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Aug. 14, 2009

Late yesterday, Sprint Nextel was forced to pay $17.5 million to settle a class action lawsuit over its early termination fees (ETFs) it charged over the last 10 years.

As part of the settlement, Sprint will pay out $14 million into a common fund and another $3.5 million in non-cash benefits to some class members.

The lawsuit covers Sprint subscribers with personal or mixed personal/business contracts between July 1, 1999, and Dec. 31, 2008.

However, Sprint did say it will not insert a flat early termination fee provision in its customer contracts until 2011 but may charge pro-rated fees up until then.

Sprint could not be reached for additional comment by press time, but has previously denied that the fees are illegal.

But Sprint still faces a lawsuit over ETFs pending in a California state court.

ETFs are charged to wireless customers who end their contracts early.

Although the FCC had previously announced their intention to examine the issue, there has been no additional regulation of the fees.

In June 2008, Verizon Wireless agreed to pay out $21 million to settle similar suits in California. As with Sprint, Verizon settled the suit without admitting any wrongdoing.

And three years ago, Verizon announced an industry-leading move to reduce or prorate its ETFs.

The subject of early termination fees is a very controversial one in the mobile industry, and one that the FCC promises to better address in the coming months.

While it is understandable that wireless operators need to recoup their 'investments' the FCC will look into other potential means of 'revenue enhancements' that could replace ETFs when a customer decides to cancel its contract before its time.

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Source: Sprint Nextel.