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Dallas Business Journal:

But now, a backlash may be forming.

Take AT&T Mobility, the wireless unit of Dallas-based AT&T Inc. In late January, the company began notifying customers that it has agreed to settle a New Jersey class-action suit alleging its early termination fees were illegal, court documents say. Should the settlement be approved, AT&T will pay $16 million in cash and provide another $2 million in unspecified non-cash benefits, court documents say.

In an e-mailed statement, a spokeswoman for the company, Sarah Andreani, said the company "strongly denies" wrongdoing and that "no court has found AT&T Mobility committed any wrongdoing regarding these fees. However, we have agreed to settle to avoid the burden and cost of further litigation."

Andreani said the New Jersey suit involves early-termination fees of the old AT&T Wireless and Cingular Wireless, both of which were folded into the broader AT&T umbrella several years ago.

AT&T is not alone in facing consumer suits over early termination fees. Last year, Sprint Nextel Corp. agreed to settle litigation over its fees for $14 million in cash and $3.5 million in noncash benefits. Like AT&T, Sprint in court papers denied wrongdoing and said it was settling the case to avoid the cost and hassle of litigation.

The issue has attracted the interest of the Federal Communications Commission. The Washington, D.C.-based agency sent letters in late January to four of the largest wireless carriers in the country - AT&T, Sprint, T-Mobile and Verizon Wireless - with about a dozen questions about the fees. Also receiving an FCC letter in the inquiry was Google, which charges an "equipment recovery fee" of up to $350 for returns of its Nexus One handset within 120 days of "continuous wireless service," according to the service agreement posted on California-based Google's Web site.

"We recognize that wireless carriers may have various rationales for (early termination fees)," the FCC's letters said. "At the same time, these are substantial (and in some cases are increasing) and have an important impact on consumers' ability to switch carriers ... (I)t is essential that consumers fully understand what they are signing up for - both in the short term and over the life of the contract - when they accept a service plan with an early termination fee."

The FCC has the authority to establish regulations on early termination fees, according to Trey Branham, a partner in the Dallas law firm Goldfarb Branham LLP. The question the agency is seeking to resolve, he added, "is why there is a disparity between early termination fees. Some phones don't have them, others do."

Dallas Attorney Charles "Trey" Branham in Dallas Business Journal

Subsidizing phones
For their part, wireless carriers say they need to charge early termination fees in order to recover the cost of handsets they subsidize for customers.

"The early termination fee in the contract is a benefit for consumers, because it makes wireless service more affordable," said John Taylor, a spokesman for Overland Park, Kan.-based Sprint Nextel, which employs at least 500 people in North Texas.

http://www.bizjournals.com/dallas/stories/2010/02/08/story12.html

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