Court Makes Sprint Pay $73 Million Early Termination Fee

from the see-how-that-feels? dept

You know that awful feeling you get when your mobile operator tells you there's a huge "early termination fee" for canceling your contract early? Yeah, that's probably about how Sprint executives feel now that Sprint may need to pay $73 million for its ETFs. A closer look at the details shows that it really would just be refunding $18.25 million and then reversing charges on another $54.75 million in ETFs that hadn't been paid. People absolutely hate ETFs, and even Sprint acknowledged this last year when it noted that its eventual WiMAX network won't have ETFs.

However, there is a reason why such ETFs exist: it's basically to recoup the subsidy that mobile operators pay to give you your super cheap mobile phones. And, those ETFs were in the contracts offered to customers, so it's difficult to see why such things are really a problem. The actual ruling sheds some light on this, as it notes that in 80% of the ETFs, it was actually Sprint terminating the contract and then still charging the ETF -- which, as the ruling points out, is basically Sprint trying to get "liquidated damages." Then, the problem is that it does so in violation of a specific California law that requires a more accurate calculation of liquidated damages, beyond "the ETF is $200 no matter what." So, this isn't the end of ETFs by any means, but might mean that they need to be a bit more fair going forward.

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  1. identicon
    Anonymous Cowherd, 29 Jul 2008 @ 10:37pm

    A bit more fair

    To be "a bit more fair", perhaps they should drop ETFs entirely and make these changes:

    * "Free" phones are actually financed, with a few dollars added to each monthly bill for this purpose. (This is typical with broadband modems and the telcos like it fine there!)
    * If the phone gets paid for fully, it's yours to keep; the monthly bill drops by those few dollars.
    * If the contract is ended by either party before that point, the customer can either pay the balance and keep the phone, or return it. (If it's not in good condition, the customer is charged for the repair or the remaining unpaid portion of the phone's price, whichever is smaller.)

    Fair enough? (Too fair for any self-respecting telco to ever even consider, I'll bet! Even though returning the phone doesn't get you any money back with the above suggestions.)

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