By Wailin Wong |Tribune reporter May 22, 2008On Sunday,
AT&T introduces a new fee structure that will make it cheaper for mobile phone customers to get out of their contracts.
The move comes at a time when more questions are being raised about the fairness of long-term agreements for mobile phone service
AT&T, which is the nation's largest wireless carrier by subscribers, will lower the early-termination fee it charges subscribers by $5 per month during a one- or two-year contract. The fee starts at $175, so a customer wishing to quit their AT&T service with one month left on a two-year contract would pay $60. The termination fee is currently $175 at any time.
The new structure applies to contracts going into effect on Sunday or after. AT&T spokesman Mark Siegel said the declining fee policy is "fair, flexible and is the right thing to do."
The operator's move to prorate its cancellation fees, announced in March, follows that of No. 2 player
Verizon Wireless, which put a similar policy in place in November 2006. Both
Sprint Nextel and T-Mobile have announced they also will offer declining fees. Sprint spokesman
John Taylor said his company's new policy will be in place by the end of the year.
The major wireless companies' decisions stem from both congressional pressure and consumer ire over these fees. Carriers such as Sprint and
Verizon are facing class-action lawsuits in state courts filed by customers who are seeking refunds for the fees, which they contend are unfair.
The operators may seek to have the federal government institutionalize these new fee structures, even as they're already responding to consumer discontent over the issue. The Associated Press reported Wednesday that under a new proposal by Verizon, the Federal Communications Commission would lower the fees each month during the life of a contract, and allow subscribers to quit their service up to 30 days after inking a contract, or up to 10 days after getting their first bill.
According to the AP, the current proposal would also render moot the litigation in state courts over early-termination fees. This means that while new subscribers would get a break on ditching their service, customers seeking refunds would be disappointed.
The operators' desire to avoid state litigation has some consumer advocates questioning the motives behind the reported proposal.
"The starting point isn't one that we're super-excited about because it seems like the point of this exercise is about eliminating legal liability for the largest wireless carriers," said Chris Murray, senior counsel for Consumers Union, which publishes Consumer Reports. He added, "It's not apparent to me that we're doing much, if anything, beyond what the carriers are [already] doing in the marketplace."
The FCC declined to comment. Verizon Wireless spokeswoman Carolyn Schamberger said in an e-mail that "we've been talking about this issue with the FCC, consumer groups and others in the industry, as we know it's important to our customers."
The carriers say the early-termination fees are necessary to cover the cost of subsidizing cell phones and acquiring new subscribers. The operators offer handsets whose full retail price is around $400 for $100 or $150 to customers that enter two-year contracts. The companies can then spread the cost of that subsidy over the life of the service agreement.
"If a customer chooses to walk away from a two-year agreement, we have to have some way to protect ourselves from that financial liability," said Taylor of Sprint.
The CTIA, the wireless industry association, put in a request with the FCC in 2005 to have early-termination fees considered rates. This would make the fees subject to federal, rather than state, regulation. State governments have authority to regulate terms and conditions of wireless contracts.
The tussle over the cancellation fees feeds into a larger debate over whether the federal government or states should regulate wireless policy. The CTIA is pushing for a nationwide framework, arguing that the advent of national calling plans and billing systems makes such a move logical.
"We don't want to go back in time when each state regulated its phone services separately," said CTIA spokesman Joe Farren.
Cell phone firms answering calls to trim early-termination fees 
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