The director of consumer protection for the Iowa Attorney General was at the statehouse Wednesday calling for legislation to give cell phone customers a break. A house bill would prevent companies from charging termination fees when a customer breaks a contract. Bill Brauch says competition is stifled when a cell phone user isn’t able to drop one plan and sign up for a better one.
Brauch says the cell phone industry claims without a contract they can’t offer free phones. "I don’t know that that is absolutely the case," Brauch said. Lobbyists representing cell phone companies says the companies do indeed absorb the cost of that free cellphone if a customer walks away. Ned Chiodo, who represents Verizon, says a deal’s a deal.
"And if you terminate the deal and you allow people to make a deal only until a better deal comes along, it throws everything up for grabs," Chiodo said. "They have a choice going in."
But, Brauch says the bottom line is about competition. "To us, the ability to shop and compare, and strong, vigorous marketplace competition makes sense. Having the early termination charge does diminish that competition…no question about it," Brauch said. The lobbyist for cellphone companies sharply disagree. They claim prices will go up if companies can’t lock in customers. Brian Johnson, speaking for U.S. Cellular, says that free phone you get with your contract needs to be paid for over time.
"That phone then becomes worthless. That is an extreme penalty on the business model of these companies," Johnson said. The bill would change Iowa law in light of a recent Iowa Supreme Court ruling which came down against a Nextel customer who challenged termination fees.