Klobuchar rebukes Verizon for rise in fees

Sen. Amy Klobuchar (D-Minn.) isn't happy with Verizon Wireless. She has long railed against wireless companies who charge high fees to consumers who want to switch carriers before their two-year contracts are up. Verizon's announcement last week that it would double its early termination fees to $350 for smartphone users has renewed the cause for her.

Klobuchar sent letters today to Verizon Wireless chief executive Lowell McAdam and FCC Chairman Julius Genachowski, calling the move "anti-consumer and anti-competitive."

"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," she said in the letter to Genachowski. "To that end, I urge the FCC to review the recent Verizon Wireless decision as well as the competitive and economic impact of ETFs (early termination fees) on wireless consumers. "

It isn't the first time this issue has riled regulators.

The FCC, under the previous administration, also took a look at early termination fees, and hearings were held in Congress on the matter. In the 110th Congress, Klobuchar introduced the Cell Phone Consumer Empowerment Act aiming to reduce the penalties for leaving a carrier.

The fees got even more attention when Apple's iPhone came out two years ago. Consumers wanting to switch to AT&T to get iPhone service were in some cases forced to stay with their current carriers to avoid the high fees.

The wireless carriers responded by pro-rating their early termination fees, so consumers would pay less of a penalty the further along they were in their contract. Carriers say they subsidize the cost of cellphones by requiring two-year contracts to recoup that cost. If a consumer leaves a contract early, they lose money on that cellphone.

Now that more consumers are getting expensive smartphones, Verizon saw the need to increase that fee to $350, which will decrease $10 for every month of the contract completed.

Sprint Nextel took the opportunity to say it would not raise its early termination fees.

"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," she said in her letter to Verizon. "In fact, Verizon Wireless’ decision underscores the need for Congress to act and to pass the Cell Phone Consumer Empowerment Act."

UPDATE: Verizon Wireless General Counsel Steven Zipperstein said consumers have a choice: they can pay full retail price (without the carrier subsidy) for a handset and, therefore, would not need to sign a two year contract. The "vast majority of our customers have chosen the contract model with subsidized handsets," he said. "This model has contributed to the widespread adoption of mobile devices across all segments of consumers.”

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