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12/4/2009
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Bill Targets Mobile Phone Service Providers

Legislation introduced by four U.S. senators seeks to limit early termination fees leveled by wireless carriers.

In legislation directly targeting Verizon Wireless, four U.S. senators have introduced their Cell Phone Early Termination Fees (EFT) bill that seeks to limit the early termination fees charged by mobile phone service providers.

In unveiling the legislation Thursday, the senators noted that Verizon had doubled its ETFs from $175 to $350 for customers purchasing certain smartphones with a one or two year service agreement.

"Changing your wireless provider shouldn't break the bank," said Senator Amy Klobuchar of Minnesota in a statement. "Forcing consumers to pay outrageous fees bearing little to no relation to the cost of their handset devices is anti-consumer and anti-competitive."

The other senators, also Democrats, are Mark Begich of Alaska, Russ Feingold of Wisconsin, and Jim Webb of Virginia.

The legislation addresses early termination fees leveled by cell phone providers that have been a perennial subject of controversy. In recent years, major cell phone carriers under pressure from lawmakers have modified their EFTs to make them more palatable to consumers, but as new phone models are introduced, the ETF controversy often arises again.

In addition to setting limits on EFT fees, the legislation would require wireless providers to prorate ETFs and notify customers in a clear way about the fees. The legislation would require carriers to spell out the EFT instructions not only at time of purchase, but also at other times during the duration of contracts.

The legislation seeks to keep carriers from charging an ETF that is higher than the discount on the cell phone offered by the carriers as they enter into multi-year contracts. In addition to requiring carriers to provide "clear and conspicuous disclosure" of ETFs at time of purchase, the legislation would require them to pro-rate consumer contracts when consumers leave their contracts early.

Verizon has argued that consumers always have the option of paying the full price of a mobile phone when they sign a contract and that when consumers elect to have a one or two year service contract and stay with the contract, they aren't charged an ETF fee.

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