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Sprint Finally Reducing Early Termination Fees

Thu Oct 23, 2008 - 4:10 PM EDT - By Jay Gross

Contract, schmontract. Sprint is finally joining their competitors in trimming the outrageous fees they charge for early termination of cell phone service contracts. You know the drill: Sign up for umpty years to get your hands on that hot new phone you just have to have. Then you’re stuck. Pay a $200 bailout fee, or just keep on paying every month.

The high cost of canceling Sprint's contract is finally coming down. Maybe it's the fear of lawsuits - a California court ruled the fees a violation of state law and ordered Sprint to refund more than $73 million to customers. Shortly before that, Verizon Wireless agreed to settle an identical lawsuit for $21 million. As of now, AT&T, Verizon, and T-Mobile prorate the termination fee. It declines as you live out more of the contract. Sprint is finally caving.

In an interview with The Associated Press this week, Sprint's CEO, Dan Hesse, said Sprint could start lowering the fees as soon as December, pending updates to its billing software.

For their part, the carriers claim the early termination fee recovers their cost of subsidizing the phones. Of course, they charge the early termination fees even if you don’t get one of their phones. Consumer groups have long argued that the fees are mostly intended to discourage customers from moving to another carrier. I side with the consumer groups. In fact, I think the carriers shouldn't even sell phones, subsidized or not. The contracts, and the high cost of getting out of one, have made the business unfriendly to consumers, in the first place.

The FCC, which oversees lots of other things, doesn't (yet) regulate the early termination fees. However, FCC Chairman Kevin Martin has discussed requiring wireless carriers to prorate the fees. Before it even hatched, the plan fizzled, but a spate of lawsuits, many of them still pending, might have accomplished what the regulators didn’t.

I welcome the news. I no longer need one of my Sprint lines, but the $200 cost of deleting it has been higher than the cost of keeping it without even a phone hooked up. Now where is that queue to terminate contracts?

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