FCC may limit early-termination fees

The federal government is considering a proposal to limit how cell phone carriers charge fees for ending a contract early.

Kent German Former senior managing editor / features
Kent was a senior managing editor at CNET News. A veteran of CNET since 2003, he reviewed the first iPhone and worked in both the London and San Francisco offices. When not working, he's planning his next vacation, walking his dog or watching planes land at the airport (yes, really).
Kent German
2 min read

If you hate paying a fee to end your cell phone contract yearly (and really, who doesn't?), you'll be interested to know that the Federal Communications Commission may just have your back. The Associated Press is reporting today that the FCC is considering proposals to regulate, but not eliminate, the early-termination fees (ETFs) that have become a sore spot for cell phone owners. Currently, wireless carriers charge up to $200 for customers who leave service contracts before their end date.

The FCC is not commenting on the proposal, but according to the AP, the agency is negotiating with carriers on a number of terms. Most importantly, ETFs would be capped at an undisclosed amount and carriers would be required to prorate fees according to how long a customer has stayed with the contract. While most major carriers prorate ETFs already (the longer a customer has been in a contract, the lower the ETF) they are not required to do so. Legislation proposed in the Senate last year also calls for prorating ETFs, but so far the Cell Phone Consumer Empowerment Act of 2007 is not close to passing.

The FCC proposal also would prohibit carriers from charging an ETF to customers who change terms of a contract or end one contract and start another. New customers would be able to end a contract without paying an ETF in the first 30 days of their contract or for up to 10 days after they receive their first bill.

As expected, the government would give carriers some concessions in return for the regulations. The AP says the proposal would prohibit states from regulating ETFs and that carriers could not be held liable in a number of ETF-related class action lawsuits that customers have filed in several states.

Carriers have long held that ETFs are necessary because they sell phones at a loss to their customers. In their view, the fees are a way to recoup the costs for offering free or heavily discounted new phones. The Cellular Telecommunications Industry Association, which counts a lot of carriers in its membership, supports ETFs for the same reason; it contends that ETFs benefit consumers because they allow carriers to offer phones and plans at a lower monthly price.