Ruthie Kelly’s Portfolio

Ending early termination I’ve always been suspicious of the fact that when I sign a contract with a cell phone company, I am expected to pay around $200 to end the contract. It seems to go against the principles of capitalism: The best products and services get my money. If there’s a better service out there, or if my current service isn’t fulfilling my needs or its promises, I should be free to switch without a $200 shot to the wallet.

This complaint is not a new one, but for the first time on record, a court of law agrees. An Alameda County Superior Court judge recently released a preliminary ruling saying that Sprint Nextel must pay consumers in California $18.2 million from a class-action lawsuit that challenged these “early termination fees,” and that the company must stop trying to collect the $54.7 million they are seeking from other customers who haven’t paid the charges.

Even though this ruling is only preliminary and thus not set in stone, and applies only to Sprint Nextel, it is a huge step in acknowledging the way such fees hurt consumers. It shows the unfair advantage given to cell-phone companies, an advantage that they can and do exploit.

Namely, it undermines the process that is the foundation of capitalism: competition. If customers are unable to go to a different service when they’re dissatisfied or their needs aren’t being met, then there’s no competition going on. That’s a monopoly.

There’s a reason that competition is a key element of capitalism. Fees like this severely lessen the motivation for the company to make sure it delivers quality service, competitive prices and complaint resolution in a timely manner. My carrier, Verizon, is famous for wrong charges and incorrect bills. One Verizon user was overcharged the rate he was originally quoted by a hundred times, and the resulting inability to resolve the problem led him to create www.verizonmath.com.

The early termination fee basically locks consumers into a long-term contract, and then the company can freely add random charges, “correctly” or not, change prices legally via the contracts “fine print” and ignore customers’ complaints. This puts cell phone companies at an insanely unfair advantage, one not enjoyed by any other type of company.

I’m not suggesting that cell phone users should be able to switch contracts blindly and at-will. The long-term contract is part of the reason companies are able to provide lower rates in the first place. But there are other options, ones that allow companies to retain customers and provide quality service, without being given free reign to exploit and ignore their customers. Several carriers have implemented plans in which the total cancellation fee is reduced as the contract continues, so that the closer you are to the end of your contract, the less you have to pay to end it. This gives consumers a better option for ending a service that is unsatisfactory. It’s easier on their wallets while still giving companies the motivation to do what they’re supposed to be doing - compete.

In the meantime, I’m going to sit back and contemplate the possibility of switching to an iPhone.

Read the original column online here.