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Sprint, T-Mobile Prorate Termination Fees

Last of four major carriers to adopt customer-friendly policies

by Martin H. Bosworth
ConsumerAffairs.com

November 8, 2007 

Sprint announced yesterday that it would implement changes to its contract policies such as prorating early termination fees (ETFs) over the life of a customer contract. Sprint customers will also be able to make changes to their rate plans without having to renew existing contracts, the company said.

"Giving our customers a superior experience is our first priority," said Sprint executive Bob Johnson. "We are introducing programs to reward our customers and show our appreciation for their business. Rewarding their loyalty is a first step in gaining their trust."

The very same day, T-Mobile announced that it too would revise its contract policies to prorate ETFs. T-Mobile provided few details about its policy, beyond a rollout date sometime in the first half of 2008.

“T-Mobile is widely recognized as the undisputed service leader in wireless. We want to do everything possible to create a great experience so customers want to stay with us for years,” said T-Mobile senior vice-president Susan Nokes.

All four major wireless carriers in the United States now have policies that lower contract cancellation fees over the life of the contract. Early termination fees have been a longstanding bone of contention in the wireless market, with customers and consumer advocates arguing that the steep fees discourage subscribers from switching plans and lock them into a service they may not be happy with.

Verizon takes the lead

Perhaps sensing a rise in consumer dissatisfaction, Verizon Wireless was the first carrier to announce that it would prorate ETFs in June 2006, but customers would have to renew their agreements to take advantage of the new terms.

It was not until over a year later that Verizon changed its contract policy to enable customers to change their plans without renewing contracts.

The other wireless carriers continued to impose full termination fees, but the tide began to turn when both the FCC and Congress announced they would be looking into limiting termination fees and restricting carriers from forcing customers to renew contracts in order to change service plans.

California's Supreme Court ruled in October 2007 that a class action lawsuit against T-Mobile over the steep cost of the termination fees could proceed. T-Mobile may have changed its policies to preempt the suit and prevent other disgruntled customers from filing claims in other states.

And Sprint, already struggling with customer losses and the resignation of its CEO, most likely made the change just to stay in the game.

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