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AT&T Sales Reps Gave Wrong Info on Termination Fees in Test

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WASHINGTON (Dow Jones) The Consumers Union said that AT&T Wireless sales representatives provided false information about the company's policy toward early termination fees during a mystery shopping exercise carried out by the public interest group last week.

In several phone calls made by an employee of the Consumers Union, some salesmen at AT&T Wireless said the company had implemented a policy pro rating the fees and provided details of that policy.

One salesman said the company's policy was that after the first year of a standard two-year service contract with AT&T Wireless, the early termination fee is cut in half.

Another said that the fees gradually reduced over the term of the contract.

But in reality, while the company announced last year that it was planning on changing its early termination fees, but has yet to announce any details of what its new policy is.

According to Mark Siegel, an AT&T Wireless spokesman, the company continues to charge $175 to any customer who wants to break his service contract with the company.

Siegel wouldn't say when the company would announce details of changes to this policy, nor when the changes would be implemented by AT&T.

Siegel apologized for the false information provided by the company's salespeople.

The Consumers Union admitted the mystery shopping exercise was a small sample, but said its findings were disconcerting.

"When we see carriers making policy announcements and then misleading consumers that they would get something they in fact, won't, it is disappointing," said Chris Murray, senior counsel at the Consumers Union. "They're actually capturing market share with consumers believing they may get a pro rate when they won't."

The group made 12 calls to AT&T salespeople. Two-thirds of the representatives provided inaccurate information about the company's policy toward early termination fees.

AT&T Wireless is a unit of AT&T.

Consumers Union also called the other three largest cellular companies: Sprint Nextel Corp. (S); T-Mobile, owned by Deutsche Telekom AG (DT); and Verizon Wireless.

Representatives of each of those companies provided the correct information about their early termination fee policy to the mystery shopper.

Verizon Wireless altered its early termination fees policy in November 2006. Its fees reduce $5 for every month of a customers' contract.

Like AT&T, Sprint Nextel has announced it will move toward a pro rated model in 2008, but similarly hasn't released any details of what its new policy would look like.

A spokesman for T-Mobile didn't return phone calls seeking comment for this article.

The issue of early termination fees has garnered the spotlight in Washington in recent months.

Sen. Amy Klobuchar, D-Minn., introduced legislation in October that would require wireless companies to pro rate their early termination fees.

The Senate Commerce Committee held a hearing into the wireless industry in October at which lawmakers criticized executives from wireless companies over "anti-consumer" policies like early termination fees.

AT&T had made public its commitment to begin pro rating its early termination fees the day before that hearing in October.

"AT&T announced the day before our hearing that they were going to pro rate their early termination fees - it turns out they haven't," said Klobuchar, in a statement Monday. "This illustrates the need for federal legislation to protect cellphone users from budget busting fees and to create more consumer friendly policies."

Wireless companies have argued there must be some way to lock in customers as they heavily subsidize the cost of handset devices.

Rep. Edward Markey, D-Mass., the chairman of the House Telecommunications Subcommittee, is currently drafting a version of a wireless bill. A spokeswoman said this would also deal with the early termination fee issue. Markey's bill is expected to be released in the next two weeks.

Federal Communications Commission Chairman Kevin Martin said in September that the agency would look into the fees charged by all the companies the commission regulates. But the commission hasn't announced any subsequent plans to carry out an investigation into the issue.

A spokesman for the FCC declined to comment about the Consumers Union findings, saying the agency hadn't seen the report of the mystery shopping exercise.

The agency has the ability to investigate complaints of this nature, but the spokesman declined to comment whether it would begin an investigation into the allegations.

- By Corey Boles, Dow Jones Newswires; 202-862-6637; corey.boles@dowjones.com

(END) Dow Jones Newswires

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