Battle lines clearly drawn in Klobuchar fight over early-termination fees for cell phones

WASHINGTON, D.C. — The battle lines have been drawn in the fight over cell phone early-termination fees.

Both consumer advocates, led by Sen. Amy Klobuchar and the Federal Communications Commission, and wireless carriers, led by Verizon Wireless, are mobilizing to claim the same moral high ground — fighting for the little guy.

In early December, Klobuchar introduced a bill that would moderate high service-cancellation fees for users with smart-phones, like the BlackBerry or iPhone, who got those phones as part of a package deal with their cell phone service contract.

Her bill would limit early-termination fees to no more than the contract discount given when a customer bought the phone. So, if you got a $200 discount at point-of-sale, your early-termination fee couldn’t be more than $200. Those fees would also be prorated along the length of the contract.

The FCC followed a day later with a letter to Verizon, demanding details about its recent early termination fee increase.

In a 13-page response to an FCC inquiry (complete with 64 pages of supporting exhibits), Verizon laid out its contention (PDF) that such fees actually reduce the initial costs of smart-phones, allowing poorer customers access to a technology they wouldn’t otherwise be able to afford.

Sen. Amy Klobuchar

REUTERS/Jonathan Ernst
Sen. Amy Klobuchar

“By reducing up-front costs to consumers, this pricing lowers the barriers to consumers to obtaining mobile broadband devices,” wrote Kathleen Grillo, senior vice president for federal regulatory affairs, in the Dec. 18 letter. “It thus enables many more consumers, including those of more limited means, access to a range of exciting, state-of-the-art broadband services and capabilities. The company’s pricing structure therefore promotes the national goal of fostering the greater adoption and use of mobile broadband services.”

The early-termination fees, Verizon goes on to say, basically compensate the carrier for the cost of the phone they’re discounting when including it with a contract plan. Given that most customers choose to bundle phones with plans, rather than buy them separately, Verizon concluded that the market has little issue with the bundling.

So far, Verizon’s logic has yet to hit home with many industry watchers. New York Times technology columnist David Pogue, for one, posted two questions for Verizon on his Times blog:

• How come our monthly bills don’t drop at the end of two years, once we’ve fully paid for the phone?

• Verizon says that we, the customers, can avoid the early-cancellation penalty if we’re willing to pay the full retail price of the phone up front ($500 or whatever). Fine. But then why do we have to pay the same monthly fee as somebody who got the discounted price?

A Verizon spokesman told him its letter speaks for itself — though the letter doesn’t address either point.

Klobuchar said if Verizon is really on the side of the little guy, “they should like our bill.” Reminded that such an endorsement seems unlikely right now — given that the two sides are worlds apart on the issue — Klobuchar invited wireless providers to back her legislation “as a Christmas present to the American people.”

Derek Wallbank is MinnPost’s Washington, D.C., correspondent and can be reached at wallbank[at]minnpost[dot]com.

Comments (6)

  1. Submitted by Frank Neubecker on 12/22/2009 - 06:11 pm.

    I wish they would just change the pricing structure to show what we are actually using. Phone calls and data transfer should be expensive while text messaging should cost almost nothing! Charge by the actual bit transfer.

  2. Submitted by Rebecca Hoover on 12/22/2009 - 07:47 pm.

    How nice, Amy throws more crumbs to the masses. Amy never did work hard for a public option that would have saved lives of middle class Minnesotans who fall through the cracks when they get sick. But hey, if you’re alive Amy will toss you a stale crumb and help you out with some cell phone termination fees. And Amy didn’t to a thing about the fact that the exchange plans that will be available will not be available for years.

    The old Biblical idea of just punishment is interesting at this time–the New Testament warns that unrepentant sinners will suffer in hell for all eternity in a way appropriate for their ill treatment of others. In today’s terms that probably means the senators and congresspersons, such as Amy, who did not support a public option would have to spend all eternity seeking but never receiving treatment for an excruciatingly painful affliction. Interesting … . But, she would get some cell phone termination fee relief when she could no longer afford a cell phone. I’m sure she would be happy to know that.

  3. Submitted by Dan Hintz on 12/22/2009 - 10:03 pm.

    I don’t know if I agree with Rebecca that eternal damnation awaits Amy Klobuchar. That being said, it does seem quite pathetic that Klobuchar is focusing in such a trival issue after contributing little or nothing to the health care debate.

  4. Submitted by Ron Gotzman on 12/23/2009 - 09:45 am.

    I wish Senator Amy K would work on keeping her campaign promises – lowering the deficit, lowering the national debt, and strictly enforcing pay-go.

    Her focus on swimming pools and cell phones is not the “big-picture” stuff she on which she campaigned.

  5. Submitted by Richard Schulze on 12/23/2009 - 10:35 pm.

    Ms. Hoover, I get that you do not like the Senator Klobuchar. Other than your dislike of Klobuchar. Do you have a point? Or better yet a solution?

  6. Submitted by Rebecca Hoover on 12/25/2009 - 07:35 pm.

    Richard Schulze, yes, I do have a solution. Another senator as soon as possible. Amy’s election can come up soon enough for me.

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