FCC Investigating Early Termination Fees on Cell Phones

Digital Trends is one of the many outlets reporting that the FCC is investigating cell phone companies for their early termination fees. Verizon Wireless set off the investigation by doubling their early termination fees on their smartphones, but AT&T, Google, T-Mobile, and Sprint all received communications from the FCC looking into exactly how these fees work. They are currently not regulated, and the FCC's concern is that people don't understand what they're getting into when they sign that contract. Some of the fees exceed the value of the phones that were purchased!

Most people who have a cell phone have signed a 2-year contract before. The theory is that you make up the cost of the phone over those 2 years. I was a US Cellular customer when I was in college, but when I moved from the area I was always on roaming. When I saw the roaming charges on my bill, I tried to cancel my contract, but they wouldn't let me out without a $150 termination fee. I bought the lowest end phone I could, and I was more than a year into the contract, but it was still $150, which was a huge percent of my monthly income at the time! They were unwilling to work with me, and why should they, when they don't have to? I signed, so I was stuck with it.

I am now an AT&T customer, and they do their early termination fee a little differently. You get a discount based on how long you've been under contract. The original fee is $175, but for each month you get a $5 reduction in the fee. It's a little weird, since it isn't $0 by the time you hit your 2 year mark, but it's better than a flat fee for the full two years. I think that's nice, since if the fee is to cover the phone, you should owe less when you've been paying once a month for a year! I don't think FCC regulation would be a bad thing at this point; cell phone companies are running rampant, charging fees and taxes and overages and goodness knows what else without really warning their customers. It's almost like they want you to go outside of your plan so that you will have to pay them for extra minutes, extra text messages, for driving too far, or any number of other things. We're all paying too much for everything right now, so here's hoping the FCC can do some good in this case!

To see the Digital Trends article, click here.