Senator Amy Klobuchar

Working for the People of Minnesota

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Joel Gross
Press Secretary
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News Releases

Klobuchar: Wireless Carriers Early Termination Fees are Anti-Competitive and Anti-Consumer

Criticizes Verizon Wireless plan to double Early Termination Fees for new smart phone customers

November 9, 2009

Washington, D.C. – Today, U.S. Senator Amy Klobuchar, who introduced the Cell Phone Consumer Empowerment Act in the 110th Congress, sent a letter to the Verizon Wireless President and CEO Lowell C. McAdam, criticizing the company’s decision to increase its Early Termination Fees (ETFs) for new smart phone customers.  Klobuchar also sent a letter to Federal Communications Chairman (FCC) Julius Genachowski, urging a review of the Verizon Wireless decision to raise these fees. 

On November 5, Verizon Wireless announced that beginning November 15 they will double the penalty fees to $350 for certain subscribers who leave their contracts early.

“These fees are anti-consumer and anti-competitive and they bear little to no relationship to the cost of the handset device” said Klobuchar, a member of the Senate Commerce Committee.

Verizon Wireless is the nation’s largest cell phone service provider.  Verizon customers purchasing an Advanced Device (smart phone) with a one or two year service agreement will be subject to an ETF of up to $350 if they disconnect service prior to the minimum term.  The $350 ETF will decrease $10 for each month of service completed.

In the letter to Verizon Wireless President and CEO McAdam, Klobuchar expressed concern that the ETFs are anti-competitive and anti-consumer.  In the letter to FCC Chairman Genachowski, Klobuchar urged the FCC to review the recent Verizon Wireless decision and the competitive and economic impact on wireless consumers. 

The Cell Phone Consumer Empowerment Act, previously introduced by Klobuchar, encourages fairness, transparency and quality service in the wireless market.  Among other pro-consumer measures, the bill would require wireless carriers to pro-rate their Early Termination Fees so that, at a minimum, a consumer exiting a two-year contract after the end of the first year would have to pay only half the termination fee.

The full text of Klobuchar’s letters are below:

November 9, 2009

Lowell C. McAdam
President and CEO
Verizon Wireless
140 West Street
New York, NY 10007

Dear Mr. McAdam:

As you know, I introduced legislation in the last Congress – the Cell Phone Consumer Empowerment Act – that would encourage transparency, competition, and quality service in the wireless market.  Among other pro-consumer measures, this legislation would require wireless carriers to pro-rate their Early Termination Fees (ETFs) so that, at a minimum, a consumer exiting a two-year contract after the end of the first year would have to pay only half of the termination fee. 

Since introducing this legislation, I was pleased to see that Verizon Wireless and other wireless carriers implemented modest plans to pro-rate their ETFs.  That is why I was so disappointed to learn that Verizon Wireless announced that it will soon double its ETFs and charge a $350 ETF for its new smart phones.  Although Verizon Wireless will pro-rate the ETF by $10 a month, under the company’s new plan, the penalty for leaving the contact halfway through a two-year contract would be $230 – still higher than the $175 ETF Verizon Wireless previously charged for these phones. 

I remain concerned that ETFs – especially at these high prices – unfairly penalize consumers, bear little to no relationship to the cost of the handset device, and are anti-consumer and anti-competitive.  In fact, Verizon Wireless’ decision underscores the need for Congress to act and to pass the Cell Phone Consumer Empowerment Act.

I look forward to working with you as I seek to address these concerns.

                    Sincerely,


                    Amy Klobuchar
                    U.S. Senator


November 9, 2009

Julius Genachowski
Chairman
Federal Communications Commission
445 12th Street, SW
Washington, DC 20554

Dear Chairman Genachowski:

As you know, I introduced legislation in the last Congress – the Cell Phone Consumer Empowerment Act – that would encourage transparency, competition, and quality service in the wireless market.  Among other pro-consumer measures, this legislation would require wireless carriers to pro-rate their Early Termination Fees (ETFs) so that, at a minimum, a consumer exiting a two-year contract after the end of the first year would have to pay only half of the termination fee. 

Since introducing this legislation, I was pleased to see that Verizon Wireless and other wireless carriers implemented modest plans to pro-rate their ETFs.  That is why I was so disappointed to learn that Verizon Wireless recently announced that it will soon double its ETFs and charge a $350 ETF for its new smart phones.  Although Verizon Wireless will pro-rate this ETF by $10 a month, under the company’s new plan, the penalty for leaving the contact halfway through a two-year term would be $230 – still higher than the $175 ETF Verizon Wireless previously charged for these phones. 

Verizon Wireless’ decision shows us once again that the wireless industry cannot police itself and will not, on its own, make its practices more competitive and consumer-friendly.  To that end, I urge the FCC to review the recent Verizon Wireless decision as well as the competitive and economic impact of ETFs on wireless consumers.  

                    Sincerely,



                    Amy Klobuchar
                    U.S. Senator

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