Or really, the consumer could just read the contract before they sign it. Problem solved. ;)
Travis Microserv Larry Yunker wrote: > I think that the FCC has a bona fide reason for addressing the early > termination fee issue. The underlying concern is that early termination > fees often do not reflect the true cost incurred by the contracting provider > as a result of the subscriber's breach of contract. > > > > In reality, an early termination fee should be prorated over the course of > the contract such that at the beginning of the contract term, the cost > includes the full cost of equipment, installation, and acquisition which has > been lost due to that customer. Whereas, as the subscriber nears the end of > his term, there should be very little cost remaining to be recovered. > > > > The problems that arise are these: > > (1) Early termination fees are often too low to cover the full cost of the > equipment/installation, so companies "average-out" losses by cost-shifting. > > > > For example assume Customer A and Customer B both sign up for 2 year terms > with a $200.00 early termination fee and each received equipment and > installation worth $350.00. Customer A drops in month 1, so the Service > Provider loses its entire $350.00 investment. Customer B drops in month 23 > so the Service Provider has recouped most 95% of its $350.00 investment. > The Service Provider loses $150.00 on Customer A but gains roughly $182.00 > by overcharging Customer B. This system shifts the cost burden from those > who drop early to those who drop late. > > > > (2) Customers are usually not made aware of the costs of the equipment and > installation that they are receiving as part of their package deal. If > customer's understood that their neat new Razor phone actually costs > $350.00, they might opt to keep their old phone longer or they might not buy > at all. Similarly in the broadband arena, if the DSL subscriber understood > that the DSL/Wireless router costs $100 and the DSLAM port costs $200, they > might think twice before signing up for 2 years at $20.00 a month. > > > > (3) Providers lose some of their incentive to maintain quality service > and/or customer service when they know that their clients are under an > oppressive contract which limits their ability to choose an alternative > provider. > > For example: If a provider knows that their customer is on a 2 year term > with a $200.00 early termination fee and that provider charges the customer > $40.00 per month for service, the provider has very little incentive to > respond to the customer during the last 5 months of the contract. During > that period, the provider stands to gain more from the early termination > than they do through the subscription fees! > > > > Potential Solutions to these problems: > > (1) Require disclosure and option to pay actual installation, equipment, > and acquisition fees in lieu of early termination fees. > > (2) Require that cancellation fees reflect the actual cost of > installation, equipment, and acquisition fees. (This one is pretty > idealistic. providers will almost always eat some cost and pass it along > through subscription fees). > > (3) Require proration of early termination fees so that the cost-shifting > described above CANNOT OCCUR. > > (4) Allow/Encourage/Require? competing providers to buy-out the prorated > balance of any early termination fee for a new customer that wants to switch > to that new provider. Often the cost of buying out a prorated balance will > be less than the cost of new customer acquisition, so it would be a win-win > for the new provider and the new customer. > > (5) Encourage interoperability of equipment between providers or provide > some realistic secondary market for customer equipment so that costs of > switching carriers could be mitigated. Make "locking phones" and/or CPE > illegal wherever the customer "owns" the equipment. > > (6) Provide a mechanism for regulation of minimum standards of service, > if a provider cannot meet the minimum standard of service then a customer > should be released from his contract without penalty and the equipment > should be returned to the provider. > > a. This idea could be established in the cell phone industry by recording > a baseline of coverage within the first 30 days of new service and comparing > changes in coverage to that first 30 day baseline. If the coverage drops > significantly from the baseline then the customer would have a basis for > dropping without penalty. In the fixed wireless business, this process > could be more difficult due to the uncertainty of outside interference, but > the concept remains the same. Set a baseline, set a minimum threshold and > create a procedure for testing against that threshold. > > > > Well that's my two cents worth. hopefully some of these ideas make it > through to the powers-that-be in D.C. > > > > > > Larry Yunker, J.D. > > Network Consultant > > [EMAIL PROTECTED] > > > > > > -----Original Message----- > From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On > Behalf Of Travis Johnson > Sent: Friday, May 30, 2008 11:51 PM > To: [EMAIL PROTECTED]; WISPA General List > Subject: [WISPA] FCC changes > > > > This could turn in to something it shouldn't really fast... > > > > http://www.washingtonpost.com/wp-dyn/content/article/2008/05/30/AR2008053002 > 776.html > > > > We charge 100% of the remaining contract because we are eating the cost > > on the equipment and rolling a truck (for both installation and pickup). > > Now they want to regulate how much we can charge for early termination. :( > > > > Travis > > Microserv > > > > > > ---------------------------------------------------------------------------- > ---- > > WISPA Wants You! 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