FCC expands ETF inquiry, fires off letters to AT&T, Sprint, T-Mobile, and Google
By Chris Ziegler 
posted January 26th 2010 3:26PM
posted January 26th 2010 3:26PM
Verizon might be getting picked on for introducing its whopper $350 "advanced device" ETF, but the FCC has decided that it wants answers from everyone on concerns that "there is no standard framework for structuring and applying ETFs throughout the wireless industry." The commission has sent letters (via fancy certified mail, in case you're wondering) to all of the other biggies -- AT&T, Sprint, and T-Mobile -- along with Google, asking a series of questions probing how each carrier's ETFs are determined and applied. Google gets roped in for its nasty equipment recovery fee, but all of the recipients share a common dubious distinction: the frickin' FCC -- a bureaucracy filled to the brim with lawyers and... well, bureaucrats -- can't figure out terms that everyday customers are expected to understand. Of course, most customers don't have the distinction of being able to send a certified letter to their carrier probing fees and require a prompt and complete response, so we're happy to see the feds get to the bottom of this. Sure, ETFs may ultimately prove to be completely justified in their current form considering the expense that carriers put up to subsidize hot hardware, it's true -- but regardless, it's in everyone's best interest to make sure they're spelled out in ways even FCC commissioners (and Engadget editors) can appreciate.
@Samurai Jack
Could you provide more info? I fall into that range and currently letting my contract expire its last couple months because ATT won't prorate my ETF because the associated contract started like 2 months before the agreed to start pro rating. What's worse is I didn't even receive any subsidized phone when they imposed a new 2 year contract. This was when the edge iPhone was full price.
@wraith404 The complete letter:
Important Notice from the United States District Court for the District of New Jersey about a class action settlement regarding early termination fees which could affect your rights. A proposed class action settlement has been reached that could affect your rights if you: (a) subscribed to wireless telephone service from AT&T Mobility LLC or its predecessors and paid or were charged a flat rate early termination fee ("ETF") from January 1, 1998 through November 4, 2009 or (b) your contract included a flat-rate ETF provision at any time after January 1, 1998. Please click here for an important notice regarding this settlement.
To view your account online, visit att.com/mywireless.
-----
I don't live in New Jersey and never have, so presumably this applies to all of their customers. The "click here" link is to a PDF that outlines the settlement terms and deadlines for opting out of the class action. My personal opinion is that I'll be getting some sort of small billing credit sometime this summer.
@Samurai Jack
Thank you, I just filed a claim at http://attmetfsettlement.com. Looks like a 200minute calling card for me, but better than nothing. Those that have paid a flat ETF really should get on over there.
Please let this be the start of reasonable fees and charges for cell phone providers.
...it won't be, but please let it be.
Fuck ETF's.
From the write up: "Google gets roped in for its nasty equipment recovery fee, but all of the recipients share a common dubious distinction: the frickin' FCC -- a bureaucracy filled to the brim with lawyers and... well, bureaucrats -- can't figure out terms that everyday customers are expected to understand."
Seriously? Look, I'm not the sharpest tool in the shed, but this stuff isn't rocket science. When I log into my Verizon account, all I have to do is click a link to find the Customer Agreement. It states the following:
"What Happens if My Service Is Canceled Before the End of My Contract Term?
You're agreeing to subscribe to a line of Service either on a month–to–month basis or for a minimum contract term, as shown on your receipt or order confirmation. (If your Service is suspended without billing, that time doesn't count toward completing your contract term.) Once you've completed your contract term, you'll automatically become a customer on a month–to–month basis for that line of Service. If you cancel a line of Service, or if we cancel it for good cause, during its contract term, you'll have to pay an early termination fee. If your contract term results from your purchase of an advanced device after November 14, 2009, your early termination fee will be $350 minus $10 for each full month of your contract term that you complete. (For a complete list of advanced devices, check verizonwireless.com/advanceddevices.) Otherwise, your early termination fee will be $175 minus $5 for each full month of your contract term that you complete. Cancellations will become effective on the last day of that month's billing cycle, and you are responsible for all charges incurred until then. Also, if you bought your wireless device from an authorized agent or third–party vendor, you should check if they charge a separate termination fee."
Is what is written above really that hard for people to understand? Surely you jest if you say yes.
@mbushnell
I'm sure he meant the actual reason why rather then the contractual terms you agree to. The reason being is because ETF were originally handed out to cover subsidize cost.
@mbushnell
The average consumer is probably like me- once they see that wall of text, they say:
tl;dr
ATT will have the most bullshit story, and probably raise ETFs to match verizon
@Hydra
The thing about ETF is that the FCC has no grounds to regulate it. Actually their the one who said ETF were fine. How do you think these carrier are able to have your social security on file. They run credit to qualify you for a discounted phone. The price of these phones are very expensive and telecoms have to keep the prices low to grab business. I agree that ATT will prob, do the same. T-mobile has already with the nexus one (And if you think that google is behind that then you are so WRONG. That is all t-mobile.) So Its up to sprint and ATT to see if they'll follow suit. I believe they will. But this is to only push the fact that it makes more sense to buy the phone out right and save a little.
Yeah, sweet. Thanks FCC.
We'll all be THRILLED when they move to a system where you're responsible for the full cost of service of the contract. How's this for plain english: "You're agreeing to 24 months of payments of $100. If you choose to end service prior to the end of the contract, you will be responsible for the remaining balance of that service."
Because that's the direction it's gonna push things.
@outphase84 To clarify, when you sign the contract, you're agreeing to maintain service for the length of said contract. Legally, they do not have to release you from that liability. An ETF is not a penalty -- it's a fee you have to pay in order for them to release you from your contract. Would anyone here prefer to have to pay the thousands of dollars left on an agreement over a $150-$350 charge? I wouldn't.
I'm not in favor of ETFs by any stretch, but I'm even less in favor of an arm of the government sticking their nose where it has absolutely no right being. It's an abuse of power. It might be to your benefit, but if you think they'll stop there, you're insane.
@outphase84 - it'll only push things that way if we keep contractually obligating ourselves over and over. If we start buying the phones unlocked and shopping services, they can't lock you into an ETF unless they convince you to sign a contract.
Personally, I have hope for the future with this pressure on the providers - maybe we'll get to a more open system where actual service and customer satisfaction is important, rather than which shiny new trinket you can use to lure suckers into your web.
@outphase84 I see your point about contracts and ETFs, but I'm not sure why you assume the FCC's action will naturally lead to greater abuse by the telecoms, nor why suffering abuse at the hands of a large corporation is inherently preferable to government intervention that is, one would hope, on behalf of consumers.
@outphase84
You're only partially right. You said "hen you sign the contract, you're agreeing to maintain service for the length of said contract". Well, the only reason you agree to maintain service for a length of time is to pay for the subsidized phone. If you choose to break your contract, you should only have to pay back the remaining balance on the phone, not the remainder of the term. Also, after the end of the contract, your rate should decrease because you've paid for your phone, but it doesn't. And at either the end of the contract or your termination of the contract, the phone should be unlocked.
The problem is, people in this country are too complacent and won't stand up and say enough is enough. Contracts are bull. Businesses and government agencies get out of them on a daily basis. Everyone else should be allowed to also.
@outphase84
I agree, but because of the entry barrier to become a telecom is to great, these companies are semi-monopolistic. Saying that, I don't treat this as a free market dispute, but rather something that needs to be regulated or the alternative being allow nobody to control any spectrum.
@v0rt Because the line they tow right now, which is the easiest for a consumer to swallow, is that the ETF is to recoup the handset subsidy. When push finally comes to shove, they'll call it what it is: reimbursement for a loss of guaranteed revenue.
@Ryujin The problem is, that there IS competition, and the free market is what will dictate the direction. Look at the push tmobile is making with their even more plus plans. If someone wants no contract, all they have to do is mosey on over there. The public at large, however, is showing that they prefer the old system over an arguably superior one.
@Outlaw Yes, business and government entities get out of contracts all the time. But if you think that they get out scott-free, free of charge, you're grossly mistaken.
@Vrmithrax Exactly. Couldn't have said it better.
Here's the thing, people...and this comes from someone with 6 years of experience in the industry, in everything from retail sales, b2b sales, and management: by and large, people don't care about signing a contract. Most people keep their phones past the end of the contract, most people are happy with their service overall and don't plan on going anywhere. This is why that system isn't going away. There's a subset of us that aren't fans of it, like to have the latest and greatest, etc. But we are BY FAR the minority. We have the option now of paying retail for a phone and signing up contract-free, they have the option of getting a subsidy and agreeing to a term. Where's the problem?
Honestly, the people with a huge issue want to get their subsidies but not be bound by the contract. You can't always have your cake and eat it, too.
@Vrmithrax
This is the well best put advise ive read. and thats the only reason i think the fcc is investigating this. It would make more sense for the wireless company to be more open. There reason theres a subsidy is because certain carries get landed certain phones and they pay hefty to have excusivity with them over a certain time period. Examples are t-mobile (sidekick and a variety of android phones), AT&T (the Razr when it first came out, iPhone, and supposedly a new android device not yet announced), Sprint (Palm pre, and a few nextel devices with cdma built in), Verizon (with the Storm, Droid). You want a specific phone, youre limited to the carrier that you really want. Im sure everyone would love to have tmobiles cheap plans, on verizons coverage, with atts savings on minutes and sprints free and clear calls.
@outphase84
OMG!! You said that beautifully!!!!!!
ETFs are also important, but also dangerous. I think people have been under a rock thinking phones really cost as low as they do now. It's really just a disguised loan they are paying back in contract.
What I don't like is how the ETF doesn't appear to depreciate as the contract is being fulfilled. To me, that's the bigger concern.
@mbushnell
You are correct though. These contracts really aren't that difficult to understand if people read them in it's entirety. Only problem is these are usually very long and a piece of paper hardly seems to scream out "DO NOT USE" if they don't agree with it for the general population. Like how many people actually read the EULA when they install software, I'd assume a very small percentage.
@HypnoticSilence I agree that the early term fee should depreciate to zero over the life of the contract. However, it is what it is currently so we just have to deal. As far as reading the contract, as the saying goes...caveat emptor. Anyone that signs a contract without reading and comprehending it fully is just asking for trouble.
@HypnoticSilence And it further begs the question; Why don't unsubsidized phones result in a lower monthly bill, if you are in fact not paying a recovery cost for the initial price of the hardware?
I think it would be a lot less sketchy if they just eliminated contracts and ETFs altogether, and just signed you up with a small loan to pay for the phone, and the monthly payments would then be added to your bill. When you terminate the account, you are still on the hook for the remaining amount owed on the phone. Nothing sketchy, or illegal about that. Of course, it wouldn't make them as much money....
@RandomGuy In Canada, Koodo Mobile (Owned by Telus), does something similar. When you purchase a phone you have the option of getting it on the 'tab', which is essential a $150 loan to cover most or all the cost of the phone. As you use the month by month service (no contracts) 10% of the value of your bill is subtracted from the tab balance. Even though my phone would take over 4 years to pay off this way with my cheap contract, the initial cost was low, I'm not getting screwed, and if I want out, I only have to pay back the rest of the balance.
@RandomGuy
I agree. and one such company has done just that. T-mobile. Even more plus plans costs you lower than the top three competitors just so long as you pay full retail price for the phone. The problem is, carriers do not really make any money off minutes. Its not the minute plans that costs the average consumers. Major carriers are make an ARPU (average revenue per user) from text (pic, video, audio), Data (internet, email, instant message), and other features (caller tunes, international discount calling, early nights and weekends). These ARPUs are whats really high. And its easy to for get what cellphones main function really is which is to make calls. So when you look at why your bill is so high after you've landed a good deal on a phone, it should draw a question to how you really use your phone. Carriers are raking in a lot of money and if consumers spent more money on phones (which in the long run they won't, trust me) and had lowered rate plans they there wouldnt be enough innovation to build on infrastructure. Verizon is doing a very pretty good job at expanding versus their competition. Although I do not agree with there prices, however they make up for it with reliable coverage and service thats unparalleled. And they've already got an head start on the new LTE (4g not fucking wimax). T-mobile doesnt care about infrastructure. Why should they 60% of their towers were originally owned by the old Cingular Wireless (Now ATT). But they care about real money which is in these handsets. Which is why in my oppinion they have been landing great android smart phones to compete with the unbeatable iphone thats out there
@RandomGuy
Now tell me genious what sense would that make. So what happens when a $500 phone gets billed to your account in the course of 24 months. Your'e going to be billed for $25.00 extra on the bill each month. So what happens when you loose your job in two months and you cannot afford to pay for the remainder of the 22 months you have left. You just made off with paying just $50 for a phone that cost the wireless carrier about $500.00 to get an exclusivity on. Now they are out $450.00 and the profit they expected to make with service just flew out the window. Real smart scenario, jack. T-mobile is already doing something like that but once you break it down it eventually costs the same as getting the phone for free with a contract. And plus, it would still be a contract considering if you couldn't afford your bill, you still have to pay for the remainder of the phone. So whats your point?
This is fanfrickintastic. Thank you FCC!
Even for the size of the company, Google is still a lapping dog from the mammoth ultramegacorporation called Sequoia Capital (who moves the strings).
Currently, Sequoia Capital control big part of the Internet and the only way to be 100% away from them is to disconnect it from the net...... until Google will take controls over the wireless bandwidth.
So our latest line of defense is the FCC (and a tinfoil hat).
I'm fine with ETFs if they are reasonable and decrease as months go by. What I don't understand is the point of locking a phone, if the ETFs are there already. Part of the point of the ETF is to keep you with the current provider in order to pay off the phone. If phones were unlocked, and I wanted to take it to another provider I would still have to pay the ETF. Once that is paid, I think I should own my phone and be able to use it on whatever network. I think the FCC should be looking into phone locking.
@JabariHB
There are two types of technologies in mobile phones that dominate in america. GSM and CDMA. Currently there are only two GSM network that are very similar in the us (ATT and Tmobile). Carriers with cdma phones have all rights to lock their phones becuase how it works is that, these carriers get to put their own software to these devices to make it their own. And another reason is because Carriers with cdma phones will not connect any other phones but their own. So if you were to buy an unlock cdma phone via web, it would be hard to get it connected with verizon, sprint, metro, cricket, etc. because they do not allow foreign phones on their network. That is why there is a subsidy. However, GSM phones are pretty much world wide. And the fact that ATT and Tmoble ALLOW foreign phones to get on their networks should justify that all carries should do the same. The problem is, these two carries are playing in the same field as sprint, verizon, etc and since they dont unlock phone neither should they but they'll do it any, but only under certain circumstances. Now the only phones on their networks that they are not willing to unlock is sidekicks and iphone period.
Here is the link on the ATT ETF settlement
http://www.attmetfsettlement.com/
ETFs only exist because we allow the wireless providers to treat us like sheep, and we bleat along following whatever shiny new toy they can offer us at tiny costs, all for the low low price of our immortal souls (well, 2 years at a time, at least). We just sign in blood, feel like we got a great deal, and then slowly realize we've been completely shafted, and they didn't even buy us dinner or take us to a movie first.
If we want reasonable monthly fees, and contract freedom, we'll have to start rewarding the progressive companies like Google by purchasing the phones outright and avoiding the subsidizing process completely (like the rest of the world does). It'll cost us more up front, but tends to be less than the deal with the devil we sign with whatever wireless provider hooks us into 2 years of servitude. No forced contract, no ETF... Ever...
@Vrmithrax I, too, would like to purchase phones outright that I could take to the carrier of my choice without be tied down 2 years at a time.
I could go for a parallel pricing scheme: 1.) The present setup where you get a subsidized phone and get locked in, and 2.) You can bring your own phone to the carrier (or purchase one from them unsubsidized), and get service with proportionally lower monthly rates.
Unless the carriers implement an option for lower monthly rates, buying unsubsidized is only feasible for people with too much money (or too little sense) who value freedom.
@Vrmithrax
You ablsolutely right
When there's legal jargon I don't understand I just wait for Nilay's explanation for it.
Funny... I just got done reading this entry, minutes later I received an email from ATT regarding a class action settlement regarding ETF.
"Important Notice from the United States District Court for the District of New Jersey about a class action settlement regarding early termination fees which could affect your rights. A proposed class action settlement has been reached that could affect your rights if you: (a) subscribed to wireless telephone service from AT&T Mobility LLC or its predecessors and paid or were charged a flat rate early termination fee ("ETF") from January 1, 1998 through November 4, 2009 or (b) your contract included a flat-rate ETF provision at any time after January 1, 1998. Please click here for an important notice regarding this settlement.
To view your account online, visit att.com/mywireless."
FCC ftw! Normally I'm on google's side but they have no justification for their equipment recovery fee.
And as soon as I complete the contract period, my monthly rate drops by how much?
the end of ETF's = the end of subsidized handsets. be careful what you wish for.
Instead of ETFs, I'd much rather have a built in payment plan. Lower the cost of the plans a little, have an upfront cost for the phone, and the remaining cost of the phone is spread out over 12-24 months on the bill. IIRC a company out of Europe (I think it was Germany to be specific) already does this. If one leaves before the phone is paid off, the remaining amount is due upon service cancellation. Heck, I'd be ok with a nominal finance charge; a 6% loan of $300 over two years is about $22 in interest.
I know the carriers wont make as much money this way since they can't charge a full ETF two months before contract ends. My thing is, I'm paying the same amount of money for the service whether I'm on or off contract. If I'm planning to stay with the carrier, I'd rather replace my working phone and renew my contract since I'm not getting any kind of discount off contract. I'd rather do the above plan so I know where I stand with the cost of my phone in case it dies after 1.25 years or some game changer phone comes out, I can pay off the old phone and finance the new one.
I doubt any of the carriers in the US would do it. Perhaps T-Mobile would do it, but even then I wouldn't switch to them over keeping VZW just for that.
okay here's straight and easy to understand rules.
1. a carrier can not charge more than what they paid on behalf of the customer as an ETF
2. the price 'loaned' to the customer must be spelled out in the initial contract
3. all ETFs will be prorated at the rate of 1/number of months in the contract
4. the amount of the ETF included in each monthly bill will be listed separately as a 'device cost payment'
5. remaining device cost will also be listed on each monthly bill allowing the customer to see how much the ETF would be if canceling before the next bill
no more of this agreeing to a $350 ETF that prorates so that you still owe $100 at month 23 when they claimed you have been paying off the device over your contract
I just really dont get this... are people stupid or what... You made an agreement that you were happy enough with what the company was offering you to stay with the service for two years. you took the god damn offer. There is truly no justice in what is going on with these early termination fees and the FCC. Some asshole lawyers somewhere get to add this as another positive note in their resume and makes some massive bank while the customers get nothing... Sure, they say you can do the class action settlement thing but good luck getting your 12 dollars of your 200 etf, dumbasses. All this is doing is leading to a point when subsidized handsets will be a distant memory of the 00s and assholes on minimum wage will be forced to buy shitty nokias because they cant afford the 400 dollar phones.
@KrazyCalvin
Youre wrong for saying that but oh so true.
Why is it that if the phone is subsidized that if I go to a carrier with my own phone, I don't get a rate discount?
No ETFs, no loans. You buy your phone full price, use it on any carrier. Eventually costs of the phones will come down to an affordable level and then the carriers have to actually compete with one another instead of price fixing. That would be ideal.
I, for one, am glad the FCC is at least ruffling the feathers of those vultures.
ts funny how people get upset about early termination fees as if they werent there like 5 years ago. Heres the thing. Big telecoms company are business, plain and simple. They hire people to work for them and they need to pay them. If you get a phone for free which costs them $500 from the manufacturer, an early termination fee is justified so that they can recoup the costs of the handset. Granted youre paying for service, however its not forced. YOU the consumer, wants the service. Its not forced upon you. If you do not want to commit to a contract just buy the phone out right. You the problem with people in america these days is that they want more for less. Well nothing in this world is free. You should of learned that in middle school. If all carriers offered non contracts to every consumer then the cost of getting a handset would be very expensive. You have to understand that If I, the manufacturer, sell devices to a telecom at $300 a pop, its ok for them to resell it however they'd like to make a profit.
If you it costs me pennies to make a device and i sell it for $300 to a telecom company, they might go ahead and sell it for $200.00 more just to recoup some of that money back, hence a $500.00. Here's common sense. These telecoms offer you service for a somewhat reasonable price usually depending on they type of coverage you get. The higher your rate plan, obviously the more coverage you have. It varies with other carries but it pretty much is just that. Considering that the price may or may not be reasonable, you are still paying taxes both federal and state to keep the prices low for individuals who cannot afford service. So you walk into a cellphone store and you see a phone you like but its like omg!! I'm not paying $500.00 for this. What happens is that you walk away. Thats bad for business. So what ends up happening is that you sign a one to two year (most likely two) agreement to get the phone for a lower price point....Still with me...Normally you get your credit ran every time you walk into these stores to see if you qualify for a discounted phones. Based on your credit history, it determines whether you would be able to keep up with payments month to month withing the course of two years. All this is available to wireless carriers via public record such as loans, morgages, types of jobs that you worked for etc. But based on the history of America, there is a major issue with credit. People are getting approved for responisbilities that they cannot handle.
Chances are if youre a person whos had service with a carrier before, you'll probably never qualify with another carrier in the realms of getting a great deal on a handset that you want without paying full price for the handset or some sort of deposit....Get my drift. So for those who complain about ETF need to fuck off and get a life. Seriously. Its a business. No matter how you look at it. Verizon charges a high price point because they have to maintain their network, which if you do not already know, is superior than any other carrier out there. ATT's prices pretty much match that of verizon inspite of nation wide coverage, there service is not as reliable and they've failed to invest properly on their infustructer. Sprint to me by far offers the better deals, good coverage, despite sketchy roaming areas however their phones are pretty pricey. Same with T-mobile who's just recently matched sprints plans. T-mobile has nation wide coverage, cheap plans but limited on great phones, despite these androids. All in all its a business. You pay for what you get. You want a better deal on a phone sign a two year. You dont want that then BUY THE PHONE OUT RIGHT!!! ITS THAT SIMPLE!!!
I don't see why Google is receiving a letter about their ETF and why people are so shocked about it. Seems to me they have a relatively standard third-party dealer agreement with T-Mobile where they discount the handset in exchange for a payment from T-Mobile after the customer has been with T-Mobile for a certain term.
Every carrier has been doing this for years with virtually all third-party retailers. If you go to "Bob's Cell Phones" in a mall and purchase, say, a BlackBerry Tour with Verizon Wireless, chances are nearly certain that in addition to the standard Verizon contract you will sign a secondary contract saying that if you cancel before a certain term (usually 90 to 180 days), you will pay Bob's Cell Phones the subsidy they lose from Verizon, which could be somewhere from $200 to $400. Amazon has similar terms. So do RadioShack, Advantage Wireless, Sam's Club, and other third-party dealers.
I'm glad the FCC is taking up the topic of ETFs. But if they send a letter to Google they better very well be sending it to any of the larger wireless phone retailers. Since that's hardly practical due to there being so many of them, they need to concentrate on the root causes of ridiculous ETFs: the carriers themselves. Dealers would not have to have a secondary contract if wireless carriers had a more straight-forward contract and subsidy system in place that actually correlated to the monthly price customers pay and the actual subsidy given.
You see the biggest issue that I have is the openness. Google does a very good job at selling a phone unsubsidized for a reasonable price and give you the option of choosing either AT&T or T-mobile (and soon to come, both, Sprint and Verizon). The problem is this......the band frequency each devices use to access data. Each carrier has a proprietary band that only works on their networks. It was fine with edge, but since the role out of 3g, you have to make certain phones with certain bands to work specifically with one carrier. Which is why the iPhone 3g will work only on Edge with T-mobile and not 3G, and the Nexus will on t-mobile's 3G (good luck with that by the way) and only on edge with AT&T. This will be the problem with Sprint and Verizon. The 3g band will probably work for verizon vs Sprint.
What business is it of the federal government what independent, private companies charge? It's not illegal to charge an ETF, and if customers voluntarily make themselves liable to a large ETF they are not being tricked or deceived. It is the consumer's choice whether or not they want a large ETF, or any ETF whatsoever (especially with the plethora of pre-paid wireless providers and plans out there).
This is absolute BS. Just like Verizon's $350 ETF and the Google/T-Mobile ETF are absolute BS. But, guess what? IT'S YOUR CHOICE, NOT THE GOVERNMENT'S!