Sen. Amy Klobuchar (D-Minn.) will soon introduce a bill to rein in the fees wireless carriers charge consumers who want to switch carriers or cut off cellphone service before their two-year contract is up.
The bill, which could be introduced as early as this week, according to staffers, takes direct aim at a recent annoucment from Verizon Wireless. The nation's second-largest wireless carrier announced it would start charging smartphone customers $350--nearly double its current fee--to end service contracts.
It is unclear how far the bill will go in curbing the termination fees. Klobuchar's office is still working out the details with co-sponsors.
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, and therefore charge a fee (typically around $175).
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.
This is a pet issue for Klobuchar. Last session, she introduced a bill that would require carriers to reduce their fees for departing customers. The wireless carriers responded by pro-rating their early termination
fees, so consumers would pay a smaller penalty closer to the end of their contract.
Earlier this month, Klobuchar sent letters to Verizon Wireless CEO Lowell McAdam and FCC Chairman Julius Genachowski, calling the increased fee "anti-consumer and anti-competitive."
Verizon Wireless General Counsel Steven Zipperstein responded to Klobuchar's letter by saying consumers can pay full retail price for a handset and, therefore, would not need to sign a service contract. But a relatively small number of consumers choose that option.
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.”