FCC adds AT&T, Google, Sprint and T-Mobile to Verizon ETF inquiry

FCC adds AT&T, Google, Sprint and T-Mobile to Verizon ETF inquiry
A few weeks ago, we told you that the FCC was sniffing around Verizon because of Big Red's ETF hike to $350 for some devices. Now, the Feds are widening the scope of the inquiry and is seeking answers from Sprint, AT&T, T-Mobile and Google. The companies have until February 23rd to tell the Commission how they disclose to customers all about the Early Termination Fee. The FCC says that because there is no industry standard, those that sign up for cellular service with an ETF must understand completely what they are obligating themselves to. In the U.S., most cell carriers have customers sign a 2 year contract. In return, the carrier often subsidizes a huge part of the cost of that sexy new cell phone. The subsidized amount can add up to $300-$400 in some cases and the operators need to make sure that the customer lives up to the 24 month terms of the contract or else paying the subsidy could lead to huge losses for the company.

Verizon, in particular, was also getting hurt when customers took advantage of BOGO offers on certain cellphones to play "Cellphone Arbitrage". In this situation, the customer would buy a phone, getting the second unit for free by signing a second contract. The customer would then sell the free phone on eBay, cancel the extra 2 year line, and turn a nice profit-a profit that technically came out of the carrier's pocket. Verizon replied to this by doubling its ETF on certain advanced model phones which brought on the unwanted attention of the FCC. It also recently came to light that T-Mobile customers who walk out early on a 2 year contract can end up owing more in Early Termination Fees than the cost to buy the unsubsidized version of the Nexus One. The FCC wants the companies to disclose how customers are told about the ETF in ads, corporate web sites, monthly statements and sales scripts. In Google's case, the Commission is looking into Equipment Recovery Fees charged by the Mountain View based company.

sources: FCC via Reuters, EngadgetMobile

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7 Comments

1. jundibasam

Posts: 119; Member since: Aug 05, 2009

Another big brother intrusion...FCC should be focusing their attentions on how they plan to allocate more wireless spectrum to meet the increasingly huge demands that advanced devices are placing on wireless infrastructure. Almost every U.S. consumer is aware there is some type of cancellation fee involved if they are getting a phone valued at several hundred dollars for almost nothing. Or lets check out why carriers are making things like data and even messaging allowance packages mandatory instead of optional. ETF are more or less valid, but customers shouldn't be getting strong-armed into getting messaging or data on a midrange device just to get a decent phone.

2. vzwtechbill

Posts: 175; Member since: Mar 16, 2009

My only rebuttal to your points is on the data requirement part. More and more mid-range phones are coming out with full HTML browsers or at the very least WAP browsing. They also often have some sort of 'online store' for application purchases. Probably 1% of customers take my offer to block all data, since in the process they lose picture messaging. That leaves 99% with the potential to use the services. And, of course as soon as there's a charge, it's automatically disputed, even when I can see the IP addresses visited. Easy solution: require some level of data service for owning a mid-range phone. I'd personally love to see a requirement of either having a data pkg or block mandate, and do away with pay-as-you-go data entirely. But that's just my $0.02....

4. lolipopjones

Posts: 51; Member since: Jun 21, 2009

The ETF has nothing to do with recouping the monetary loss of the subsidizing the phone. Most companies will recoup the loss in a month or two depending on Device and plan. The real reason for an ETF is to lock customers into the contract so to reduce customer churn rate. The cost for the phone and then some is added into the plans you get so in the end the customer is not getting a deal...

6. jundibasam

Posts: 119; Member since: Aug 05, 2009

that is b.s. I have been a a big verizon fan, but this is about greed. Even in their press release, they implicitely stated as much by saying that revenue has been maxed out with voice, so now its about getting max revenue from data. Why else do you think they went from an unlimited data plan with V CAST for $15 to a 75 MB plan for $20, then less than 3 months later changed back to unlimited data like V CAST had but doubled the price to $30? Come on, the is Business 101 here! They couldn't just double the price and require something to be mandatory. They're making oblivious and ignorant customers think they're improving their value by saying "hey, instead of just getting 75 MB for $20, we'll give you unlimited for just $10 more when it was only $15 a few months before and not a requirement at that! Also, you cannot tell me that an LG EnV Touch, even with its HTML browser, has the same web browsing and data experience as a Motorola DROID and yet both require $30 if you want unlimited data. The MB data charges were crap, and we all know it. My niece had a Juke and Wife had a Venus before I got her the DROID and both lines incurred MB data even with the Block Web Access and Block APP Download features on them. Furthermore, the Juke can't even get on Mobile Web, so the only way to get data charges was from Get It Now and I had a block on it. It is about greed and trying to force customers to get features they don't want. Nonetheless, you tell me how I get the same data experience from an LG EnV 3 or a Razzle that I can get out of a DROID or Touch Pro 2 and i'll eat my words. I know why they require these features on Smartphones but to require it on a mid-range device at nearly the same costs because they think they know better than a customer on how they should use the phone is just a load of shit

7. jundibasam

Posts: 119; Member since: Aug 05, 2009

I think it takes more than just a few months to recoup the subsidy. I remember reading an article on CNET a year ago or so that it takes ATT 18 months to become profitable on an average iphone customer and Verizon about 15 months to become profitable on an average BlackBerry customer.

3. GlenF

Posts: 50; Member since: Nov 02, 2009

welcome to an election year... with as many as 78 seats up for grabs, senators are trying to make their mark and FCC regulators are appointed by those senators. Just another pathetic attempt by dems and conservatives to try to seem relavant and in touch with the people

5. n0gar2

Posts: 71; Member since: Oct 19, 2009

Only criminals with something to hide don't like the law sniffing around. Criminal gangs (street and suits) always say the same thing because they know they are doing wrong.

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