Google and the four major U.S. carriers (AT&T, Verizon, Sprint, T-Mobile) told the FCC that early-termination fees are necessary to recoup costs of handset subsidies, and that customers are well aware of these fees.
The news comes in response to an FCC inquiry in January that was triggered by Verizon raising its ETF for “advanced devices” to $350. AT&T said it clearly identifies that its subsidized prices come in exchange for a two-year commitment, and there are penalties for breaking that contract. It also said the prepaid market is vibrant, and it offers a highly competitive landscape for users who don’t want an ETF hanging over them.
Verizon said it plans to notify customers about the ETFs on the labels in store, and it recently took 10 features phones off its “advanced devices” list. T-Mobile said it offers a variety of options including contracts, pre-paid, and its Even More Plus plans that have no ETFs. Sprint – which is bleeding customers – said it is in its best interest to make sure the customer knows about cancellation fees before, during, and after a handset purchase.
“The last thing Sprint wants is a surprised customer that is unhappy,” Sprint’s Vonya McCann wrote. “An unsatisfied customer is much more likely to leave Sprint for another carrier.”
All of the carriers do prorate the ETF depending on how long a customer has been on contract, and each mobile operator has a trial period where the customer can return a device without a cancellation fee.
Google said it charges an “equipment recovery fee” for some Nexus One owners because it receives a commission from each new or upgraded T-Mobile customer. Google passes on the commission to the customer in the form of a subsidy, but if the user cancels within 120 days, T-Mobile asks for the commission back. To be fair, Google did just drop its recovery fee from $350 to $150, but Nexus One owners are still subject to two cancellation fees if they cancel within four months.
The response from the carriers is typical, and it is on par with what these companies have been saying for years. I understand this point too because most Americans don’t know or care about the true cost of their phonse and the mobile operators do risk a lot of cash on customers who don’t fulfill their contracts. It’s very fishy when the ETF exceeds the cost of the subsidy though, and I don’t think these cancellation fees should cover a company’s marketing or store costs.
Google can eat me, though, because the search giant continues to say it is trying to create a new, streamlined way for customers to buy phones on the Internet. But because Americans don’t have the ability to easily swap their handsets between networks, Google just becomes a pricey middleman for many U.S. customers.