On Call takes on early-termination fees

Editor's note: Instead of answering your questions this week, I'm going to take a different tack and tell you about a recent meeting between CNET and two executives from the Cellular Telecommunications Industry Association (CTIA). In the coming weeks, I'll be alternating between focusing on your questions and discussing hot-button issues for cell phone users.

It should come as no surprise that the cell phone industry has a lot of people in Washington, D.C., looking after it. Granted, lobbyists haven't been too popular lately with the public thanks to Jack Abramoff, but that hasn't stopped industry organizations such as CTIA from representing the interests of carrier and manufacturers. Last week, I spoke with CTIA CEO and President Steve Largent and Executive Vice President Bobby Franklin. We spent much of our meeting discussing early-termination fees (ETFs). I'm not a fan of ETFs--and I'm certain my readers agree--but they'll be around for a long time if the industry gets its way.

I'd bet that cell phone users who favor early-termination fees are like travelers who always choose the middle seat on airplanes: They simply don't exist. It doesn't take a brain surgeon to see why ETFs are the bane of most mobile users. They lock customers into a carrier for two long years and penalize them as much as $200 when they try to switch. But here I go telling you something you already know, so let's look at how the industry views them instead.

The CTIA contends that ETFs benefit consumers because they allow carriers to offer phones and plans at a lower monthly price. "ETFs are a means of holding customers to the 'bargain' they made with their carrier," said a recent CTIA position paper. "They allow carriers to offer their most attractive rate plans to their customers who commit to a specific term." The paper also pointed out that ETFs are "a common practice in many industries."

While I dismiss the "everyone is doing it so why can't we?" argument immediately, I have to admit the first point isn't so cut and dry. Consumers may hate ETFs, but I think many don't realize ETFs (and contracts) are one reason why they're able to get a free phone in the first place. Personally, I'd rather pay more for a phone than be locked into a contract, but I'm not so sure every other cell phone owner would concur. Largent admitted that many consumers don't see cell phone carriers for what they are: for-profit companies competing to make the most money rather than a public utility providing service because they have to. "People don't understand we are not a utility," he said. "We're a highly competitive industry." Yet I think there has to be some give from both sides. Yes, the carriers have the right to make money, but they also need to provide friendlier practices that allow more freedom. And yes, consumers should be able to switch providers more frequently, but they may have to say goodbye to free phones. So can we have our cake and eat it, too? Here's how carriers and consumers can help.

Keep contracts to one year and charge less for an ETF. Or how about prorating ETFs so the longer we stay with the contract, the less the fee becomes? If that means we pay more for our phones, then so be it. And don't make us sign a new contract when we do something as simple as sign up for a new service feature.

Once in a while carriers can cut you a break for moving into an area where they don't have coverage but even that's not a firm guarantee. Carriers reserve the right to end your contract prematurely if they cut service in your area so customers should have the same right. To suggest otherwise is ridiculous and frankly a bit petty.

Last October, some Sprint customers were able to leave their contracts without an ETF after the carrier upped its text-messaging rate. The customers cited a clause in the contract that allowed premature termination due to a "material change in service." In the future carriers should be more flexible about significant service changes and let people out of their contracts when they're affected adversely.

I always get the sense that when you call a carrier with a problem, customer service representatives are reading from a script that doesn't allow for any deviation from the standard company line. Reps should be allowed to think creatively and have the power to decide when customers can leave a contract.

Here's an idea. Sell us unlocked phones with a one-year contract. Yes, this would only apply to GSM users, but at least they could take their phone with them when they want to move on.

Consumers should understand that ETFs aren't going away and they should be honest when trying to get out of them. On the other hand, the industry should accept that the public isn't happy with exorbitant ETFs. So instead of trying to educate the government on how great they are, perhaps they should talk to consumers instead. Also, while I agree with the CTIA's position that having 50 states trying to regulate ETFs won't help the situation, some federally imposed limitations won't be the death of the industry.