The FCC survey found similar confusion and surprise over early termination fee practices. While there are other factors considered in determining the ETF, it is generally accepted as a prorated fee representing the amount subsidized by the carrier for the cost of a new smartphone or mobile handset in exchange for a contractual obligation.
In other words, a brand new 32Gb Apple iPhone 3GS costs $499, but AT&T will subsidize $200 of that cost and sell you the smartphone for $299 with a two-year contract. AT&T expects that it will make up that difference and then some through the mobile service, data, and texting fees you will incur over the two year period, and if you break the contract early AT&T will want its $200 (and then some) back.
AT&T just recently followed in Verizon's footsteps by announcing an increase of its ETF for smartphones from $175 to $325 effective June 1. Verizon's smartphone ETF is actually even higher, coming in at $350. Both ETFs exceed the actual amount subsidized by the carriers, but Verizon and AT&T (and other carriers) also claim the right to recover some portion of lost potential revenue they had expected to receive over the life of the contract.
A statement from the FCC announcing the survey results explains "The survey shows that ETFs are one factor that can keep cell phone customers from switching carriers even when their service is not ideal. Forty-three percent of these customers said ETFs were a major reason they would stay with their current service, almost exactly the same number who said they would be deterred from switching by the cost of setting up a new service or by paying a deposit on a new service."
That has an ominous tone to it, as if the carriers are somehow extorting customers to force them to remain locked in. The reality, though, is that the customers willingly accepted the subsidy from the carrier, and willingly engaged in the contract in order to receive the subsidy. Customers that are not comfortable with those terms are welcome to pay full price for their smartphone and pay for monthly service without the contractual obligation.
The FCC statement includes this quote: "These findings support our ongoing efforts to help consumers get better information on these charges and fees," said Joel Gurin, Chief of the FCC's Consumer and Governmental Affairs Bureau. "As we know from our consumer complaint center, even an unexpected charge of $20 or $30 can make a difference to many people. Several carriers are taking steps to make their fees and billing more transparent, and we would like this to become a universal practice. We're confident that we will be able to work with both wireless carriers and public interest groups to help consumers avoid these unwelcome surprises."
Fair enough. Nobody likes an unwelcome surprise. But, IT administrators and business professionals should accept responsibility for understanding the billing and early termination fees they have committed to rather than expecting the carrier to hold their hand and manage the billing for them.