[Sara]

California judge rules early cell phone termination fees illegal
Thu Jul 31, 2008 12:48PM EDT
See Comments (778)

Buzz up!on Yahoo!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.

LINK: Sprint early termination fees are illegal, judge rules

[jimmy330xi]

Before these the only people that didn't have to pay termination fees was military personnel with deployment orders.

[ska///235i]

is this only for the state of CA?

[AJerman]

I'm very interested in this since Sprint is about to try to charge me an ETF. Looks like I need to read up and educate myself. Unfortunately I'm not in CA.

Really, ETFs are ridiculous. Why do you need to force someone into a contract and charge them if you leave? The only reason would be if you can't provide decent service and need insurance that you won't lose your customers after they realize how bad your service is. I had a situation where I get bad reception in my apartment. Sprint's response? "Sorry, deal with it or pay an ETF to leave." To me this is terrible business. If I want to leave as a happy customer who just can't get service, why do you need to screw me out of more money, just so I can have a working phone?

Oh well, hopefully this is a good start.

[jaiman]

Originally Posted by AJerman

I'm very interested in this since Sprint is about to try to charge me an ETF. Looks like I need to read up and educate myself. Unfortunately I'm not in CA.

Really, ETFs are ridiculous. Why do you need to force someone into a contract and charge them if you leave? The only reason would be if you can't provide decent service and need insurance that you won't lose your customers after they realize how bad your service is. I had a situation where I get bad reception in my apartment. Sprint's response? "Sorry, deal with it or pay an ETF to leave." To me this is terrible business. If I want to leave as a happy customer who just can't get service, why do you need to screw me out of more money, just so I can have a working phone?

Oh well, hopefully this is a good start.

the short answer is because the phone you paid $200 for cost the phone company $400 and they want to at least recoup their money. Personally I think the break fee should be limited to a pro-rated portion of your phone subsidy and wireless companies should have to give you 1 week to test their service for gaps in coverage.

[Sara]

Originally Posted by jaiman

companies should have to give you 1 week to test their service for gaps in coverage.

Agreed..Tmobile works great in Salt Lake but SHITTY in Picayune, Mississippi..if I had known that, I'd have stuck with Sprint.

[TurboFan]

Originally Posted by jaiman

the short answer is because the phone you paid $200 for cost the phone company $400 and they want to at least recoup their money. Personally I think the break fee should be limited to a pro-rated portion of your phone subsidy and wireless companies should have to give you 1 week to test their service for gaps in coverage.

Agreed, and possibly a reasonable profit on the remaining amount. After all, you did sign a contract. Doesn't that mean anything to anyone anymore??

[TurboFan]

Originally Posted by Sara504

Agreed..Tmobile works great in Salt Lake but SHITTY in Picayune, Mississippi..if I had known that, I'd have stuck with Sprint.

Hate to say it, but nothing short of a tin can and string is going to work where you live!

[ArmyBimmerDude]

Originally Posted by TurboFan

Agreed, and possibly a reasonable profit on the remaining amount. After all, you did sign a contract. Doesn't that mean anything to anyone anymore??

+1000 Its a contract that you signed. If it's for 24 months, then thats on you for signing it. Don't cry because they charge you to break a legal document. If this holds up, cellular providers are going to get hit hard.

[NaTuReB0Y]

California people always set the standard for the rest of the country.......

We need to be an independent nation.............

if that's the case.........cell phones will be selling for $500-1000......

[ArmyBimmerDude]

Originally Posted by NaTuReB0Y

California people always set the standard for the rest of the country.......

We need to be an independent nation.............

if that's the case.........cell phones will be selling for $500-1000......

Oh yes. Way to go with that gay marriage thing guys!

Agreed. Cell phone prices will go through the roof.

[NaTuReB0Y]

Originally Posted by ArmyBimmerDude

Oh yes. Way to go with that gay marriage thing guys!

Agreed. Cell phone prices will go through the roof.

i knew that was coming........

i was going to write:

*except -- gay marriage

[Sara]

Originally Posted by TurboFan

Hate to say it, but nothing short of a tin can and string is going to work where you live!

I'l be sitting in my bed...have service..lose service..have service ..lose service and I wont even move!

[Maestro]

Gee I have no termination fees or contracts, but then again I did not go for a free phone either. So I am free to go to any company any time, however, I have been with the same company for 12 yrs and have always been able to get a better deal by telling them what I want. Taking the free phone you loose bargaining power.


Face it this was the way for the industry to grow cell phone use, no one was going to pay the Hundreds of $ it cost to make these phones, but they would take a free phone in exchange for have to stay with the service for 1 or 2 yrs.

I think the industry should stop giving phones away, make people pay what things are worth instead of hiding the costs all over the place.

However, I have seen them require a contract to get additional services like Texting or a data plan, now I can see this being illegal, but if they are giving you something in exchange for the contract then no foul no harm.

There is also the issue they are giving you the phone and your not paying sales tax on that transaction, which could also make the contract illegal...

[AJerman]

Originally Posted by jaiman

the short answer is because the phone you paid $200 for cost the phone company $400 and they want to at least recoup their money. Personally I think the break fee should be limited to a pro-rated portion of your phone subsidy and wireless companies should have to give you 1 week to test their service for gaps in coverage.

But my point is, if their service isn't terrible, then you'd have no reason to leave. Sprint has terrible service. People get in, use the phone for a while, then maybe a couple of months in, have to deal with their absolutely terrible customer service, get pissed off, and want to leave.

Furthermore, if you read deeper into the exact ruling of this case, they found that the price lost when they subsidize the price, is on average no where even close to the typical ETFs. Just because they tell you they have a $400 phone, and they sell it to you for $200, doesn't mean they paid anywhere near $400 for it.

And in my personal situation, I didn't even want to cancel my contract. I just wanted to take my number to another carrier and keep my contract open, to which they absolutely refused. Basically, I could see Sprint sitting there, looking like an immature little kid with it's fingers in it's ears, yelling over and over "YOU HAVE TO PAY THE ETF IF YOU WANT YOUR NUMBER". They would have made more money in the long run to leave the damn contract going, but they are so stubborn in their ways that they refuse. It's things like this that make me want the ETFs to be illegal. The majority of the times, it's just used to bully you into staying with the company.

[Spool]

Spring sucks, no signal anywhere...


I wish Verizon would do this, they been over charging me for years

[!Xoible]

i ruv carifonia

[epbrown]

I agree about simply not signing contracts. The cell companies would have stopped the contracts/ETF practice years ago if all the people that hated them would stop signing contracts/paying fees, and used the other alternatives. The American public always wants its own way, and it's someone else's fault if what they wanted doesn't work out. Do they no longer tell the story of the ant and the grasshopper, the tortoise and the hare? Too many people in the US think short-term and whine long-term.

[ArmyBimmerDude]

Originally Posted by Spool

Spring sucks, no signal anywhere...


I wish Verizon would do this, they been over charging me for years

Tell me about it. The last two months with nearly identical usage. One month I get charged $65.00, then next $95.00. Only difference was I downloaded ONE ringtone. Verizon is shady.

[Spool]

Originally Posted by ArmyBimmerDude

Tell me about it. The last two months with nearly identical usage. One month I get charged $65.00, then next $95.00. Only difference was I downloaded ONE ringtone. Verizon is shady.

I called them threatened to cancel my phone they pretty much told me to eat shit...they have so much clientel they don't give a shit anymore...they dont respond to threats..

[ArmyBimmerDude]

Originally Posted by Spool

I called them threatened to cancel my phone they pretty much told me to eat shit...they have so much clientel they don't give a shit anymore...they dont respond to threats..

There's a website I saw a few months ago detailing how you can get out of the contract without paying the fee. I'll try to find it. By the way, how much DOES it cost to terminate?

[Spool]

175 per line..and i have a family plan with 3 phones total for my brother and sister...