such as mobile phone phone service and subscription television commonly have termination fees or early termination fees (ETFs) as they are more commonly known. However, the imposition of these fees have been criticized by consumer interest groups. These fees prevent users from migrating to superior services so they are labeled as being anti-competitive.

The process usually works this way. A person purchases cellular phone service from a particular wireless carrier. He or she might be required to sign a two-year contract in order to avail of the service. Now that contract might stipulate a $200 fee in the event that the customer breaks the contract or wants to opt out of it.

The clamor and the disputes about the unfairness of early termination fees in wireless phone contracts have lead to positive changes. Verizon wireless was the first carrier to give in when it announced that it will prorate it's early termination fee. AT&T followed Verizon's lead and other carriers namely, T-Mobile and Sprint, have also decided that they would begin prorating their ETF in the first half of next year.

Now, what does a prorated early termination fee entail? The customer will still have a to pay a fee for ending the contract abruptly. However, the amount will decrease as the decision to end the contract early gets closer to the contract end date. This means that a customer will no longer be forced to pay the original fee if he decides to end the contract.

Here's a list of the current termination fee for each major wireless carrier:

Alltel: $200 per phone line

AT&T: Prorated

Sprint: $200 per phone line (to be prorated next year)

T-Mobile: $200 per phone line (to be prorated next year)

Verizon: Prorated

So far, Alltel has not made any announcements on making it's ETF prorated. However, it may lose customers if it remains as the only carrier to have a non prorated early termination fee next year. It would be logical to assume that the company will also follow the examples of other wireless networks to keep their consumers happy.

Play Dead to Escape your Wireless Phone Contract

If you've signed up for a wireless phone contract and found it inappropriate for your life style, then you would probably want to get rid of it. However, you might be required to cough up a couple of hundred bucks to pay for a contract termination. A man found a simple solution to become free of his wireless contract contract. He simply staged his own death.

This solution seems logical enough. Wireless phone contracts will release a signer in the event of his or her own death. Apparently this person had experienced a lot of dropped and defective calls over the years. After paying large sums of money he wanted to close his contract without paying more money. He crafted a fake death certificate and asked a friend to fax it to his service provider's customer service. Unfortunately, the plan failed because the company caught on the forgery. The company decide to close his contract after they forced forced him to pay the termination fee.

Frustration and dissatisfaction can often be experience by those who sign long term contracts. they often feel that carriers do not provide top quality services and products. They are also unhappy with the fact that they are hooked to a service that no longer satisfies them and are required to pay a termination if they want to end their service. As a result, weird ideas may form in some subscribers minds.

In the past few years, unhappy contract subscribers have filed increasing about their lon term contracts. There have even been hearing s in congress to address these complains and any possible abuse form wireless service providers. A bill was also proposed to protect consumers from possible abuse from wireless contracts. In response to these hearings and complaints, the wireless companies have started to make changes.

The tight competition between them triggered the development of programs that would provide the best customer satisfaction. customer satisfaction is a great attraction for consumers who are bombarded by different wireless product offers.

Wireless companies have also made their contracts flexible and have allowed consumers to change their contract or pay a pro-rated termination fee instead of the fixed fee. A couple of top wireless service providers have also made announcement to open their networks to outside devices. Perhaps if these changes become more come, unsatisfied costumers will no longer come up with crazy ideas to escape their wireless contracts.

The Cell Phone Consumer Empowerment Act of 2007

Last September, Senators Amy Klobuchar and Jay Rockefeller unveiled a legislation that was driven towards empowering the 200 million cell phone customers nationwide. The bill would allow consumers to be able to make informed choices about a wireless service that best fits their needs and their budget.

The bill named the Cell Phone Consumer Empowerment Act of 2007" will put pressure ton wireless service providers. It will encourage them to share simple, clear information on their services and charges with customers before they enter into long-term contracts. Customers will have a thirty-day window in which to exit a contract without early termination fees. The service providers will also grant customers greater flexibility to exit contracts with services that don’t meet their needs if this bill will be implemented.

Sen. Klobuchar explains her views by saying that “Early termination fees are a family budget-buster; families should be able to terminate service without outrageous fees; know if their cell phone will work on their drives and in their home and office; and understand what to expect in their monthly bills once you pile on charges and fees. It’s a simple matter of fairness.

These are some of the key points of the Cell Phone Consumer Empowerment Act of 2007 :

EARLY TERMINATION FEES (ETF)

The FCC shall set forth regulations to pro-rate ETFs. At a minimum, the ETF for a 2-year contract shall be reduced by ½ after 1 year.

DISCLOSURE REQUIREMENTS FOR PLANS AND CONTRACTS

Publication of the terms of a wireless plan shall include information on: contract terms; charges; minutes; information on taxes and surcharges; wireless E-911 service; and other information that the FCC considers appropriate.

This information shall be given to a consumer prior to entering into any contract.

CONTRACT EXTENSION, MODIFICATION, OR RESCISSION

Extension: An extension of a contract shall not be valid unless the wireless provider provides point-of-sale notice of the extension to the customer and allows the customer to cancel the extension within 30 days after such notice.

Modification: Wireless carriers must provide subscribers with written notices of changes in rates and terms at least 30 days before such changes are to take effect.

Rescission: A contract for wireless service may be canceled upon the request of a subscriber for any reason up to 30 days after entering into the contract.

ENFORCEMENT

The FCC shall enforce the legislation’s provisions and the attorney general of a State, or the public utility commission of a State may bring a civil action in federal district court or establish or use existing administrative procedures to enforce the Act’s provisions.
-The Act preempts state law, except that the Act does not preempt state laws that provide additional protections to wireless subscribers.


This billed coupled with the Congressional hearings on the issue of wireless contracts have pushed wireless service providers to have a softer stance on their contracts. Some of them have preempted the bill by pro-rating their early termination fees and have allowed their consumers to alter their contracts.

It also seems that this bill has encouraged wireless service providers to pay attention to customer satisfaction. They have began to make plans to implement consumer friendly programs in an effort to provide better service and to attract more customers.

Wireless Contract Changes and Congress

U.S. Congressional hearings were recently held to decide if it was best to legislate more consumer-friendly practice among wireless cell phone carriers. Perhaps rumors about this hearings prompted wireless companies, Verizon and AT&T to loosen their restrictions on wireless contract changes.

This is Verizon Wireless' policy on their right to change their contract:

UNLESS OTHERWISE PROHIBITED BY LAW, WE CAN ALSO CHANGE PRICES AND ANY OTHER CONDITIONS IN THIS AGREEMENT AT ANY TIME BY SENDING YOU WRITTEN NOTICE PRIOR TO THE BILLING PERIOD IN WHICH THE CHANGES WOULD GO INTO EFFECT. IF YOU CHOOSE TO USE YOUR SERVICE AFTER THAT POINT, YOU'RE ACCEPTING THE CHANGES. IF THE CHANGES HAVE A MATERIAL ADVERSE EFFECT ON YOU, HOWEVER, YOU CAN END THE AFFECTED SERVICE, WITHOUT ANY EARLY TERMINATION FEE, JUST BY CALLING US WITHIN 60 DAYS AFTER WE SEND NOTICE OF THE CHANGE.

And this is AT&T's policy on terms and condition changes:

These terms and conditions may be changed from time-to-time. AT&T will post the most current version of these terms and conditions at att.com/MediaTerms or other appropriate location. Please check these regularly to inform yourself about changes to the terms and conditions.

Sen. Amy Klobluchar introduced a bill that would require wireless providers to prorate fees charged to customers who cancel cell phone contracts. A two-year contract usually requires a $200 fee if a customer wants to cancel the wireless service before the contract expires. Another facet of the Sen. Klobuchar's bill demands that customers will not be forced to sign up for a contract extension if they want to make changes to their calling plans.

Verizon and AT&T have already removed the contract-extension stipulation and their customers can now change their plans without signing a new contract. Here is a statement from Verizon Wireless contract on contract-extension:

Except as explicitly permitted by this agreement, you're agreeing to maintain service with us for your minimum term. (Periods of suspension of service don't count towards fulfillment of your minimum term.) After that, you'll become a month-to-month customer under this agreement. AN EARLY TERMINATION FEE WILL APPLY IF YOU CHOOSE TO END YOUR SERVICE BEFORE BECOMING A MONTH-TO-MONTH CUSTOMER, OR IF WE TERMINATE IT EARLY FOR GOOD CAUSE. FOR SERVICE ACTIVATED PRIOR TO 11/16/06, THE EARLY TERMINATION FEE IS $175 PER WIRELESS PHONE NUMBER. FOR SERVICE ACTIVATED ON OR AFTER 11/16/06, OR FOR LINES OF SERVICE WITH MINIMUM TERMS EXTENDED ON OR AFTER 11/16/06, THE EARLY TERMINATION FEE IS $175, WHICH WILL BE REDUCED BY $5 FOR EACH FULL MONTH TOWARD YOUR MINIMUM TERM THAT YOU COMPLETE. (The Early Termination Fee applies only to the extent permitted by law. If you buy your wireless phone from an authorized agent or third-party vendor, you should check to see if they charge a separate termination fee.) If you terminate your service as of the end of your minimum term, you won't be responsible for any remaining part of your monthly billing cycle. Otherwise, all terminations by you during a monthly billing cycle become effective on the last day of that billing cycle. You'll remain responsible for all fees and charges incurred until then and won't be entitled to any partial month credits or refunds. You may be able to take, or "port," your current wireless phone number to another service provider. If you request your new service provider to port a number from us, and we receive your request from that new service provider, we'll treat it as notice from you to terminate our service for that number upon successful completion of porting. After the porting is completed, you won't be able to use our service for that number. You'll remain responsible for any Early Termination Fee, and for all fees and charges through the end of that billing cycle, just like any other termination. If you're porting a phone number to us from another company, we may not be able to provide you some services, such as 911 location services, immediately.

Some experts see the loosening up of wireless contracts as peace offerings so Congress will not see a need for regulating the business of wireless cell phone companies. Well, only time will tell if lawmakers will agree with that notion. Many consumers have filed more complaints with Better Business Bureau about the wireless industry so maybe the recent changes are a move in the right direction. As a wireless customer, I have to agree with that.

Wireless Carrier Contract Policy Change

Wireless carrier's contracts or terms and conditions do not change very often. However, due to unseen circumstances or changes in the wireless industry, the top wireless carriers have decided to make adjustments on their contracts.

A good example would be the Verizon Wireless policy change that was made on the month of March of last year. The wireless giant became the first cellular carrier to pro rate its termination fees over the life of the contract in the history of the wireless industry.

And a month ago, another wireless industry giant followed Verizon Wireless policy change. AT&T another leading wireless carrier also announced that it will no longer charge customers a flat termination fee if they cancel their service before their contract is up. This new contract policy will be implemented into in early 2008.

AT&T will pro rate the fee depending on how many months the customer has left on their contract. The company has also made the decision not to require customers to renew contracts when making changes to their wireless service plans.

The wireless sales and marketing division of AT&T explained that the policy change was done to accommodate the demand of consumers. They have acknowledge that wireless consumers dislike one-size-fits-all approaches and thus they have made changes to remedy the problem.

Wireless customers have long been complaining about contract termination fees and upgrade fees. They have to pay anywhere from $175 to $250 to cancel a contract before its expiration date which is obviously a burden to those who have tight budgets.

They view as measures designed to retain customers and prevent them from seeking better deals elsewhere. Industry representatives expressed that fees are necessary to subsidize the costs of handsets.

Hopefully, the contract policy change made by AT&T will encourage similar adjustments from other wireless carriers. Perhaps they will also consider the difficulties posed by ontract termination fees and upgrade fees to their loyal customers.