Cell Phone Plans

By: Christine Peppler

Cell phone plans in the US generally require a commitment of 2 years from consumers. The primary advantages of being under such plans are the lower cost per minute of talk time that is available to users as well as the significant discount in the cost of the phone they receive. In many instances, the cell phone itself may be completely cost free for those committing to a plan.

For many years however consumers have voiced concerns about some of the more negative aspects of committing to cell phone plans in this country. One complaint has been the difficulty they face when they wish to change carriers prior to the end of the plan contract. When a user finds that a particular carrier does not provide the level of quality service or the features that they need, they run into barriers when they attempt to change.

Luckily, one of the issues related to switching providers was abated in 2004 when local number portability became the norm. Prior to this time, consumers had to drop their current number and pick up a new one when switching providers. Now however, consumers can contact their current carrier to begin the process of switching their current number over to a new local carrier and incur only a small charge. Gone are the headaches of notifying everyone of a change in number.

Of course, terminating a current contract and changing providers entails a number of other problems however. Probably the one creating the most angst is that anytime a contract is ended prematurely, the cellular provider generally charges a flat termination fee. This fee, often to the tune of $150 to $250 is reportedly assessed to allow the provider to cover the cost they incurred in providing the cell phone at a significant discount. Consumers have argued that the fee is exorbitant; particularly for those who have had the contract and paid their monthly bills for a year or more prior to attempting a change over. It would seem that the cellular provider in these instances would have had time to recoup most of the initial cost that was incurred by providing the cell phone itself.

Recently, it appears that calls from consumers to allow greater flexibility with cell phone plans aren't falling on deaf ears and may spell relief from the issue of flat termination fees across the industry. During 2006, Verizon made some initial steps by changing their policy related to flat termination fees when customers decide they need to switch carriers. Under their new policy, consumers pay a pro-rated fee which decreases the longer they have the phone/plan. Certainly, a move by an industry leader to base termination fees on the amount of time remaining in the contract is a strong shove for other carriers to follow suit. And in fact, nearly a year later, AT&T decided to make a similar move by instituting the pro-rated termination fee. It is anticipated that other carriers will follow resulting in greater flexibility on this issues across the industry.

While it appears likely that moves to make termination fees more reasonable will become the norm based on competition among cellular providers, the US Senate may be a driving force that assures all carriers institute such policies. A measure known as the Cell Phone Empowerment Act is now being considered by the Senate. It includes a number of consumer protection measures such as requiring providers to pro-rate early termination fees by reducing such fees by 50% after the first year of the contract is fulfilled. Providers would also be required to eliminate fees other than those required by local, state, and federal government. The measure also mandates that providers communicate more clearly about changes to a contract and allows consumers 30 days to cancel such services. In addition, there are provisions to assure consumers can get their hands on information to make good choices when initially selecting cell phone plans. For instance providers would be required to provide coverage maps to consumers and the FCC would make data available to the public related to dropped calls and coverage gaps for all cellular services.

With recent policy changes from some cellular providers and the proposed actions of the Senate, the move toward allowing consumers greater flexibility in switching the provider of their cell phone plans and making the process less painful appears to be well underway and will hopefully become a concern of the past.

Cell Phones
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