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Yahoo: California judge rules early cell phone termination fees illegal


Toe Jam

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Now if only they can make this stick everywhere..

http://tech.yahoo.com/blogs/null/99655

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.

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This is ****ing terrific!!!!!111!!111000!1100!!! This is what makes our country kick ass! The phone companies have been pulling bull**** like this for 90 years (with the advent of the "hush-a-phone" where AT&T said you couldn't legally use that product.)

If it wasn't for judges like this guy making outstanding judgements we'd never had the internet cuz the phone companies would be telling us we can't use interwebz on their phone lines. **** you PHONE COMPANIES lick my clean shaven nutz.

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I may be missing something, but if you cancel your contract early, you pay more. Seems fair to me.

I hope the argument is that the cancellation fee should decrease over time. Otherwise it's ludicrous.

I don't have a problem making a two year commitment on a cell plan, and because I do I want a much better deal than someone who doesn't make that length of commitment.

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I found this part to be the most interesting:

"A consistent, uniform, national framework of standards is the best-case scenario for consumers and for the industry to serve consumers," he said. "If you allow 50 states to regulate and legislate in 50 different ways, you can create a very confusing and obviously inefficient service."

At a public hearing last month, FCC Chairman Kevin Martin sketched out a plan in which cancellation fees would be reduced over the life of the cell phone contract. Three companies - T-Mobile, AT&T and Verizon Wireless - already do that, and Sprint said it would begin prorating its fees next year.

The commission also is trying to resolve whether states have any role in regulating early termination fees, which are among the biggest source of complaints among wireless consumers, said spokesman Robert Kenny.

I won't comment further on the judge's opinion until I read it.

However, if ETFs do go the way of the dodo, I think you can certainly kiss cheap new cell phones every two years goodbye. No way I can see wireless companies subsidizing equipment without a contract where they are not guaranteed revenue to offset the subsidy. Why would they?

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only if they buy the expensive cell phones. news flash, you don't need an iphone to make phone calls.

Any contract absorbs the cost of the equipment up to a point. But if you are making no commitment you would pay for a handset in the same way as a pay-as-you go phone.

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However, if ETFs do go the way of the dodo, I think you can certainly kiss cheap new cell phones every two years goodbye. No way I can see wireless companies subsidizing equipment without a contract where they are not guaranteed revenue to offset the subsidy. Why would they?

And yet, you seem to buy what I suspect is a complete myth, that cell phone prices are incredibly subsidized.

My first cell phone cost me 50 bucks. With no contract required. I stayed with my company because I was satisfied with their coverage (it wasn't great, back then, but everybody else's was worse), and because I wanted to keep my number.

Frankly, I don't believe, given the way prices generally move in the consumer electronics industry, that a device that cost 50 bucks 5-7 years ago, now costs 500. (But we'll sell it to you for 50 if you sign this contract.)

I think it still costs 50 bucks. And the "price" they list on the phone is a myth, just like the auto dealers who claim that putting a light bulb in your trunk is a $300 option. (But you can buy the "convenience light accessory package", which comes with over $2,500 worth of options for $250.)

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Predicto is trying to hide something from the NSA. Has a disposable phone which he ditches frequently. :laugh:

Or he's proving that the actual, fair market cost to manufacture the electronics in a minimal cell phone is less than 5 bucks.

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My first cell phone cost me 50 bucks. With no contract required.

Today you can get 'pay-as-you-go' phones for $10 - no contract required.

And you can buy much more expensive handsets with more functionality and then add a plan.

If you are going to commit to a two year contract AND the provider has a phone on offer that you like, then it's reasonable for them to give you a real discount on the price compared to if you bought it without a commitment.

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