WASHINGTON The chairman of the Federal Communications Commission laid out a plan Thursday to regulate the high fees that cellular phone companies charge consumers for canceling their contracts early.
FCC Chairman Kevin Martin's proposal was similar to an industry plan put forward last month.
Martin said he was skeptical ongoing class-action lawsuits would adequately resolve for consumers all the pending issues about the unpopular fees. The chairman made his comments at a public hearing.
Martin joked that his wife, apparently unhappy about the fees, had volunteered to testify at the hearing. He also criticized the fees, saying that "in practice, it can leave people locked into a service that they really want to leave."
Companies charge early termination fees that can range from $150 to $225 to recover the cost of cell phones, which they subsidize under long-term service contracts, according to wireless companies. The fees also defray costs for signing up new customers, companies said.
The fees have resulted in class-action lawsuits in several states and legislative proposals on Capitol Hill and in state legislatures.
Martin did not specifically commit the commission to regulating the fees, but said how such a system should work if it did.
"If we take jurisdiction and therefore responsibility for this issue, then we must have clear rules that adequately protect consumers," he said.
Martin's plan would require the fees be related to the actual cost of the phones. A fee for a $50 phone would be higher than for a $5 phone, he said.
Martin said such fees should be pro rated, or reduced over the time of the contract. The nation's two largest wireless carriers have both begun pro rating fees with other national carriers promising to follow.
The chairman also said the contract should be a "reasonable length of time" and extension of contracts should not necessarily include a renewal of the termination fee.
Finally, he said consumers should have a chance to examine their first bill before they are subjected to the fees.
The Associated Press last month revealed details of the industry's efforts to help consumers avoid such fees in exchange for letting companies off the hook in state courts where they are being sued for hundreds of millions of dollars by angry customers.
The plan was similar to what Martin is proposing.
State officials have resisted the imposition of federal control over the fees, saying state consumer protections are more responsive to consumers.
"Any federal approach should not take the state cops off the beat. Partnership, not pre-emption is the preferred policy," said Larry Landis, a commissioner on the Indiana Utility Regulatory Commission.
Anne Boyle, who chairs the Nebraska Public Service Commission, said the fees "should be abolished."
Thursday's hearing included representatives from state government, the cable and satellite television industries as well as consumers and consumer advocates.
Industry representatives, like Tom Tauke, speaking for Verizon Wireless, said the fees should be regulated at the federal level.
"Faced with the prospect of multiple state policies on this issue, Verizon believes that appropriate federal action to establish a national policy is preferable," he said.