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Senator's bill would bar cellphone ETF rate spikes

updated 04:10 pm EST, Tue November 10, 2009

Law forces VZ, others to keep ETF in check

Minnesota Democrat Senator Amy Klobuchar said on Monday that she will introduce a measure to prevent US cellular carriers from raising their early termination fees (ETFs) quickly. The move is a direct reaction to Verizon's decision to double ETF rates for "advanced devices" like the Droid to deter customers from exiting their service early. Klobuchar claims the rate hike has "little to no relation" to the cost of the phone and that it punishes those who depend on cellphones and have to quit for honest reasons, such as moving into regions that don't have coverage.

The Senator has written to both Verizon Wireless chief Lowell McAdam and FCC chairman Julius Genachowski to signal her intent. In the FCC letter, Klobuchar rejectes anti-regulation arguments by Verizon and other CTIA members, claming instead that the ETF jump is proof carriers will spike their rates when no one is monitoring their practices.

"Verizon Wireless' decision shows us once again that the wireless industry cannot police itself and will not, on its own, make its practices more competitive and consumer-friendly," she writes.

Verizon has responded that the ETF is prorated, as the fee drops $10 for each month of service, and also points to the contract-free price as an option. However, choosing this option raises the price of a Droid from $200 to $560, or more than it costs to simply abide by the contract and cancel later. Most carriers use the ETF as a means of guaranteeing the profit they would make from each subscriber that is lost when a customer quits before a certain point in time.

It's not clear when the bill will reach committee, but it comes as the FCC is about to debate wireless net neutrality that, if enacted, would prevent all US carriers from blocking legal apps and services.



By Electronista Staff
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Comments

  1. climacs

    Dedicated MacNNer

    Joined: Sep 2001

    +4

    nice idea

    but they'll just do what the credit card companies are doing... jack up the early termination fees before the law takes effect, should it pass.

  1. Timon

    Fresh-Faced Recruit

    Joined: Mar 2009

    +2

    Better idea

    Unless they add a retro clause to set it back to November 1 2009.

    I have no problems with ETFs if and only if they drop to zero at the end of the contract period and if it's inline with the cost of the device.

    I would almost rather have NO subsidies and lower the monthly rate.

  1. aristotles

    Grizzled Veteran

    Joined: Jul 2004

    +3

    Contact that senator to add on unlocking as well

    If you want to have official unlocking and sale of unlocked iPhones in the US, contact this senator or your own senator to include an amendment which would also force AT&T to sell unlocked iPhones and offer an official unlock through iTunes for iPhones which have been purchased at full price or for iPhones from contracts that have been completed in one manner or another.

  1. SergioRS

    Fresh-Faced Recruit

    Joined: Sep 2004

    +2

    Still not enough

    Carriers should be forced to stipulate their cost for a device (the profit comes in from selling services (particularly SMS/MMS/Data) and that cost should be equally prorated over the course of a contract:

    Example: a 600 phone on a 24mo contract should be prorated at $25mo - $50mo for 12mo

    It's OBSCENE that they charge an ETF on a junk phone you can buy outright on a pre-pay plan for $20-30 if you're uninformed enough to select that phone on a contract plan.

  1. Fast iBook

    Fresh-Faced Recruit

    Joined: Mar 2003

    +1

    Early termination fee...

    If you are genuinely dissatisfied with your provider's service, there should be no termination fee.

    - A

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