WASHINGTON/NEW YORK (Reuters) - The U.S. telecommunications regulator asked Verizon Wireless, AT&T Inc (T.N), Google Inc (GOOG.O) and other mobile companies to explain how they tell their customers about early termination fees due when they bow out of service contracts early.
The companies, which also include Sprint Nextel Corp (S.N), Verizon Wireless and Deutsche Telekom AG’s (DTEGn.DE) T-Mobile USA, have until February 23 to tell the Federal Communications Commission how they disclose early termination obligations.
The FCC said in letters to the companies on Tuesday that since there is not an industry standard for the fees, consumers must be able to understand what they are signing up for when they choose a service plan with an early termination fee.
U.S. service providers typically require customers to sign two-year service contracts in exchange for a discount on handset prices. Since carriers pay for part of the cost of the phone the fee is their way of recouping that amount if customers leave before paying for two years of service.
The FCC had kicked off an investigation into such fees late last year after Verizon Wireless, the biggest U.S. mobile service, caused an uproar by doubling its fees for smartphone users who bow out of their service contracts early.
The FCC’s chairman, Julius Genachowski, indicated earlier this month that he wanted more details, saying that Verizon’s response to the FCC had raised more questions.
This was before it emerged that some T-Mobile USA customers who exit contracts early could be on the hook for fees that exceed the cost of buying — without a contract — Nexus One, a phone made by HTC Corp (2498.TW) and sold by Google.
Verizon Wireless, a venture of Verizon Communications Inc (VZ.N) and Vodafone Group Plc (VOD.L), declined comment on the letters, saying it would look at them and then respond to the FCC. Representatives for Google, AT&T, Sprint and T-Mobile USA were not immediately available for comment.
The FCC asked the companies to detail how each discloses early termination fee information to consumers in advertisements, in statements on corporate websites, in brochures and sales scripts and in monthly bills.
“The absence of a standard framework makes it especially important that consumers have a clear understanding of terms and practices of individual companies, which will allow them to compare services offered by different providers on a clear and consistent basis,” the FCC said in the letters.
Reporting by Julie Vorman in Washington and Sinead Carew in New York, editing by Gerald E. McCormick, Phil Berlowitz