The nation's Tier 1 wireless carriers and Google strongly defended their early termination fee policies, arguing they are transparent about the terms of the fees and that ETFs protect device subsidies.
The operators--AT&T Mobility, Sprint Nextel, T-Mobile USA and Verizon Wireless--and Google responded to questions the FCC posed in late January. The probe, part of the commission's larger truth-in-billing inquiry, asked the companies to explain how ETFs are assessed and the rationale behind them. Wireless carriers have defended ETFs as a mechanism that allows them to provide the newest handsets to customers at subsidized prices while ensuring they can recoup the expense of those subsidies if customers break their contracts early.
In their responses, the carriers noted that customers can opt for prepaid or month-to-month plans and pay full retail price for their phones if they want to avoid an ETF. "Customers clearly understand that they have choices," Robert Quinn, AT&T's senior vice president for federal regulatory affairs, wrote in his response. "While the vast majority of AT&T's subscribers choose term commitments and discounted or free handsets, AT&T has millions of month-to-month and prepaid subscribers."
Sprint argued that heated competition among wireless providers creates an incentive for transparent ETF policies. "The last thing Sprint wants is a surprised customer that is unhappy," wrote Vonya McCann, Sprint's senior vice president of government affairs. "An unsatisfied customer is much more likely to leave Sprint for another carrier."
Interestingly, Google's response essentially outlined part of the sales strategy behind the company's Nexus One smartphone, which Google sells through its online store. Google charges a $150 ETF (which it recently lowered from $250) on the device, a fee that is levied in addition to T-Mobile's $200 ETF for service for the device. Google said T-Mobile pays Google a commission for each customer it steers toward the Nexus One, which Google then passes along to customers in the form of a discount on the handset's price. When a customer breaks their contract within 120 days, Google said, T-Mobile seeks full repayment of the commission, which Google must get directly from customers.
The FCC has not decided whether it will take specific action on ETFs.
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