Following ATandT, Verizon ETF Hikes, Sen. Klobuchar Pushes FCC

Verizon Wireless doubled its early termination fee, and AT&T recently did nearly the same, hiking the fee in advance of the Apple iPhone refresh from $175 to $325. Minnesota Sen. Klobuchar has again asked the FCC to consider how ETFs are decreasing industry competition.

U.S. Sen. Amy Klobuchar is again calling on the Federal Communications Commission to take action against the early termination fees imposed by many wireless carriers.

The Minnesota Democrat, following the results of an FCC-commissioned survey of 3,000 Americans from April to May, described ETFs as hurting competition in the marketplace and leaving consumers uncertain about their options.

"The FCC's consumer survey confirms what we have known for a long time - that confusing Early Termination Fees undermine competition and result in less consumer choice," Klobuchar said in a statement May 26. "Nearly two out of three Americans have seriously considered switching cell phone providers but ultimately decided to stay with their current provider because of a cancellation fee. Like a rigged carnival game, wireless providers bury these fees in the fine print and slam consumers if they try to find better service or save a few bucks in their monthly bill."
On May 21, AT&T followed Verizon Wireless in raising the ETF on several of its popular smartphones, including the Apple iPhone - which Apple is expected to refresh in June. iPhone and BlackBerry Bold users who look to end their service agreement in advance of their contract date now face a fee of $325 - up from $175.
In November 2009, Verizon doubled its ETF, boosting the fee from $175 to $350.
The FCC study found that Americans are generally confused about the cell phone marketplace. Approximately 30 million Americans - or 17 percent of those surveyed - reported experiencing "bill shock," a sudden one-time increase in their bill, "though they had not changed their calling or texting plans," states the report. "Overwhelmingly, these Americans were not contacted by their carriers about the change in their bill."
Regarding ETFs directly, nearly 20 percent didn't know whether their contract included an ETF, while among those who knew they had an ETF, as well as the actual amount, 56 percent said the fee was more than $200.
"ETFs may also play a role in consumer behavior among those who consider changing their cell phone service provider," stated the report. "When asked whether paying an ETF was a factor behind a decision to keep service - even though they might have seriously considered switching - a majority (61 percent) of personal cell phone users said the ETF was at least somewhat influential."
Forty-three percent named ETFs as the major reason for staying with their cell phone company.
In December 2009, Klobuchar introduced the Cell Phone Early Termination Fee, Transparency and Fairness Act, which was co-sponsored by Sens. Russ Feingold, D-Wisc., Jim Webb, D-Va., and Mark Begich, D-Alaska. The act would require wireless carriers to pro-rate ETFs and clearly notify customers of the fee at both the time of purchase and during the duration of their contract.
According to the statement from Klobuchar's office, "the FCC Consumer Task Force is currently investigating the impact of [ETFs]."