The FCC’s plan for early termination fees (ETF)

Taxes, death, and ETFs are the only sure things in life. But, that may all change with the FCC Chairman Kevin Martin’s new proposal for ETF (early termination fee) regulation.

As we’ve said before, ETFs are something of a necessary evil. Wireless carriers use ETFs and long-term contracts to ensure that they’ll recoup the cost of subsidizing a high-priced handset to make mobile phone purchase prices reasonable to the average consumer. An early termination fee essentially guarantees that a carrier won’t lose any handset subsidization-money if a subscriber ends their wireless contract early. And, lower purchase prices also drive revenue for both hardware vendors. But, when is enough enough?

The FCC’s Martin’s new plan to regulate the US’s ETF policies is the first step toward putting termination fee control in the hands of the Feds. Responding to increased consumer demand for ETF policy overhauls, Martin has proposed that ETFs should reflect the cost of the handset – customers that purchased more expensive handsets should pay higher ETFs than those that purchased lower-cost phones. And, customers should be offered a first-month trial before any ETF goes in to effect.

Martin also wants ETFs to be pro-rated – which reduces the ETF based on remaining contract length. And, seeing as how most carriers are already offering or plan to offer pro-rated ETF policies (and Sprint (NYSE: S) has even waived it for government employees), Martin’s pro-rating wishes are already coming true.

State officials don’t want their consumer protection authority to be completely preempted by the Federal government, so we expect a good amount of back and forth between state-level officials and the FCC before this whole ETF deal gets ironed out. Let’s hope the FCC’s ETF regulation doesn’t end up hurting the consumer…

[Via: AP]