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Verizon seeks deal on cell phone cancellation fees
May 25, 2008 / 3:09 PM / 9 years ago

Verizon seeks deal on cell phone cancellation fees

WASHINGTON (Reuters) - Verizon Wireless said on Friday it is trying to forge a deal with consumer groups and regulators that would reduce the fees customers are charged when they cancel their cell phone service early.

Federal Communications Commission Chairman Kevin Martin said at a media briefing on Friday the two sides had made “substantial progress” toward a compromise, although there was still no final consensus.

“I think it would be good for consumers and, ultimately, good for the industry if there was more of a national framework with consumer protections built into it,” Martin said.

Verizon said in a statement it was “pleased the commission is turning its attention to this issue.”

The early cancellation fees are a perennial complaint of wireless phone customers and have also drawn complaints from some lawmakers in Congress.

Wireless carriers such as Verizon Wireless, AT&T Inc (T.N) and Sprint Nextel Corp (S.N) say the fees are needed to ensure they recover subsidies they provide for handsets that customers get under the most popular service plans, as well as other up- front costs and rate discounts for those plans.

Verizon Wireless is a joint venture of Verizon Communications Inc (VZ.N) and Vodafone Group Plc (VOD.L).

Martin listed several concerns he has about the current early termination fees, including that the fees go into effect even before customers receive their first bills and that, in some cases, they remain high even as a customer’s contract nears expiration.

Verizon Wireless already prorates the early termination fees, reducing them as customers’ contracts get closer to expiring. AT&T is scheduled to begin prorating the fees starting on Sunday. Sprint Nextel has indicated it will do so by the end of this year.

The compromise floated by Verizon Wireless would place additional restrictions on the fees the carriers could charge and it would shift oversight of the fees to the FCC from state regulators, a source familiar with the discussions said.

The deal would benefit the industry by taking the dispute out of state courts, where the companies are currently facing a number of class-action suits filed by customers.

“Ultimately, it makes more sense for wireless consumers and providers to have one set of clear and consistent guidelines, rather than a 50-state patchwork of regulations,” Verizon said.

According to a filing with the agency, executives with Verizon and Verizon Wireless met FCC officials on Tuesday to discuss the early termination fees.

The Associated Press reported earlier this week that executives of other leading wireless companies had also agreed to the terms of the Verizon Wireless proposal.

Martin said at the news briefing that consumer groups “still have concerns” about the proposal.

“I‘m not sure there was any consensus yet built around it,” he said.

The commission is scheduled to hold a public hearing on the issue on June 12.

Editing by Tim Dobbyn and Andre Grenon

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