FCC probes Google, T-Mobile for double-whammy termination fees

The average consumer is so clueless. Contract cancellation fees are some of the most abused tactics that typically come in the fine print.

As consumers, we want switching costs to be as low as possible. Which they should be. Two years is an insane amount of time to be chained to a particular provider. They should be worried. Verizon tried to get away with something similar, and the FCC pretty much said "no dice"

http://online.wsj.com/article/SB1000142405274870352350457460...

From the PDF release by the FCC: “I was pleased to see the Commission’s Wireless Bureau pose a series of important questions in early December to Verizon Wireless regarding the company’s recently increased early termination fees (ETFs) and related issues. I was surprised, as many people were, to see that Verizon elected to raise its early termination fees for certain ‘advanced devices.’ “Late Friday, Verizon Wireless responded to the Bureau’s queries. The company’s answers, however, are unsatisfying and, in some cases, troubling. In particular, I am concerned about what appears to be a shifting and tenuous rationale for ETFs. No longer is the claim that ETFs are tied solely to the true cost of the wireless device; rather, they are now also used to foot the bill for ‘advertising costs, commissions for sales personnel, and store costs.’ Consumers already pay high monthly fees for voice and data designed to cover the costs of doing business. So when they are assessed excessive penalties, especially when they are near the end of their contract term, it is hard for me to believe that the public interest is being well served.

Oy FINALLY people are catching on to this. Ive sold cell phones since 2002 and here is the deal:

Basically non t-mobile, verizon or whatever stores are independent stores. They buy a phone, say for $500. Then a contract gives them a spiff for it, say $250. So the store charges you $300 for the phone and makes $50 off the sale. IF you terminate the contract with t-mobile or any of these companies before your contract is up AT ANY TIME, that $250 is not paid to the store, or is deducted from what the carrier owes the store. Basically the store (like google) MUST charge you $250 or they lose more money than they made off of your sale.

This is why the little cellphone stores make you sign similar agreements. Now how the company recoups the "price of the phone" by early termination fee, I don't know. The fee is pure profit for the carrier.