The fourth-largest U.S. carrier is responding to a class-action lawsuit that alleges it broke federal and local laws by imposing a fee for users who terminate their contracts early. The suit was originally filed in August 2008, and it covered subscribers affected between July 1999 and February 2009.
Under the terms of the proposed settle, which has yet to be approved by the courts, customers who paid the fee will be compensated up to $125. Affected customers who were charged a cancellation fee but did not pay it or received a credit within 30 days are eligible for up to $25. The company estimates this could cost up to $11.5 million.
Existing customers who had the cancellation fee charged to their contracts will receive "noncash" assets, which could include extra minutes, text messages, or free Wi-Fi hotspot access. The total value of these assets is expected to total $2 million.
T-Mobile is just the latest carrier to have legal woes over its termination fees, as Sprint Nextel, AT&T, and Verizon Wireless have all been sued for their contract cancellation fees. The carriers say these fees are necessary to cover the costs of subsidizing cell phones and smartphones, but some consumer advocate groups say they are illegal and stifle competition.
The issue has even caught the attention of the Federal Communications Commission, and former Chairman Kevin Martin argued for a nationwide policy over these cancellation charges. Over the last few years, each of the major mobile operators has implemented a prorated policy regarding their early-termination fees.
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