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Summary:

The FCC, as part of its effort to boost competition by lowering the cost of switching providers, today released a survey showing that early termination fees influence consumer behavior and how unexpectedly higher phone bills hurt consumers, especially younger phone users.

The Federal Communications Commission, as part of its effort to boost competition by lowering the cost of switching providers, today released a survey showing that early termination fees (ETFs) keep consumers wedded to carriers even when they want a divorce. It also released data to support its effort to get carriers to notify consumers before their mobile phone bills get too expensive, known as bill shock regulations.

The survey notes that 83 percent of adults in this U.S. have a cell phone, and 80 percent have a personal cell phone that an employer doesn’t subsidize. And 58 percent of users are happy with their coverage. That being said, 30 million Americans (roughly 17 percent) were found to have received bills that were higher than they anticipated — of those, 21 percent had children under the age of 18.

It also found that 43 percent of customers with contracts said ETFs were a major reason they would stay with their current service (which may be why AT&T is following Verizon’s boost in ETFs with one of its own come June). The termination fees aren’t used as much in fixed-line broadband, with 21 percent of users saying that their contracts include an early termination fee. Of those users, however, fully 64 percent don’t know what the fee is — a higher level of confusion than for cell phone service.

On a call to discuss the survey, the FCC officials shied away from saying whether or not the agency would step in a regulate higher ETFs (so far it has questioned them, but hasn’t stepped in to change them). So for those who don’t want to be locked into a carrier, buying an unsubsidized handset (GigaOM Pro sub req’d) and paying (in some cases) higher monthly bills may be the way to go.

  1. Couple of thoughts on this:
    1) Putting iPhones on sale at Costco for $97 while AT&T keeps increasing their contract cancellation penalty (even for existing customers – and it’s now at $375) seems to hit the lower threshold of abusive lending practices.
    2) How many people know their rights to void a contract when a carrier (for example) has changed terms mid-stream? I would have escaped my T-Mobile contract had I realized within 30 days of the change that they had set a 500-minute limit for free forwarded calls.

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  2. Sooner or later people will figure that they don’t have to stick with a carrier that is ripping them off because of ETF’s.
    When they get to the end of the contract, they will switch to pre paid, which is the smart way to go. There are some great deals on prepaid out there. I use net 10, which saves me about $ 40 a month compared to my contract which I quit about 6 months ago.

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  3. I divorced my carrier in spite of the termination fee to go prepaid with Net10 as that saves me about $750.00 per year. The hidden costs in a contract…roaming fees, long distance charges, overages etc …are killers and cost a silent fortune! Now I pay 10c per minute calling and 5c per text and it’s a pleasure. It pays to pay to get out of a contract so don’t be afraid!

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