There are increasing rumors the Federal Communications Commission is about to quietly ram through new rules written by wireless phone industry covering those ubiquitous early termination penalties they charge.
Under an all-but-laughable banner of protecting consumers, Verizon Wireless recently presented FCC Chairman Kevin Martin with a plan to take away the current regulatory and legal authorities of states over early termination fees (ETFs), effectively stifling current and future consumer lawsuits at the state level on ETFs.
Several such cases are now moving through state courts. In fact, Verizon recently agreed to pay $21 million to settle an ETF case brought against it by consumers in a state court in California. If other cases are successful, wireless companies could face billions of dollars in damages.
In exchange for this sweeping preemption of state authority by the FCC over ETFs and the accompanying sweeping away of billions of dollars in potential damages in consumer lawsuits, the wireless companies are giving up literally next to nothing. The biggest concession by the wireless industry would be a watered-down form of pro-rating of ETFs and the adoption of a short trial period during which consumers could cancel their long-term contracts without incurring penalties.
None of the “concessions” offer much of anything new. Nearly all of the big wireless companies are already pro-rating their ETFs or plan to begin doing so soon, primarily due to pressure from consumers. Same goes for the trial period.
Ever since Verizon brought forward this grossly lopsided plan a few weeks ago, we have been stunned that the FCC – and agency charged with protecting consumers and guarding the public interest – has even taken it seriously.
More than 14,000 consumers have recently sent letters to the FCC asking the agency to reject the industry-authored, anti-consumer plan put forward by Verizon and its fellow wireless carriers. The letters urged the agency to give consumers a more powerful marketplace and limit exorbitant early termination fees – but not at the expense of their legal right to sue wireless companies for potentially illegal behavior.
Now the rumors are flying that FCC Chairman Martin wants the Verizon plan to be adopted as soon as possible and has quietly drafted the necessary rules to do so.
Because of the FCC’s often opaque rulemaking process, Martin can ask his four fellow commissioners to consider and approve rules implementing the Verizon plan under a process known as “on circulation.” Unfortunately for wireless consumers and the public at large, that means it’s possible that any formal rules implementing the Verizon plan could effectively become the law of the land without any further public notice or meaningful input from consumers.
We have written at length about the flimsy and nonsensical arguments wireless companies have trotted out in defense of ETFs.
In a nutshell, wireless providers argue that these fees, which range from $150 to 250 per phone line, are imposed on customers who break a one- or two-year contract in order to recoup the company’s losses from subsidized or free phones. However, research has shown that the average cost incurred by wireless companies in providing a free phone is $14.33.
The practice of early termination fees have in effect acted as barrier to a fair marketplace in which consumers can choose the best wireless provider at any time.
Given the facts, we find it amazing the FCC is even thinking about implementing the anti-consumer, anti-competitive plan put forward by Verizon on behalf of the wireless industry.
The FCC will be acting against the consumers it is charged with protecting if it continues with any further such back room, below the radar shenanigans. The commissioners need to quickly and forcefully reject this legal bailout written by the wireless industry, for the wireless industry.
