CTIA Agrees With FCC on Transparency in Early Termination Fees

Free Press echoes call for action in statement

By John Eggerton -- Broadcasting & Cable, 1/26/2010 4:46:15 PM

Reaction was swift to the FCC's announcement it had sent letters to some top wireless carriers and Google seeking information on early termination fees (Google's has an equipment recovery fee connected with the Nexus One handset it offers customers agreeing to a two-year contract with T-Mobile).

CTIA, the wireless association, said it agreed with the FCC that transparency and disclosure were keys, as was understanding what was in contracts. The FCC said the letters were the first initiative of a consumer tasks force it launched with a mandate of, among other things, making sure those consumers were aware of the terms and conditions of various telecommunications services, including broadband and wireless telephony.

"While we understand that the FCC's Consumer Task Force is only looking into the issue of early termination fees," the association said, "we hope that there is a recognition by the FCC that these fees are part of the rate and rate structure that allows wireless carriers to, among other things, subsidize phone purchases. Additionally, consumers of all of the carriers that received letters from the FCC have multiple options when it comes to choosing plans and devices without early termination fees. About 20% of Americans have chosen a prepaid plan without a contract. It is also important to note that consumers can avoid ETFs by completing the contract terms."

In its letter, the FCC said it did recognize that there may be various scenarios under which those fees would be collected.

The letters were seen as a sign of increased FCC interest in the issue by a number of consumer advocacy groups critical of the fees.

Calling the letters a "probe," Media Access Project said it was a good first step, but that the FCC "must take decisive action based upon the responses it receives. In short, the FCC should be prepared to propose new rules when the answers it gets back demonstrate that high ETFs are both a symptom of a failed market and a contributing factor to that market failure."

Free Press Policy Counsel Chris Riley echoed that call for action in a statement. "Excessive and poorly disclosed early termination fees are a symptom of the dire need for FCC intervention in a broken market," he said.  "The state of consumer disclosure must be improved for there to be any hope of meaningful competition in the wireless industry."

Consumers Union Policy Analyst Joel Kelsey said it was time to begin adding tough questions. "We look forward to the next several steps the FCC takes to protect wireless consumers from abusive practices."