Cell phone customers who have forked over more than $200 in early termination fees (ETFs) might be wishing they were a Verizon or Sprint customer right about now.
Verizon recently settled a class-action ETF case, and a California judge last week ordered Sprint to pay $18.25 million to customers who claim the companys ETFs are illegal and far more than the actual costs associated with a mobile provider losing a customer.
Sprint must also stop trying to collect $54.75 million from customers who have refused to pay their ETFs, according to a ruling from the Alameda County Superior Court.
Sprint started offering contracts with a $150 ETF in 2000. The company merged with Nextel in 2005 and later raised its ETFs to $150 because Nextels handsets were more expensive than Sprints, according to court documents.
Sprint ETFs were charged on a per-phone basis, however, so somebody with a $100/month family plan with four phone numbers on the account would end up paying $700 in ETFs.
"There is an evidentiary disconnect between charging ETFs on a per line basis and the evidence presented on a per-subscriber or per-account basis," wrote Judge Bonnie Sabraw.
In 2007, Sprint started offering pro-rated ETFs so customers nearing the end of their contract who decided to cancel service would not incur the full ETF.
Both sides presented "expert" testimony at the trial, but while an expert for the class members put Sprints monthly loss per canceling customer at 70 cents, an expert for Sprint said it was actually about $39.
"The FCCs need for a hearing on the issue in June 2008 suggests the issue is unclear, which in turn suggests that Congress has no clear intent to preempt"
Both sides have until Tuesday to file a rebuttal to Judge Sabraws ruling, according to the court documents. Sprint did not immediately respond to a request for comment, but is reportedly readying a response.
Verizon Wireless last month reached a $21 million settlement with a group of former customers who sued the company over its ETFs.
Verizon introduced pro-rated ETFs in 2006. T-Mobile followed suit in 2007, and AT&T implemented the same policy in May 2008.
These state-level ETF cases could be for naught if the Federal Communications Commission (FCC) decides to make ETFs a national rather than a state issue.
The agency held a hearing on the issue in June, during which chairman Kevin Martin said he was concerned "that early termination fees are being used not as a means of recovering legitimate costs but as a means of locking consumers into a service provider."
One of the customers who sued Verizon appeared at that hearing and asked the FCC to back off because if the agency took over jurisdiction on the ETF issue, it would invalidate all the work done on the state-level cases.
"Ive been fighting this for five years and when Im now about to get my day in court, the FCC proposes to step in and prevent me from doing this," Harold Schroer told the commission. "This would be a miscarriage of justice."
Though the wireless industry is generally opposed to additional regulation on the issue, stakeholders have said that if regulation is necessary, one national standard would be preferable to a patchwork of state laws.
The FCC in 2005 ruled that regulation of wireless rates falls to the federal government, not the states. As a result, CTIA, the wireless industrys trade group, requested in a 2006 filing that the FCC categorize ETFs as "rates" instead of "fees" which would mean that the federal government would have jurisdiction over ETF disputes, not the states.
The commission never took action on the CTIA request, but Verizon in May called on the FCC to revive the issue and categorize ETFs as rates.
Sprint used a similar argument in its case, but the judge disagreed.
"Sprint has not proven that ETFs are rates-charged," Judge Sabraw ruled. "Sprints ETFs were not assessed for the services that Sprint provided over the term of the service contract they were assessed when contracts were terminated."
Verizon recently settled a class-action ETF case, and a California judge last week ordered Sprint to pay $18.25 million to customers who claim the companys ETFs are illegal and far more than the actual costs associated with a mobile provider losing a customer.
Sprint must also stop trying to collect $54.75 million from customers who have refused to pay their ETFs, according to a ruling from the Alameda County Superior Court.
Sprint started offering contracts with a $150 ETF in 2000. The company merged with Nextel in 2005 and later raised its ETFs to $150 because Nextels handsets were more expensive than Sprints, according to court documents.
Sprint ETFs were charged on a per-phone basis, however, so somebody with a $100/month family plan with four phone numbers on the account would end up paying $700 in ETFs.
"There is an evidentiary disconnect between charging ETFs on a per line basis and the evidence presented on a per-subscriber or per-account basis," wrote Judge Bonnie Sabraw.
In 2007, Sprint started offering pro-rated ETFs so customers nearing the end of their contract who decided to cancel service would not incur the full ETF.
Both sides presented "expert" testimony at the trial, but while an expert for the class members put Sprints monthly loss per canceling customer at 70 cents, an expert for Sprint said it was actually about $39.
"The FCCs need for a hearing on the issue in June 2008 suggests the issue is unclear, which in turn suggests that Congress has no clear intent to preempt"
Both sides have until Tuesday to file a rebuttal to Judge Sabraws ruling, according to the court documents. Sprint did not immediately respond to a request for comment, but is reportedly readying a response.
Verizon Wireless last month reached a $21 million settlement with a group of former customers who sued the company over its ETFs.
Verizon introduced pro-rated ETFs in 2006. T-Mobile followed suit in 2007, and AT&T implemented the same policy in May 2008.
These state-level ETF cases could be for naught if the Federal Communications Commission (FCC) decides to make ETFs a national rather than a state issue.
The agency held a hearing on the issue in June, during which chairman Kevin Martin said he was concerned "that early termination fees are being used not as a means of recovering legitimate costs but as a means of locking consumers into a service provider."
One of the customers who sued Verizon appeared at that hearing and asked the FCC to back off because if the agency took over jurisdiction on the ETF issue, it would invalidate all the work done on the state-level cases.
"Ive been fighting this for five years and when Im now about to get my day in court, the FCC proposes to step in and prevent me from doing this," Harold Schroer told the commission. "This would be a miscarriage of justice."
Though the wireless industry is generally opposed to additional regulation on the issue, stakeholders have said that if regulation is necessary, one national standard would be preferable to a patchwork of state laws.
The FCC in 2005 ruled that regulation of wireless rates falls to the federal government, not the states. As a result, CTIA, the wireless industrys trade group, requested in a 2006 filing that the FCC categorize ETFs as "rates" instead of "fees" which would mean that the federal government would have jurisdiction over ETF disputes, not the states.
The commission never took action on the CTIA request, but Verizon in May called on the FCC to revive the issue and categorize ETFs as rates.
Sprint used a similar argument in its case, but the judge disagreed.
"Sprint has not proven that ETFs are rates-charged," Judge Sabraw ruled. "Sprints ETFs were not assessed for the services that Sprint provided over the term of the service contract they were assessed when contracts were terminated."
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