FCC chief proposes rules on cellphone cancellation fees

The chairman of the Federal Communications Commission laid out a plan Thursday to regulate the fees that cellular phone companies charge consumers for canceling their contracts early.

FCC Chairman Kevin J. Martin’s proposal was similar to an industry plan put forward last month.

Martin, speaking at a public hearing, criticized the fees, saying that “in practice, it can leave people locked into a service that they really want to leave.”

Companies said they charge early termination fees that can range from $150 to $225 to recover the cost of cellphones, which they subsidize under long-term service contracts. The fees also defray costs for signing up new customers, companies said.

Martin’s plan would require that the fees be related to the actual cost of the phones. A fee for a $50 phone would be higher than for a $5 phone, he said.

The fees should be prorated, or reduced over the time of the contract, Martin said. The two largest wireless carriers have both begun prorating fees, with others promising to follow.

The chairman also said that the contract should be for a “reasonable length of time” and that the extension of contracts should not necessarily include a renewal of the termination fee.