After weighing in on how to handle early-termination fees for about a year, the FCC has finally formalized its inquiries by sending letters to AT&T (NYSE: T), Google (NSDQ: GOOG), Sprint (NYSE: S), T-Mobile USA, and Verizon Wireless. The letters were sent by the FCC’s Consumer Bureau Chief Joel Gurin and Wireless Bureau Chief Ruth Milkman and are intended on gathering “facts and data on the consumer experience with wireless early termination fees,” according to a release.
The one surprise is that the FCC also sent a letter to Google, the only company that is not a carrier. In the letter, which is publicly available on the FCC’s website, the regulatory agency tells Google that the purpose is to gather information about whether customers are adequately informed about Google’s Equipment Recovery Fee in connection with its offering of the Nexus One to customers who agree to a two-year contract with T-Mobile. Shortly after Google unveiled the Nexus One, reports trickled out condemning the company for charging a cancellation fee in addition to the one being charged by T-Mobile. It could cost consumers up to $550 to cancel. However, Google defended its actions by saying the fee is a way for the company to recoup the subsidy it gives to contract customers, just like T-Mobile.
Verizon had already been asked by the FCC why it doubled its fee to $350 from $175. Previously, Verizon responded that it doubled fees because devices cost much more as consumers upgrade from feature phones to smartphones. The FCC wrote in the letters to the companies that: “While different companies may choose to offer different kinds of service plans to their customers, the absence of a standard framework makes it especially important that consumers have a clear understanding of terms and practices of individual companies, which will allow them to compare services offered by different providers on a clear and consistent basis.”
CTIA-The Wireless Association VP of Regulatory Affairs Chris Guttman-McCabe issued the statement today in response to the FCC’s requests: “While we understand that the FCC’s Consumer Task Force is only looking into the issue of early termination fees, 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. Additionally, consumers of all of the carriers that received letters from the FCC have multiple options when it comes choosing plans and devices without early termination fees. About 20 percent of Americans have chosen a prepaid plan without a contract. It is also important to note that consumers can avoid ETFs by completing the contract terms.”
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