Sprint to trim phone cancellation fees

October 22, 2008


— Sprint Nextel Corp. will soon join other wireless industry leaders in trimming the costs customers face for canceling their cell phone services early, the company's chief executive said Tuesday.

In an interview with The Associated Press, Dan Hesse said the company could start reducing early termination fees as soon as December. He said the company is awaiting an update in the software it uses to bill customers.

"We can then prorate the early termination fees once that new software is put into our new billing system next month," he said.

Sprint, like most cellular companies, charges a fee to customers who cancel their wireless service before the end of their service contracts. In Sprint's case, the fee is $200 or more.

The other leading wireless carriers - AT&T;, Verizon Wireless and T-Mobile USA - already prorate their fees.

Wireless companies say the termination fees are necessary to recover the cost of cell phones, which are typically subsidized under long-term contracts, and to defray the costs for signing up new customers.

Consumer groups, however, say the fees are unreasonable and are intended to discourage customers from jumping ship to another carrier.

In July, a California judge sided with subscribers, issuing a tentative ruling that termination fees likely violate that state's consumer protection laws.

Alameda County Superior Court Judge Bonnie Sabraw also ordered Sprint to pay $18.3 million to consumers who sued over the fees and credit $54.8 million to those who were charged but did not pay the fees. Sabraw hasn't yet filed a final order in the case, after which Sprint could appeal, said company spokesman Matt Sullivan.

Days before Sabraw's ruling, Verizon Wireless agreed to settle an identical lawsuit for $21 million.

Sabraw's ruling isn't legally binding outside California, but it speaks to ongoing efforts in other states and before the Federal Communication Commission on whether the fees are fair.

The telecommunications industry has asked the FCC to regulate the fees and prevent other class action lawsuits filed at the state level from going forward. FCC Chairman Kevin Martin this summer discussed a preliminary plan that would call for wireless carriers to prorate the fees but that plan hasn't gone anywhere since then.

Consumer advocates have lobbied the FCC to allow state courts and state governments to oversee and penalize wireless companies for their fees.


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