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Amy in the News

Senator, FCC's Martin At Odds Over Early Termination Fees

June 12, 2008

David Hatch, Congress Daily

FCC Chairman Kevin Martin outlined a series of proposals today for reducing fees that wireless carriers impose on customers who break their service contracts early, but his plan to reduce state oversight puts him at odds with a powerful senator. "I think we need to have a clear set of rules that will protect consumers," Martin declared at a commission hearing on so-called early termination fees that are closely associated with cellular companies but also assessed by cable and satellite television operators. The wireless industry insists the penalties are necessary to recoup the costs of handsets, which are often provided free or at very low prices as incentives for purchasing service. Critics counter that the charges are exorbitant, usually hidden in fine print and force customers to remain with companies with whom they are dissatisfied. The chairman recommended that termination fees be consistent with the value of the equipment provided, explaining that a $500 phone should not have the same fines as a $50 version. He also wants the charges pro-rated over time, which some carriers are doing voluntarily, and restrictions placed on the timeframe for imposing them. Monthly bills, he added, should reflect the services customers have agreed to purchase.

But Martin's push to limit the role of state regulators in overseeing the wireless sector puts him at odds with Sen. Amy Klobuchar, D-Minn., a member of the Senate Commerce Committee and its Consumer Affairs Subcommittee, and sets the stage for a potential showdown. "The pre-emption of state regulations that is now being proposed by some in the wireless industry simply does not give me confidence that consumers will be protected," said Klobuchar, who spoke at the outset of the hearing. "We shouldn't deny consumers who may have been abused by the wireless companies their day in court," she said, referring to pending class action lawsuits in state courts accusing carriers of price-gouging. "A grant of pre-emption simply locks the courthouse door for these consumers."

Martin emphasized that not all customers would benefit from the lawsuits and seeking relief in the courts would contribute to the patchwork of differing state regulations, a position espoused by the wireless association CTIA. Klobuchar and fellow Commerce member John (Jay) Rockefeller, D-W.Va., introduced legislation in 2007 that would reduce wireless fees and require carriers to disclose more information about their cellular coverage. The measure is strongly opposed by CTIA, which considers it unnecessary and insists it would trigger higher prices. Draft legislation floated by House Energy and Commerce Telecommunications and the Internet Subcommittee Chairman Edward Markey, D-Mass., would combine lower penalties and other pro-consumer steps with less state oversight.