Wednesday, October 22, 2008

Sprint to join rivals in cutting termination fees

KANSAS CITY, Mo. -- Following its rivals, Sprint Nextel Corp. will soon begin trimming the fees customers face for canceling their cell phone service early.

Chief Executive Dan Hesse said Tuesday in an interview with The Associated Press that Sprint could start lowering the early termination fees as soon as December, once the company updates its billing software. The fee of $200 or more is charged to wireless subscribers who end their service before their two-year contract ends.

The new policy would reduce the fee slightly for each month a subscriber stays with the plan. Competitors AT&T Inc., Verizon Wireless and T-Mobile USA already prorate their fees.

A California judge this summer said such fees likely violate state law and ordered Sprint to reimburse customers more than $73 million. Days before that ruling, Verizon Wireless agreed to settle an identical lawsuit for $21 million.

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.

The wireless industry has asked the Federal Communications Commission to regulate the fees and prevent other state class-action lawsuits 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.

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