Lawmaker Targets Smartphone Early Termination Fees

Sen. Amy Klobuchar fired off a letter Nov. 9 to Verizon Wireless President and CEO Lowell C. McAdam, denouncing the nation's largest cell phone service provider's recent decision to increase early termination fees for new smartphone customers. Klobuchar also wrote to Federal Communications Commission Chairman Julius Genachowski seeking an FCC review of Verizon Wireless' decision.

Verizon Wireless said Nov. 5 that beginning Nov. 15 the company "will double the penalty fees to $350 for certain subscribers who leave their contracts early," Klobuchar's Nov. 9 news release said. "Verizon customers purchasing ... [a smartphone] with a one- or two-year service agreement will be subject to an ETF of up to $350 if they disconnect service prior to the minimum term. The $350 ETF will decrease $10 for each month of service completed."

The statement emphasized, "'These fees are anti-consumer and anti-competitive and they bear little to no relationship to the cost of the handset device,' said Klobuchar, a member of the Senate Commerce Committee."

Klobuchar's letter to McAdam stated that in the last session of Congress, Klobuchar introduced the Cell Phone Consumer Empowerment Act, legislation that would "require wireless carriers to prorate their ... ETFs so that, at a minimum, a consumer exiting a two-year contract after the end of the first year would have to pay only half of the termination fee."

Her letter continued, "Since introducing this legislation, I was pleased to see that Verizon Wireless and other wireless carriers implemented modest plans to prorate their ETFs. That is why I was so disappointed to learn that Verizon Wireless announced that it will soon double its ETFs and charge a $350 ETF for its new smartphones. Although Verizon Wireless will prorate the ETF by $10 a month, under the company's new plan, the penalty for leaving the contact halfway through a two-year contract would be $230-still higher than the $175 ETF Verizon Wireless previously charged for these phones."

Klobuchar added, "Verizon Wireless' decision underscores the need for Congress to act and to pass the Cell Phone Consumer Empowerment Act." In the letter to Genachowski, Klobuchar urged the FCC to "review the recent Verizon Wireless decision as well as the competitive and economic impact of ETFs on wireless consumers."