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Abstract
"Recent press reports indicate that on November 15, 2009, Verizon Wireless doubled the 'early termination fee' (ETF) it charges new customers purchasing an 'advanced device' if they disconnect service prior to completing the contract term. Another recent press report has raised questions about whether consumers are being charged for minimal, inadvertent use of Verizon's Mobile Web service, and what notice is being provided to those consumers," the FCC letter said. "In light of the Commission's ongoing interest in the issues associated with ETFs and its pending proceeding regarding disclosure of billing information to consumers, we seek a more complete understanding of these practices."
The agency also wants information on "the rationale for the increase in the ETF for an 'advanced device.' ... In particular, please explain: (1) the cost differentials that Verizon pays for advanced devices over what it charges its customers; (2) the ETF levels, proration schedules, and other terms and conditions of ETFs; (3) how the levels of ETFs, together with the terms and conditions, relate to these cost differentials; and (4) how this relationship varies among devices and/or among 'advanced devices.'"
The letter added, "We are interested in learning whether, and to what extent, the increase in the ETF is the result of increases in the wholesale price of 'advanced devices' charged by equipment manufacturers, and whether any such cost increases are uniform across all 'advanced devices.' Does Verizon Wireless contemplate a similar increase in ETFs in the near future for any other services and devices?" It also asked if customers can subscribe to a month-to-month service with an advanced device and how the carrier decides which devices are advanced.
Under the three-page bill, the FCC would have to adopt rules requiring that wireless carriers "(1) prorate any early termination fee over the term of a subscriber's contract; and (2) link the fee to the cost to the provider of the handset device provided to the subscriber, reduced by the price paid by the subscriber for the handset device at the start of a subscriber's contract." As a result, the FCCs rules would ban any ETF that exceeds the discount on a device provided to a consumer. The agency's rules also "shall require a ratable reduction of the early termination fee over the term of the contract." Customers who cancel after one year would only pay half the ETF and those who cancel just before the contract is up wouldn't pay anything, the senators said. Although wireless carriers prorate ETFs, they still charge a reduced fee if a subscriber cancels shortly before a contract is up. And carriers don't set variable ETFs based on the discount to consumers.