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Federal report shows cellphone users are happy but don't like cancellation fees

The federal government’s investigative arm has issued a report on wireless phone services that shows users are generally happy with their cellphone service. But about 15 percent aren’t happy with contract obligations and the penalties charged by their carriers when they want to leave their contracts early. And 42 percent of users surveyed say they didn’t switch carriers because of the penalties.

The Government Accountability Office’s report adds to mounting concern by lawmakers and regulators over early-termination fees. Last week, the Federal Communications Commission sent a letter to Verizon Wireless, the nation’s largest cellphone operator, asking it to explain why it decided recently to more than double its ETFs to $350 from $150 for smartphone users. Lawmakers including Sen. Amy Klobuchar (D-Minn.) have introduced a bill that would limit ETFs.

Verizon Wireless spokesman Jim Gerace has defended the practice by saying the company prorates those fees through the duration of the contract. He says the fees allow companies to offer the newest and sleekest phones at a subsidized discount to subscribers and the only way Verizon can recover the cost of the phones is to ensure customers stick through their one- or two-year contracts.

“Our declining early-termination fee, or ETF, makes it possible for a broad array of Americans who might not otherwise be able to afford broadband connections to be active participants in the online world,” Gerace said.

Rep. Ed Markey (D-Mass.) commissioned the report when he headed the subcommittee overseeing telecom and Internet regulation.

He said even a small percentage of the 270 million cellphone users in the United States
expressing frustration with their service is significant.

“GAO has pinpointed one key reason for consumer dissatisfaction – early termination fees charged by carriers – which raises concerns both from a consumer protection and competition standpoint,” Markey said in a statement. “In the digital age, where technology can change overnight, consumers should not be chained to their wireless provider for years through exorbitant early termination fees.”

The GAO said consumers complained most about cellphone bills, contracts, explanation of service, and call and service quality. And they said that they didn’t know where to go in the federal government to relay problems they had.

The report also called for the FCC to take a greater role in dealing with customer concerns.

By Cecilia Kang  |  December 10, 2009; 1:34 PM ET
Categories:  Early Termination Fees , FCC  
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Did the survey determine whether people also hate the subsidies they get for the phones when they sign a contract?

Posted by: ah___ | December 10, 2009 3:39 PM | Report abuse

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