Lawmaker Upset by IPhone Termination Fee

V-MODA VIBE Duo with Apple iPhone (Photo: Business Wire) (Business Wire)

WASHINGTON -- The Apple iPhone has enjoyed favorable reviews since its recent debut, but it came in for some rare criticism on Capitol Hill on Wednesday.

The phones, which cost between $500 and $600 _ are usable only on AT&T Inc.'s wireless network and will remain that way until 2012.

Even though the phones become expensive paperweights if customers quit AT&T's wireless plan, the company will still charge a $175 early termination fee, said Rep. Edward J. Markey, D-Mass., chairman of a House subcommittee on telecommunications and the Internet.

Markey described the phone as a "Hotel California service. You can check out any time you like, but you can never leave _ you're stuck with your iPhone and you can't take it anywhere."

The issue arose at a hearing on whether Congress should grant the cell phone industry's wish and pre-empt states from regulating wireless phone companies. State public utility commissions have no authority over pricing on wireless plans, but do have the authority to regulate the terms and conditions of wireless service agreements.

The wireless industry opposes what Verizon Wireless general counsel Steven Zipperstein called "patchwork, utility-style regulation" as "unnecessary and harmful."

Verizon wants a national framework for wireless oversight that would take authority away from state utility commissions while still allowing state attorneys general to protect against unfair and deceptive industry practices.

Tony Clark, a North Dakota public utility commissioner and chairman of the telecommunications committee of the National Association of Regulatory Utility Commissioners, said the states should be allowed to maintain their enforcement authority.

"The bottom line is that state regulators are seeking a middle ground that relies on each level of government doing what it does best: the federal government setting standards that apply to all and the states enforcing those rules and tailoring them to specific emerging issues," he said.

Timothy Wu, a law professor at Columbia University and commentator on technology issues, described the cell phone industry as "spectrum-based oligopoly" where customers have given up their property rights.

"Imagine buying a television that stopped working if you decided to switch to satellite," Wu said. "Or a toaster that died if you switched from Potomac Power to ConEd."

The Federal Communications Commission is currently considering rules that will dictate how a valuable swath of spectrum to be auctioned in the next six months will be used. Among the proposals is a requirement that one block of airwaves being auctioned be accessible to all wireless devices _ which would include the iPhone.