FCC Chairman Calls for Federal Rule on Cellphone Fees
Published on: 12th June 2008
WASHINGTON -(Dow Jones)- Federal Communications Commission Chairman Kevin Martin on Thursday pressed for federal regulation of early termination fees for cellphone users.
"Don't you think that some kind of federal rules, even if it was a floor, is better off for the consumers who have none," Martin asked a panel of witnesses at a hearing on the issue.
While many states have enacted rules governing the fees consumers must pay when they cancel their cellphone contracts, other states have taken no action, Martin said. "Wouldn't consumers be better off if we took on a role," he asked.
Martin has previously said he believes the FCC should adopt a "national framework" for cellphone termination fees. He also has floated the idea of preempting state rules, although consumer groups have protested that idea.
The FCC hearing convened as several state class-action lawsuits are moving through the courts against various wireless carriers for charging exorbitant early termination fees.
Martin said he is "skeptical" that the lawsuits are the most effective way to help consumers. "I do not believe a patchwork of 50 different sets of regulations with widely varying protections benefits consumers or the industry," he said.
Martin outlined some ideas for early termination fee standards, including prorating the fees over the life of a contract and eliminating the fees when customers renew contracts and do not upgrade their equipment.
Martin also said wireless contracts should last a "reasonable amount of time" and that termination fees should not kick in until after the customer has received and reviewed the first bill.
Wireless carriers argue that the termination fees are used to subsidize the cost of cellphones to customers. People who sign up for one- or two-year contracts receive discounts on phones and their monthly wireless rates.
Consumer advocates say the early termination fees, which can reach several hundred dollars, are much higher than the actual cellphone subsidy. They argue that the actual cellphone subsidy is as low as $14 per device. Carriers say that estimate is based on flawed analysis.
Several wireless carriers, including Verizon Wireless and AT&T, offer customers the option of paying the full cost of cellphones and buying wireless service on a month-to-month basis. Those customers pay more up front, but they have no termination fee.
At the hearing, Verizon public affairs executive vice president Tom Tauke said the company would endorse FCC action on termination fees. "Faced with the prospect of multiple state policies on this issue, Verizon believes that appropriate federal action to establish a national policy is preferable," Tauke said.
Verizon has taken the lead in negotiating with consumer advocates and the FCC about regulations for early termination fees.
State regulators are dubious about the idea of a national standard for early termination fees. They also haven't reached agreement among themselves about whether they would endorse any federal action, said Indiana Regulatory Utility Commissioner Larry Landis, who testified on behalf of the National Association of Regulatory Utility Commissioners (NARUC).
Among state regulators who are open to a national standard, Landis said they want such a standard to be created "in a consultative fashion." The standard would be introduced by the FCC but then enforced by the states," he said.
Other state regulators think laws governing cellphone fees should reside solely with the states, Landis said.
The FCC also voted Thursday to preserve indefinitely registration on the national "Do Not Call" list. Currently, people who sign up are kept on the list for five years.
The FCC also voted late Wednesday to make adjustments to Internet-based Telecommunications Relay Service (TRS). TRS and newer, Internet-based forms of TRS, including Video Relay Service (VRS) and Internet Protocol (IP) Relay, allow persons with hearing and speech disabilities to communicate with hearing users of voice services.
The FCC order adopted a system for assigning traditional ten-digit telephone numbers to Internet-based TRS users.
The commission also approved a proposal seeking comment on possible improvements to Speech-to-Speech telephone relay services.
-By Fawn Johnson, Dow Jones Newswires; 202-862-9263; email@example.com
(END) Dow Jones Newswires