Wyden Calls For FCC Probe Of ETFs
May 27, 2010
| 2:18 PM
Wireless operators came under more pressure from some lawmakers Thursday for the fees they charge customers for breaking their wireless phone contracts.
In a letter to FCC Chairman Julius Genachowski, Sen. Ron Wyden, D-Ore., called on the commission to launch an investigation into these early termination fees (ETFs) charged by wireless carriers to determine what costs they are trying to offset with the fees.
AT&T came under fire last week from Sen. Amy Klobuchar, D-Minn., after the wireless firm announced it was raising its ETFs for some of its smart phones. The fee will nearly double on June 1 from $175 to $325 for some of the most advanced devices such as the iPhone and Blackberry Bold. Klobuchar introduced a bill late last year that would place restrictions on ETFs.
An AT&T spokesman said the fees help offset the deep discounts that his company and others offer for high-end handsets such as the iPhone. He also noted that while it did boost its ETFs for some smart phones it also lowered the fees on some less-advanced phones from $175 to $150.
But Wyden dismissed such claims and pointed to Verizon Wireless' response to questions posed by the FCC last year about ETFs. He noted that the fees do not seem to be linked directly to the cost of the devices. "Given Verizon Wireless' response to the FCC's 2009 inquiry regarding ETF structures for 'advanced devices,' it appears that the cost of these termination fees are based on much more than recouping the wholesale cost or retail value of the wireless device," Wyden wrote, adding that Verizon's response indicate that the fees also are aimed at recouping costs and risks of providing service including advertising, commissions, store costs and network costs.
He asked the FCC to examine the extent to which monthly service charges for voice and data communications are set to help pay the costs of wireless devices for all subscribers and whether any national providers have reduced their monthly fees once they have recouped the cost of a handset.
"It is hard to see how consumers and competition can drive innovation in the marketplace when consumers must choose their wireless carrier based upon the devices they offer, and must stay with a sub-optimal carrier in order to avoid exorbitant exit fees," Wyden wrote.
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