Early Termination Fees are effectively a loan, so why limit it?
Sam Diaz made some great points in his blog posting “Bill aims to limit wireless early termination fees; Do we need this?” Senator Amy Klobucher (D-Minn) has put forth a bill that aims to limit the size of Early Termination Fees (ETF), but why? An ETF is effectively a phone loan where more expensive phones given to consumers for very little money up front are associated with larger ETF. The bigger the ETF, the bigger the loan. At most, we’re looking at a $350 loan so how is it beneficial for consumers to put a cap on that loan size? Would it make sense to cap credit card limits to less than $350?
Consumers have the right to buy the phones upfront and never have to pay a dime on an ETF and they have plenty of inexpensive no-contract service options to choose from. The fact that most consumers choose to pay less up front but more later does not indicate a broken market, it only indicates a normal market place.
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