Fees for Google’s Nexus One Phone Probed by FCC
The FCC asked another round of questions about early termination fees in letters to the four national carriers Tuesday. This time around, the commission also questioned Google, which recently released the Nexus One handset but isn’t a carrier that comes under conventional FCC regulation. T-Mobile is the only service provider for the phone for now. The letters were signed by Consumer Bureau Chief Joel Gurin and Wireless Bureau Chief Ruth Milkman.
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Nexus One was of particular interest to the FCC because if a subscriber cancels 14-181 days into a contract, the termination is $550, more than those that have been charged by carriers, a commission official said.
“The Google-T-Mobile plan we feel is an unusual kind of hybrid plan in that there are ETFs that are assessed both by Google and by T-Mobile,” Gurin told us. “For a consumer, it feels like you're purchasing a single plan, but there are ETFs paid to both companies. … We felt that we really needed to write to both companies to really understand how these two ETFs are structured.” Gurin said the “amount and the complexity” of some of these fees is confusing to consumers. “Our real goal at this point is to make these ETFs transparent and clear in their rationale, in their structure, so that consumers know exactly what they're signing up for.”
“The combination of ETFs from Google and T-Mobile for the Nexus One is … unique among the four major national carriers,” said the FCC’s letter to Google. “Consumers have been surprised by this policy and by its financial impact. Please let us know your rationale(s) for these combined fees, and whether you have coordinated or will coordinate on these fees and on the disclosure of their combined effect.”
“Where does Google fall into the FCC’s jurisdiction here?” asked a wireless industry source. “I don’t know where in the Communications Act the FCC gets jurisdiction over business practices. … The timing has a looking-through-the rearview-mirror aspect to it. Each of the major carriers has addressed” ETFs. A commission official said, “Google is not a carrier -- at least not yet.”
“The purpose of this letter is to gather information about whether customers are adequately informed about AT&T’s Early Termination Fees for wireless service,” said the letter to that carrier. “We recognize that wireless carriers may have various rationales for ETFs. At the same time, these fees are substantial (and in some cases are increasing) and have an important impact on consumers’ ability to switch carriers.” All the letters to the carriers asked the same questions.
Carriers agree that openness and disclosure are critical, said Chris Guttman-McCabe, CTIA’s vice president of regulatory affairs. “We hope that there is a recognition by the FCC that these fees are part of the rate and rate structure that allows wireless carriers to, among other things, subsidize phone purchases,” he said. “Additionally, consumers of all of the carriers that received letters from the FCC have multiple options when it comes choosing plans and devices without early termination fees.”
The ETF letters are problematic, said Randolph May, the Free State Foundation’s president. “They purport to want to gather information concerning the adequacy of consumer disclosure about ETF practices. But it is evident from the questions that what the FCC is really interested in is how the termination fees are established and whether, in the agency’s view, they are reasonable. … I'd prefer to see the Commission concentrate on finishing the broadband plan and reforming the universal service regime.”
But it’s good that “the FCC is beginning to ask tough questions about this unfair practice,” said Joel Kelsey, policy analyst for Consumers Union. “Wireless carriers have been using early termination fees to limit consumer choice and punish subscribers in search of competition for years.”
“Consumers should not have to pay $350 -- or more -- to cancel a bad service, but the harm is even greater when this penalty comes as a surprise,” said Free Press Policy Counsel Chris Riley. “The FCC is right to express concern that disclosure of these penalties and their justification follows no clear format. We urge the FCC to clarify that the ‘discount’ offered on devices should be measured relative to the wholesale price of the device and not to the artificial, meaningless, and uncompetitive ‘retail price.'”
“Like the other carriers, T-Mobile will respond to the FCC’s questions and provide it with information that underscores the consumer benefits of our practices in a highly competitive wireless marketplace,” said Kathleen Ham, the carrier’s vice president for federal affairs. AT&T said, “We welcome the opportunity to explain to the FCC all of the choices available to consumers and our consumer-friendly disclosure policies, as well.” Google had no response by our deadline.