Sprint — “I Could Have Had a Prorated ETF!”

[With apologies to V8] All I can say is stick it in your eye and smoke it when you are done. Looks like California sent a message to the carriers and Sprint wasn’t fast enough to step back like everyone else. Poor shareholders. –

A judge is ordering Sprint Nextel to refund $18.25 million to California customers who paid early termination fees to get out of their mobile-phone contracts. The tentative decision also requires the company to forgo $54.75 million in early termination fees it levied but went unpaid by California consumers.

A California judge late Monday ruled (.pdf) that the fees, which range as high as $200 a line, were an unlawful penalty under California law and were “implemented primarily as a means to discourage customers from leaving” their contracts.

The decision comes as major wireless carriers — T-Mobile, Verizon and AT&T — have recast their early termination fee schedules and pro-rated them, in part to avoid or settle lawsuits. Verizon agreed two weeks ago to pay $21 million to settle a similar class action.

A pro-rated fee means a customer pays less to break a contract the longer one continues the contract. Contracts usually vary from one to two years.

We of course have indicated almost a year ago that this had a good chance of being the outcome. Between Calif and Wis the ETF is taking a beating. The first carrier to drop it all together will be more competitive in the long run. ETFs made sense when the network was thin, there were few users and the capital costs per user were high. It was an insurance vehice for the carrier to know that their investment in physical plant would bear fruit. But that has long since been a problem The carriers have all the customers they need and their investment dollar per user is low. They risk nothing these days by not having an ETF.

My one complaint? I detest courts meddling in contracts unless they are illegal. Clearly ETF’s are not. Not only that but there are no contract wireless options in the marketplace. If enough people walked to no contract carriers the loss of revenue would force the ETF carriers to drop the requirement. Consumers sometimes are just not thinking.

Linky.