Newsroom: Phone & Cell Phones

FOR IMMEDIATE RELEASE

Washington, D.C. – Early termination fees are penalties designed to stop consumers from switching companies for better service and better price. These penalties don't save consumers money as the carriers claim, and they rob consumers of the benefits that an open and competitive market would otherwise bring, according to Consumers Union's testimony before the Federal Communications Commission.

"We are concerned that the wireless industry has become a cozy cartel of a few dominant providers characterized by consumer lock-in and limited device offerings," said Chris Murray, Senior Counsel for Consumers Union, nonprofit publisher of Consumer Reports magazine. "Instead of engaging robust competition, these carriers are charging consumers unconscionable Early Termination Fees and thwarting real choices in the marketplace. Action from policymakers is sorely needed," added Murray.

The average phone subsidy provided to the consumer is $14.33, yet wireless carriers charge as much as $175 for "early termination fees," (ETF) to recoup money spent on marketing, customer acquisition and other costs that are passed onto the consumer.

According to cell phone companies' reports to the International Trade Commission, the average value of handsets imported into the U.S. was $115 (2006). The wireless industry's trade association, CTIA, says that the average price new subscribers pay for handsets is $65.67 (2006). Carriers often charge an "activation fee" of $35 (which they book as handset revenues), leaving $14.33 in average upfront savings to consumers which is recouped through monthly service fees.

Click here to see the full testimony.

Contact:  Jennifer Fuson, (202) 462-6262