FCC asks cellphone companies to justify early termination fees
The Federal Communications Commission asked the nation’s major telecommunications firms and Google Inc. to explain to the agency the industry’s often unpopular practice of charging consumers to end their cellphone service early, a penalty known as an early-termination fee.
The agency sent a set of questions -- including asking why the fees are needed at all -- in letters to AT&T Inc., Verizon Wireless, Sprint Nextel Corp., T-Mobile USA and Google.
“This is an essential step to ensuring that consumers have the information that helps them make informed choices in a competitive marketplace,” the FCC said. The letters of inquiry included about a dozen questions on various industry practices relating to the fees.
The fees are a penalty for ending multiyear phone contracts, during which consumers may pay wireless companies thousands of dollars for phone and data service. The fees discourage existing users from leaving their provider, even if they are unsatisfied with the service or if they see a better deal elsewhere.
The companies have argued that the fees are aimed at recouping the cost of discounted handsets sold to customers. To spur the popularity of mobile phones, carriers offer steep discounts on many handsets, especially high-priced smart phones.
The inclusion of Google in the set of companies contacted by the FCC was related to the tech giant’s recent launch of the Nexus One handset, the first phone marketed directly by Google.
The company took some licks when observers noticed that Google had attached its own $350 early-termination fee to the Nexus One. Anyone who bought the phone, along with the default T-Mobile service contract, would have to pay termination fees to Google as well as to T-Mobile -- a decision that could cost up to $550.
“The combination of [early-termination fees] from Google and T-Mobile for the Nexus One is also unique among the four major national carriers,” the FCC told Google. “Consumers have been surprised by this policy and by its financial impact.”
The FCC requested that the companies respond to the questions by Feb. 23 but said they can request that their answers be treated confidentially.
