Post Tech: U.S. wireless users hold onto phones longer, higher fees cited: study

By Cecilia Kang
Thursday, September 23, 2010; 5:40 PM

Americans are holding onto their old cellphones much longer because of the bleak economy, and penalties and other fees attached to new purchases are turning off buyers, according to a survey by J.D. Power and Associates.

The report comes as federal regulators are being presssured to impose guidelines to better protect consumers who have seen a rise in contract cancellation penalties by major wireless providers over the last year.

In a report released Thursday, the marketing information firm found that in 2010, basic cellphone and smart phone users said they had kept their wireless cellphones for about 20.5 months. That's 17 percent longer than from the previous year and the longest duration since J.D. Power began its survey in 1999.

"Typically, when upgrading to a new cellphone, there's the added expense of either subscribing to a more expensive service plan and/or incurring termination fees when switching service providers," said Kirk Parsons, senior director of wireless services at J.D. Power and Associates. "Today, consumers are really watching their wallets, and any added discretionary expenses are being considered more thoughtfully than in the past."

Of the nearly 19,000 basic cellphone and smart phone users surveyed by J.D. Powers, consumers said their average monthly bills had increased to $78 in 2010, including taxes and fees, compared with $69 three years ago.

The increase is mainly attributed to data-related service fees and a rise in text messaging and added fees and taxes.

The Federal Communications Commission has looked into increases by Verizon and AT&T of some smart phone early termination fees. Those firms have agreed to pro-rate those fees based on the amount of time a consumer fulfills the contract.

Consumer advocates have said that early termination fees are a business tactic to keep users strapped to their carriers while punishing users with higher fees. Carriers say they need to increase fees to reflect the cost of smart phones and the subsidies they give to users when offering those phones at a discount. Sen. Amy Klobuchar (D-Minn.) has introduced a bill to limit early termination fees.

The FCC said it is reviewing how wireless carriers use early termination fees and wrote letters to major carriers and Google (which has since stopped selling its Nexus One phone). But it hasn't moved forward on that issue.

The agency is also looking into complaints by users that they were automatically being charged data for the use of phones with Internet browsers, even when they only wanted basic voice and text services.

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