early cell phone termination fees illegal

iamdasht19 · #1 07-31-2008, 08:47 PM

early cell phone termination fees illegal
California judge rules early cell phone termination fees illegal

In one of the most significant legal rulings in the tech industry this year, a Superior Court judge in California has ruled that the practice of charging consumers a fee for ending their cell phone contract early is illegal and violates state law.

The preliminary, tentative judgment orders Sprint Nextel to pay customers $18.2 million in reimbursements and, more importantly, orders Sprint to stop trying to collect another $54.7 million from California customers (some 2 million customers total) who have canceled their contracts but refused or failed to pay the termination fee.

While an appeal is inevitable, the ruling could have massive fallout throughout the industry. Without the threat of levying early termination fees, the cellular carriers lose the power that's enabled them to lock customers into contracts for multiple years at a time. And while those contracts can be heinously long, they also let the carriers offer cell phone hardware at reduced (subsidized) prices. AT&T's two-year contract is the only reason the iPhone 3G costs $199. If subsidies vanish, what happens to hardware lock-in? Could an era of expensive, but unlocked, hardware be just around the corner? It's highly probable.

Of course, the carriers aren't going to take this lying down. Early termination fees are seen as critical to business, so carriers are expected to look for ways to reclassify the fees (such as by calling them "rates," part of the arcane set of laws that covers the telecommunications industry). The industry is also pushing for the federal government to step in and claim oversight over the early termination fee issue, which would invalidate any state ruling. The FCC is generally more tolerant of such fees, though Chairman Kevin Martin has proposed a plan whereby the fees are decreased the closer you are to the end of your contract.

The FCC may also buy the argument that, since carriers are nationally based (and consumers can use their phones anywhere in the country), that a single policy should apply across the nation, rather than creating a patchwork of legislation that could lead to confusion and chaos caused by having 50 different policies.

Is the early termination fee dead? Not yet, but it's looking a little haggard.

http://tech.yahoo.com/blogs/null/99655
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Aftrshck · #2 07-31-2008, 08:50 PM

awesome!!!!!

iamdasht19 · #3 07-31-2008, 08:54 PM

“ Originally Posted by Aftrshck ”

awesome!!!!!

too bad that right now it is only for cali.

dianeofarcadia · #4 07-31-2008, 11:36 PM

“ Originally Posted by D/\SH ”

too bad that right now it is only for cali.

Maybe true, but at least it is grounds for an argument elsewhere.
Thanks for sharing this, as two of my boys are moving out this weekend they want to cancel due to no service where they are. I might just have to use this one.

Psycho · #5 07-31-2008, 11:47 PM

this is bad... Deposits are going to go through the roof as well... and it would be stupid to go to a local corporate/2nd/3rd party cellular store and pay 600$ for a phone that you could go to ebay and get for 300$... This will have a hugh impact on these stores...

lordhelmet · #6 07-31-2008, 11:48 PM

Personally, I always thought that customer service would be the best way to keep most of your customers rather than contracts. Unfortunately, most carriers have a tough time providing high quality CS, and so the contracts which can be governed by a system rather than people. Either way, I thought the "Simply Everything" plan by Sprint is the closest thing to real CS they have done in a while, and now I'm feeling more loyal these days because of it (they also didn't require me to extend my contract to change plans as in the past). So maybe this legislation if it sticks will pave the way for better CS rather than a system to keep contracts in line.

Aftrshck · #7 08-01-2008, 09:27 PM

i would have to agree.....this ruling if it clicks.....will be the window to good quality customer service again....that is needed!

Psycho · #8 08-01-2008, 11:28 PM

me thinks what will eventually happen in this case will be, all cell phones will be purchased outright, and will be treated similar to what internet bill are. you may have to pay a deposit, but you will not have to worry about a contract, or early termination fee. You can switch services at any time and keep your cellphone number and cellphone (if you stay with a provider that uses your cell phone technology ie. gsm or cdma) and eventually this could turn out to be a good thing. Customer service will increase, mainly due to a "I will go with a different carrier" threats will be taken more seriously! For a little while the cellphone industry may take a hugh hit, but it will work itself out!

BigAJ · #9 08-02-2008, 07:43 AM

Yeah its good and bad the good is that no more contract the bad is the prices on the phones are going to go up

Aftrshck · #10 08-02-2008, 09:03 AM

i dont think the prices will go up...people wont be able to afford them if they do.....and as far as deposits....why would they need a deposit....no contract...its ur equipment....it wont be any different then insurance on your car.....or your internet service....etc etc etc...

mikey227 · #11 08-04-2008, 09:36 PM

I honestly don't know what the big complaint about early termination fees are. When you buy a cell phone, you do not have to sign that contract to sign up for service when you buy the phone out right or already have one. You aren't forced to sign that contract. People know what they are getting into when they sign a contract. Buy signing the contract, the cell phone company takes a loss on the phone to make it free. It takes about two years of your service to pay for the phone itself. That is why with one year agreements, you pay more for the phone. I do think that prorating the contract is the way to go to be comletely fair. Like others said in this post, the prices of phone you go up to full price which the average price for a regular cell phone is about $300.

kudvu002 · #12 08-04-2008, 09:39 PM

“ Originally Posted by mikey227 ”

I honestly don't know what the big complaint about early termination fees are. When you buy a cell phone, you do not have to sign that contract to sign up for service when you buy the phone out right or already have one. You aren't forced to sign that contract. People know what they are getting into when they sign a contract. Buy signing the contract, the cell phone company takes a loss on the phone to make it free. It takes about two years of your service to pay for the phone itself. That is why with one year agreements, you pay more for the phone. I do think that prorating the contract is the way to go to be comletely fair. Like others said in this post, the prices of phone you go up to full price which the average price for a regular cell phone is about $300.

i think that the downfall is upgrades! with alltel you have to wait 1 yr and 1/2 to upgrade unless you have a 6800 and they drop the raphel, you wait couple months, then run it over, but thats a diff story. i just wish that as technology advanced so could we without having to wait to upgrade when that phone is extinct!

point5pnoi · #13 08-05-2008, 01:05 PM

“ Originally Posted by kudvu002 ”

i think that the downfall is upgrades! with alltel you have to wait 1 yr and 1/2 to upgrade unless you have a 6800 and they drop the raphel, you wait couple months, then run it over, but thats a diff story. i just wish that as technology advanced so could we without having to wait to upgrade when that phone is extinct!

yea 1-2 years is a long time to wait for an upgrade... especially with new phones coming out like they are.

AL_CAPONE_X3 · #14 08-05-2008, 02:15 PM

I live in california =]]

but ya sprint is appealing anyways so dont get your hopes all good.

this isnt official yet until sprint appeals and loses

Smokie3410 · #15 08-05-2008, 02:27 PM

“ Originally Posted by Psycho ”