**STATEMENT OF COMMISSIONER MICHAEL J. COPPS**

**PUBLIC HEARING ON EARLY TERMINATION FEES**

**WASHINGTON, DC**

**JUNE 12, 2008**

Thank you, Chairman Martin, for convening this important hearing on
early termination fees, and thank you, Senator Klobuchar, for joining us
today and for your outstanding leadership on this issue.  Thanks also to
our distinguished and varied witnesses who will share with us their
important perspectives on ETFs.  I am especially glad that we will hear
not only from experts  from the wireless industry, but also from
panelists who can comment on the adoption of ETFs in some of the other
industries that the Commission regulates and that we will be hearing
from folks representing the most important constituency of
all---consumers.

ETFs have long been a topic of concern to me.  A penalty of up to \$800
for a typical family of four callers that decides to cancel its cell
phone contract is a tremendous burden, especially in this time of \$4
gasoline prices, spiraling food costs and economic sluggishness.  We all
ought to be concerned when ETFs can reduce the ability of customers to
switch providers if they are dissatisfied with their existing service or
if another company makes a better offer---thus limiting consumer choice
and the benefits that are supposed to flow from competition among
carriers.  So there are plenty of reasons for regulators to ask hard
questions about whether ETFs are truly necessary---plenty of reasons for
this hearing today.  At the same time, I want to understand what
substance there is to carriers' assertions that ETFs are necessary in
order to provide subsidized handsets to their customers.  I hope that
today's testimony will get us to the bottom of this. 

First, I want to know with as much precision as possible about the
extent to which carriers are subsidizing handsets today and how these
practices are related to ETFs.  We need to know, for example, the
average handset subsidy that consumers receive, as well as how much this
subsidy varies between basic and more advanced handsets.  We also need
to understand why some carriers require contract extensions even for
events that do not involve receiving a new handset, such as changing a
rate plan.  These practices certainly raise in my mind some doubts about
whether the only function of ETFs is recovering handset subsidies.

Secondly, I want to understand the role that state regulators and state
consumer advocates can and should play when it comes to contract
provisions like ETFs.  As a recent and extremely disturbing Government
Accountability Office report makes clear, current FCC procedures for
processing consumer complaints are flawed.  Why then should we preempt
state and local enforcement authorities with a federal process that has
so little credibility?

Thirdly, I hope we will learn more about how FCC actions on ETFs will
impact pending state court lawsuits seeking enforcement of state
consumer protection laws.  Though we at the FCC often hear about the
dangers of a "patchwork quilt" of state regulation, I think it is
important to remember that virtually all consumer products---from
toasters to computers---are sold subject to generally applicable state
consumer protection laws.  Before the FCC contemplates any action that
would prevent plaintiffs from recovering for ETFs they may have paid in
the past---often based on contract terms that many carriers have now
rejected---I think we need to better understand how state consumer
protection laws affect carriers and consumers.  And we should keep in
mind here that should plaintiffs prevail in the courts, they will be
entitled to significant compensation.

  Fourthly, what about such fees applied to consumer broadband?  What
are the facts, what justifications are put forward, what are the
implications for both consumer costs and the freedom of the Internet?

 There are lots of other questions, so I hope that today's hearing
represents the beginning---not the end---of the process of answering
them.  I want to thank all our panelists for appearing today and I look
forward to hearing what each of you have to say.