CTIA defends early termination fees

The leading trade group for wireless telecoms is defending carriers' right to charge early termination fees to customers who break their contracts early.

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Responding to the Federal Communications Commission's inquiry into early termination fees, the CTIA said that the fees were an integral part of carriers' pricing structure that helped them provide several benefits to consumers, including heavily subsidized smartphones.

"We hope that there is a recognition by the FCC that these fees are part of the rate and rate structure that allows wireless carriers to, among other things, subsidize phone purchases," said the CTIA. "Additionally, consumers of all of the carriers that received letters from the FCC have multiple options when it comes to choosing plans and devices without early termination fees. About 20% of Americans have chosen a prepaid plan without a contract."

The CTIA's defense of early termination fees came just hours after the FCC said it had sent letters to AT&T, Google, Sprint, T-Mobile and Verizon "to gather facts and data on the consumer experience with early termination fees."

In particular the FCC cited concerns that early termination fees "have an important impact on consumers' ability to switch carriers" and said the commission must make sure that "consumers fully understand what they are signing up for... when they accept a service plan with an early termination fee."

The practice of charging early termination fees has come under fire in recent months after Verizon doubled its standard early termination fee from $175 to $350 last November. The release of the Google Nexus One smartphone has only added to the controversy, as both Google and T-Mobile say they plan to charge users separate early termination fees if they ditch their Nexus One in less than four months. Taken together, the twin fees could add up to $550 for customers who break their contracts early.

The FCC's inquiry into early termination fees is part of a broader examination of wireless industry practices that the commission announced last summer. Specifically, the FCC is looking for betters ways to "support and encourage further innovation and investment" within the wireless industry, to assess the state of competition within the wireless market and to assess whether carriers can do more to disclose relevant billing information to their customers. The FCC has also previously riled the wireless industry with its stance favoring network neutrality rules stating that ISPs should not be allowed to block or degrade Internet traffic from their competitors in order to speed up their own.

This story, "CTIA defends early termination fees," was originally published at NetworkWorld.com. Follow the latest developments in wireless at Network World.

This story, "CTIA defends early termination fees" was originally published by Network World.

Copyright © 2010 IDG Communications, Inc.

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