VIDEO: Pro-rated ETFs becoming rule, not exception: Sprint Nextel remains last of nationwide carriers

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Verizon Wireless was the first carrier to put its hand on its heart and solemnly swear that ETFs would decrease depending on the time left on the contract. It made its claim in late 2006, and implemented the pricing strategy in early 2007. In the carrier’s customer agreement it states that customers who activated service after Nov. 6, 2006, will pay a $175 ETF that will decrease by $5 for each month of service on the contract.

Mimicking the nation’s No. 2 carrier, others followed, but it took much longer. AT&T Mobility made its promise to the nation of pro-rated ETFs in October 2007. T-Mobile USA Inc. made the same claim in November 2007. And Sprint Nextel made its pro-rated ETF promise the day after T-Mobile USA, saying it’d be implemented within the first half of 2008.

Follow the leader

Well, 2007 came to a close quite quickly and still Verizon Wireless was the only carrier offering the price change for ETFs. AT&T Mobility implemented its pricing in the first quarter of this year, mirroring Verizon Wireless’ terms. AT&T Mobility’s $175 fee declines by $5 for each month of a contract that has passed. AT&T Mobility spokesman Mark Siegel said the short delay was due to the systems work associated with implementing the new pricing; saying its reasonably complex.

“[You] have to do good work to get that done,” Siegel said.

AT&T Mobility’s ETF policy is only for customers that have signed up for service after it went into effect, Siegel said.

At this point, there had still been no follow-through from T-Mobile USA or Sprint Nextel. In March of this year, Congress began making noise and putting pressure on the remaining carriers to keep up their collective word. And in June, the Federal Communications Commission held a hearing on the ETF debate, and while it was addressed that something needs to be done, no strict regulations were enforced allowing T-Mobile USA and Sprint Nextel to continue with their existing policies. However, shortly after the hearing, T-Mobile USA put its new ETF policy into place. For customers who join the carrier after June 28, 2008, the $200 ETF decreases to $100 if customers terminate service with 91 to 180 days remaining on their agreement; and decreases again to $50 with fewer than 91 days remaining. If customers terminate in the last 30 days of service, they pay a $50 ETF or their standard monthly charge, whichever is cheapest. When asked about its delay, T-Mobile USA declined to comment.

What of SN?

So, now deep into October, confidently past the first half of the year, where is Sprint Nextel? Roni Singleton, spokeswoman for the carrier, said the new ETF pricing has not been implemented yet because the carrier needed to make sure all customers were on the same billing platform and there were other system enhancements to complete. Sprint Nextel spent several months moving its CDMA customers to the billing platform used by its iDEN customers, a move that was thought to have been completed earlier this year.

“[It will be] sooner rather than later,” Singleton said. “We haven’t quite come up on a year yet.”

Ian Gillot of IAG Research, said the real reason Sprint Nextel is likely holding off is because it can’t afford to lose customers.

“Churn is king,” Gillot said. “They can make a commitment to do it and then drag their feet.”

But for customers that are extremely unhappy, which seems to be the case for Sprint Nextel subscribers, it may not matter if the operator offers a lower ETF or not, Gillot said. Subscribers might just pack up and leave anyway.

“If you really hate your carrier, which a lot of people do, they’ll pay the $100,” he said.

Legalities and history

Courts began to raise their eyebrows at carriers’ ETF policies earlier this decade. It began when Cingular Wireless L.L.C.(now AT&T Mobility) was hit with a $12 million penalty by the California Public Utilities Commission in February 2003, following an investigation of the wireless carrier’s activities from 2000 to 2002. The carrier was under scrutiny for charging ETFs and prohibiting refunds during a period when the mobile-phone carrier aggressively marketed service without disclosing network problems to its customers. Following Cingular’s acquisition of AT&T Wireless Services Inc. and the subsequent acquisition of AT&T Inc. by Cingular’s parent company SBC Communications Inc., the carrier put an end to seven-year case and paid $30 million to remove the U.S. Supreme Court challenge.

After the Cingular fiasco, ETF concerns began to spiral across the nation’s carriers. The government began examining whether or not a state should be involved and lawsuit after lawsuit followed until finally carriers hung their heads and began making promises to customers.

For carriers who aren’t in huge trouble or churning customers at a rapid rate, the pro-rated ETFs won’t be a huge burden, Gillot said. Verizon Wireless is in a good position to do it, he said, which is probably why they came first; especially when Sprint Nextel is churning customers like crazy and sending some of them Verizon Wireless’ way.

“[It’s] one of those situations where they strong get stronger and the weak get weaker,” he said. “[There’s] nothing to gain by the weak guys doing it. It could cost the carriers tens of hundreds of dollars.”

If Gillot is right, we’ll probably continue to wait for Sprint Nextel to keep its word on pro-rating ETFs. The carrier however says otherwise.