Senators take on cell phone contract fees

A new bill in Congress would give cell phone subscribers greater freedom to leave their contracts.

Early terminations have long annoyed cell phone subscribers, but now they're beginning to annoy Congress as well. On Friday, Sens. Amy Klobuchar (D-Minn.) and Jay Rockefeller (D-W.Va.) introduced a bill that would give subscribers greater freedom to leave cell phone carrier contracts before the agreements expire.

The Cell Phone Consumer Empowerment Act of 2007 would allow subscribers to cancel a contract for any reason up to 30 days after a new agreement is signed or an existing contract is extended. Klobuchar said the bill is all about fairness. "Early termination fees are a family budget buster," she said. "Families should be able to terminate service without outrageous fees and know if their cell phone will work on their drives and in their home and office."

While most carriers already give subscribers a set period for leaving a new contract, they are not required to do so by law. What's more, the bill would require carriers to prorate ETFs the closer a subscriber is to the contract's ending date. Here again, many carriers already offer that option, but it is not required.

Not surprisingly, the wireless industry's lobbying arm in Washington isn't greeting the bill with cheers. In a statement, Steve Largent, the president and CEO of the Cellular Telecommunications Industry Association (and a former Republican member of Congress), disputed the need for any regulation.

"Wireless consumers in America enjoy the most affordable service in the free world," Largent said. "The [bill] is unnecessary and, if enacted, threatens to increase the cost of wireless service and reduce the number of choices available to American consumers." He also cited FCC statistics that state that between 2003 and 2006, the number of contract related complaints fell from 15 for every 1 million customers to nine for every 1 million.

The CTIA has long defended ETFs as a way for them to offer free and discounted cell phones and plans at a lower monthly price. "ETFs are a means of holding customers to the 'bargain' they made with their carrier," said a CTIA position paper from earlier this year. "They allow carriers to offer their most attractive rate plans to their customers who commit to a specific term."

But Klobuchar and Rockefeller aren't buying that argument and are calling for additional mandates in their legislation.

Most interestingly, it directs the FCC to submit a report to Congress that studies the practice of handset locking and its effect on consumer behavior and competition. Though phone locking has been a long-standing practice in the industry, AT&T's much-publicized exclusive on the Apple iPhone has brought the issue under Congress' radar.

Additionally, the bill mandates that carriers do the following: produce coverage maps that are detailed enough to identify whether a person could get service in their home; make public-specific details on coverage gaps and dropped calls; and inform customers of rate changes at least 30 days before they take effect. Fees not expressly authorized by federal, state, or local governments would be illegal, and carriers would be required to clearly explain all fees and break out roaming charges in a separate section of a subscriber's monthly billing statement.

 

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