tk102 Posted July 31, 2008 Share Posted July 31, 2008 For those of you who hate the idea of being stuck with a two year service contract, this news may be of some interest to you. Source California judge rules early cell phone termination fees illegal In one of the most significant legal rulings in the tech industry this year, a Superior Court judge in California has ruled that the practice of charging consumers a fee for ending their cell phone contract early is illegal and violates state law. The preliminary, tentative judgment orders Sprint Nextel to pay customers $18.2 million in reimbursements and, more importantly, orders Sprint to stop trying to collect another $54.7 million from California customers (some 2 million customers total) who have canceled their contracts but refused or failed to pay the termination fee. While an appeal is inevitable, the ruling could have massive fallout throughout the industry. Without the threat of levying early termination fees, the cellular carriers lose the power that's enabled them to lock customers into contracts for multiple years at a time. And while those contracts can be heinously long, they also let the carriers offer cell phone hardware at reduced (subsidized) prices. AT&T's two-year contract is the only reason the iPhone 3G costs $199. If subsidies vanish, what happens to hardware lock-in? Could an era of expensive, but unlocked, hardware be just around the corner? It's highly probable. Of course, the carriers aren't going to take this lying down. Early termination fees are seen as critical to business, so carriers are expected to look for ways to reclassify the fees (such as by calling them "rates," part of the arcane set of laws that covers the telecommunications industry). The industry is also pushing for the federal government to step in and claim oversight over the early termination fee issue, which would invalidate any state ruling. The FCC is generally more tolerant of such fees, though Chairman Kevin Martin has proposed a plan whereby the fees are decreased the closer you are to the end of your contract. The FCC may also buy the argument that, since carriers are nationally based (and consumers can use their phones anywhere in the country), that a single policy should apply across the nation, rather than creating a patchwork of legislation that could lead to confusion and chaos caused by having 50 different policies. Is the early termination fee dead? Not yet, but it's looking a little haggard. Since subsidized (ie. locked) phones are taken almost for granted by most, I think the idea of an early termination fee proportional to the amount of time left on the contract is a reasonable solution. If they the fees were simply ruled illegal, there would be no subsidized phones. Link to comment Share on other sites More sharing options...
Char Ell Posted August 1, 2008 Share Posted August 1, 2008 I concur. I'm fine with a pro-rated early termination fee. Having to pay something like USD$150 or whatever the fee happens to be for your particular contract 3 months into the contract or with only 3 months left in the contract doesn't seem very fair to me. I can see having to pay the full termination fee for the first year of the contract but after that I think the fee should drop every month until of course there is no fee left at the end of the contract period. Link to comment Share on other sites More sharing options...
Jae Onasi Posted August 9, 2008 Share Posted August 9, 2008 Do we really need subsidized phones, though? We end up paying through the contract anyway. We could just buy the phones, like we do for regular phone service now, and then go on a month-to-month and not have to deal with the long plans at all. We'd have to pay more up front, but that would solve the problem of these long contracts and ridiculous fees for breaking the contract. Link to comment Share on other sites More sharing options...
Astrotoy7 Posted August 9, 2008 Share Posted August 9, 2008 an extra fee on top of whatever you may owe on the phone sucks. Im with Jae, buy your phone, go on a month by month pre or post paid plan, and cancel whenever you like with no hassles. Still, people that want the newest shiniest phones the instant they come out get suckered onto these $0 up front contracts... its a nice little scam they have going. I doubt this ruling is going to stay fully inact after an appeal though mtfbwya Link to comment Share on other sites More sharing options...
tk102 Posted August 9, 2008 Author Share Posted August 9, 2008 Heh heh, I just got a call from my cell phone company letting me know "I was eligible for a free upgrade for absolutely no additonal cost". I told him I was looking forward to ending all contractual agreements with the phone company and let him know about this court case that was pending. I then suggested that the company would be wise to adopt a business model that offered a pay-as-you-go billing for customers who dislike contracts and locked phones. He told me to have a nice day. Link to comment Share on other sites More sharing options...
Astrotoy7 Posted August 9, 2008 Share Posted August 9, 2008 @tk - the model will always exist because suckers alot of people either dont know any better or dont care. There are many places to get unlocked phones. If youve bought them from countries that sell them unlocked its not illegal to possess one Just get a uncontracted sim, easy. Its what Ive done with my pda phone for years... I loathe contracts sooooooo much! mtfbwya Link to comment Share on other sites More sharing options...
Darth Xander Posted August 10, 2008 Share Posted August 10, 2008 Heh heh, I just got a call from my cell phone company letting me know "I was eligible for a free upgrade for absolutely no additonal cost". I told him I was looking forward to ending all contractual agreements with the phone company and let him know about this court case that was pending. I then suggested that the company would be wise to adopt a business model that offered a pay-as-you-go billing for customers who dislike contracts and locked phones. He told me to have a nice day. tk you evil man I'm not at all bothered by this as I don't have a phone ~Xander Link to comment Share on other sites More sharing options...
Marius Fett Posted August 11, 2008 Share Posted August 11, 2008 Heh heh, I just got a call from my cell phone company letting me know "I was eligible for a free upgrade for absolutely no additonal cost". I told him I was looking forward to ending all contractual agreements with the phone company and let him know about this court case that was pending. I then suggested that the company would be wise to adopt a business model that offered a pay-as-you-go billing for customers who dislike contracts and locked phones. He told me to have a nice day. Yeah, ASSERT YOURSELF! Link to comment Share on other sites More sharing options...
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