Sprint Nextel dinged $73M for ETF policy
California court decision seen as harbinger for other ETF cases
August 4 2008 - 5:59 am ET | Colin Gibbs | RCR Wireless News
A California Superior Court judge ordered Sprint Nextel Corp. to pay $73 million after finding its early termination fee policy violated California law.
Alameda County Superior Court Judge Bonnie Sabraw said the carrier must pay $18.25 million to users who paid the ETFs, and provide a credit of $54.75 million to those who were charged but didn’t pay the fees. Citing “Sprint’s motivation in creating and setting the amount of the ETF and its decision not to vary the ETF in proportion to its actual damages” — among other factors — Sabraw deemed the fee unlawful under California law.
The class-action lawsuit was the first in a series of ETF-related claims working their way through courts in California and New York, and Sabraw’s ruling “will clearly pose challenges for carriers” currently battling litigation, according to a statement from Medley Global Advisors L.L.C. “The outcome is clearly a victory for plaintiffs in both the Sprint Nextel suit and all other pending suits involving ETFs in California and nationwide,” the analyst firm noted.
Others in same boat
AT&T Mobility and T-Mobile USA Inc. are the focus of other class actions in Alameda County Superior Court; Verizon Wireless settled a similar suit for $21 million in what Medley deemed “a deft move that removes (the carrier) from the continuous cycle of costly litigation.”
Not only is the ruling bad news for the operators currently fighting ETF lawsuits, it may force carriers to follow Verizon Wireless’ lead and pro-rate fees — as they promised to do last year. Such a move would surely spur an increase in subscriber movement, potentially creating havoc across the board for carriers.
What’s more, carriers — which have long baited customers with free or inexpensive phones in exchange for long-term contracts — may opt to cut back hardware subsidies if consumers find it less painful to opt out of agreements. Such a move would surely fuel a surge in the retail price of handsets. A number of carriers currently offer less-subsidized handsets for shorter or no contract terms, but those offers are typically more difficult for consumers to find.
