FCC chief wants regulation of cellphone termination fees

Associated Press Writer

The head of the Federal Communications Commission said Friday that he wanted to regulate the fees charged cellphone users who cancel their wireless contracts early.

At a news conference, FCC Chairman Kevin Martin would not say whether he endorsed an industry plan to help consumers avoid “early termination fees” that was reported by the Associated Press this week.

But Martin said he supported regulating the fees at a federal level, even if it affects a series of class-action lawsuits against carriers in state courts.

He said consumers would benefit from a national standard that addresses many of the problems with the current fee system more than “a potential lawsuit that might only affect and impact consumers in one particular state.”


Industry and consumer groups are negotiating to reach an agreement to ease the fees, Martin said, which have infuriated consumers. But they have been unable to reach a consensus.

Citizens will be able to speak their minds on the subject during a public hearing at the commission’s next meeting, June 12.

Verizon Wireless, the nation’s No. 2 cellphone company, has offered a plan that would give consumers a break on fees charged when they quit their service early. But it also would let cellphone companies off the hook in state courts, where customers are suing them for hundreds of millions of dollars.

The companies charge customers $175 or more for ending service early. Under the industry proposal, consumers would be able to cancel service without any penalty for up to 30 days after they sign a cellphone contract or until 10 days after they receive their first bill.


The proposal would require companies to reduce fees month by month over the course of a contract, according to people familiar with the offer who spoke on condition of anonymity because the FCC has not approved it.

It would not abolish cancellation fees and would not refund fees retroactively.

The sticking point for consumer groups is that the proposal would take away states’ authority to regulate the charges. Consumers Union called the provision a “get-out-of-court-free card.”

Wireless companies say cancellation fees are necessary to recover the cost of cellphones, which they subsidize under long-term service contracts, and to defray their costs for signing up new customers. Consumer groups say the fees are unreasonable and seek to discourage customers from switching providers.


The fees have led to class-action lawsuits in several states and legislative proposals on Capitol Hill and in state legislatures nationwide.