[Piratefan98]

A California Judge ruled today that early termination fees on cell phone contracts are illegal. I wonder if there will be implications for early termination fees for satellite tv services. Seems the two are pretty similiar .... i.e., the consumer gets hardware (either a cell phone, or tv gear) at a greatly reduced cost, in exchange for being locked in for a specified period of time. Obviously, there will be appeals, but I imagine there's a lot of squirming going on tonight.

http://news.cnet.com/8301-1035_3-10004049-94.html?hhTest=1&part=rss&subj=news&tag=2547-1035_3-0-5

Jeff

 

[houskamp]

either it gets thrown out or your next cell phone costs 300$ more.. as well as your recievers going up 2-300$..

 

[curt8403]

either it gets thrown out or your next cell phone costs 300$ more.. as well as your recievers going up 2-300$..

make that 500 more for an HD DVR

 

[Sharkie_Fan]

It appears, though, that primarily the decision is regarding 'static' termination fees.

The article said that several other carriers are switching to prorated termination fees.... which leads me to believe that they think prorated fees are legal, and that the prorated fees have not been challenged (yet, anyway).

Satellite is already prorated, so I don't think they're quaking in their boots over this particular decision.

If prorated fees were challenged and shot down, then it would likely carry over into the satellite carriers as well.

 

[RobertE]

I'd bet after 6 months of no contract, non subsidized cell phones, people will be crying and beating on the doors for a contract with a cheap phone. People arn't going to pay $300 for a basic phone and $1000+ for a high end phone.

Perhaps this will be a good thing with the death of "Free, free, free..."

 

[Redlinetire]

I'd bet after 6 months of no contract, non subsidized cell phones, people will be crying and beating on the doors for a contract with a cheap phone. People arn't going to pay $300 for a basic phone and $1000+ for a high end phone.

Perhaps this will be a good thing with the death of "Free, free, free..."

I don't know what planet you're finding $300 phones for basic service, but I have a no contract, non-subsidized phone for $30. The LG Aloha on VirginMobile. And $7 month, walk away anytime. It doesn't have EDGE or 3G but who cares. It makes calls, sends text messages even does the web in a pinch.

 

[curt8403]

I don't know what planet you're finding $300 phones for basic service, but I have a no contract, non-subsidized phone for $30. The LG Aloha on VirginMobile. And $7 month, walk away anytime. It doesn't have EDGE or 3G but who cares. It makes calls, sends text messages even does the web in a pinch.

oh so. Virgin is a month to month deal, and you pay a bit more per minute. they are also a sister company of Sprint/Nextel, and Sprint/Nextel subsidizes Virgin

 

[inkahauts]

everyone will be going to prorated termination fees... and those are legal in cal...

 

[GregLee]

It appears, though, that primarily the decision is regarding 'static' termination fees.

It doesn't appear that way to me -- but I confess I haven't yet found the actual decision. Instead, it seems the issues are whether the termination fees are rates charges (versus special charges), whether California law (on unfair business practices) is applicable, and whether the charges are in proportion to actual losses incurred when there is early termination.

 

[inkahauts]

It doesn't appear that way to me -- but I confess I haven't yet found the actual decision. Instead, it seems the issues are whether the termination fees are rates charges (versus special charges), whether California law (on unfair business practices) is applicable, and whether the charges are in proportion to actual losses incurred when there is early termination.

In californai, after 30 days, if a you are charging a customer for returning a service, it must be prorated, when it comes to extended service contracts. A customer can't get back a full refund, for a 5 year contract after 3 years, for example, but they can get back a prorated amount. I see this ruling as following the same lines, although in reverse of who's getting the money back, so to speak...

 

[Ken S]

I'd bet after 6 months of no contract, non subsidized cell phones, people will be crying and beating on the doors for a contract with a cheap phone. People arn't going to pay $300 for a basic phone and $1000+ for a high end phone.

Perhaps this will be a good thing with the death of "Free, free, free..."

The first generation iPhone wasn't subsidized and didn't cost $1,000. Then again not that many people bought those...did they?

When it comes down to it DirecTV (and any other company) will have to provide the equipment necessary at a price that customers are willing to pay. If they provide quality service they should be able to keep their customers long term. Then again quality service and the satellite/cable/ and mobile phone industries have never gone hand in hand.

 

[Sharkie_Fan]

It doesn't appear that way to me -- but I confess I haven't yet found the actual decision. Instead, it seems the issues are whether the termination fees are rates charges (versus special charges), whether California law (on unfair business practices) is applicable, and whether the charges are in proportion to actual losses incurred when there is early termination.

The article clearly stated that ALL the cell phone providers are in the process of switching their policy to be prorated termination fees, as opposed to a flat rate fee for terminating early.

If the decision was with regards to ALL termination fees, a change in policy would be a waste of time.

I haven't read the actual decision either, but I'm reading between the lines here based on what I have been able to read about the whole story.

 

[Steve Mehs]

I don't know what planet you're finding $300 phones for basic service, but I have a no contract, non-subsidized phone for $30. The LG Aloha on VirginMobile. And $7 month, walk away anytime. It doesn't have EDGE or 3G but who cares. It makes calls, sends text messages even does the web in a pinch.

My phone retailed for $279, and it's just a basic phone, no camera, no video, no MP3 capability, no memory card, just a monochrome external display and a color internal display. I don't want any of that extra crap, I want a phone. I paid $100 for it w/ 2 year commitment.

 

[FlBillsfan]

either it gets thrown out or your next cell phone costs 300$ more.. as well as your recievers going up 2-300$..

Why should the cost of the receivers go up for a LEASED receiver? Direct TV can just lease it to another subscriber when they get it back, so where is there an extra cost to DTV if a customer opts out early?

 

[Herdfan]

People arn't going to pay $300 for a basic phone and $1000+ for a high end phone."

I don't know what planet you're finding $300 phones for basic service, but I have a no contract, non-subsidized phone for $30.

Yep, the Europeans have use beat bad on this one. Cheap ***** "Candy Bar" phones for $50, minutes are cheap and no contract.

 

[harsh]

The first generation iPhone wasn't subsidized and didn't cost $1,000. Then again not that many people bought those...did they?

Naw, those were $500-600.

 

[say-what]

It doesn't appear that way to me -- but I confess I haven't yet found the actual decision.

This should pull up the actual decision in a java based viewer: http://apps.alameda.courts.ca.gov/d...mgviewer.html&rofadt=07/28/08&Action=21704699

The docket sheet can be found here: http://apps.alameda.courts.ca.gov/d...itcase.html&CurrBatchNbr=1&CaseNbr=RG03121510

Click on "Register of Actions" in the left column and scroll down to: 07/28/08 Statement of Decision Issued

 

[Sharkie_Fan]

I've only read about 1/3 of the decision so far, but it appears to me (so far, anyway), that the judges issue is not with early termination fees, per se, but with the fact that the fees are not in any way related to the losses of the company.

There was no cost analysis done by Sprint/Nextel to determine how much they lost when a customer terminated their contract early. Also, all the evidence they presented in trial with regards to their losses was stated on a "per subscriber" basis. However, ETFs were charged PER LINE.

I read some analysis a little while ago that said the courts have allowed ETF's as long as there is a relationship to the damages incurred and they are not overtly punitive. I don't have any rulings in front of me that confirm or disprove that, but it would seem to make sense, especially given the fact that everybody is switching to prorated termination fees.

I'll get through the rest of the ruling tomorrow when I have more time, but it seems to me that the judge is taking issue with these particular ETFs and how they came up with the number and not making a broad sweeping statement regarding the legality of ETFs.

 

[houskamp]

I've only read about 1/3 of the decision so far, but it appears to me (so far, anyway), that the judges issue is not with early termination fees, per se, but with the fact that the fees are not in any way related to the losses of the company.

There was no cost analysis done by Sprint/Nextel to determine how much they lost when a customer terminated their contract early. Also, all the evidence they presented in trial with regards to their losses was stated on a "per subscriber" basis. However, ETFs were charged PER LINE.

I read some analysis a little while ago that said the courts have allowed ETF's as long as there is a relationship to the damages incurred and they are not overtly punitive. I don't have any rulings in front of me that confirm or disprove that, but it would seem to make sense, especially given the fact that everybody is switching to prorated termination fees.

I'll get through the rest of the ruling tomorrow when I have more time, but it seems to me that the judge is taking issue with these particular ETFs and how they came up with the number and not making a broad sweeping statement regarding the legality of ETFs.

by that logic it could limit the fees to recovery cost (cost to get hardware back), refurb cost (cost to make it saleable again or it's decrease in value), and the initial setup costs (cost of canceled install)..
very interesting..

 

[dgordo]

Sharkie_Fan is correct. Its not just that ETFs should be prorated, the damages need to reflect actual losses. Sprint failed to show that $200 was an accurate representation of their losses.