T-Mobile to discount its early termination fees

While it is not the prorating system that competitors such as AT&T and Verizon use, the nation's fourth largest carrier will discount its early termination fee if it is within 180 days of the contract end date.

Early termination fees (ETF) more than 180 days since the T-Mobile customer's contract expiration will remain at $200. However, those with 91 to 180 days left will see the fee halved to $100. The fee is halved yet again to $50 for those with 31 to 90 days to go.

Finally, those with a month or less to go will pay either $50 or the standard monthly charge of their rate plan, whichever is cheaper. The policy is scheduled to go into effect on June 28, and is only for new subscribers or current ones who renew contracts after that date.

ETFs have become a hot topic recently, and the FCC held hearings on the subject earlier this month. Chairman Kevin Martin has expressed concern that the fees are being used to lock consumers into a provider rather than recovering costs.

Possibly trying to head off any regulation, carriers have already begun to adjust their policies. Verizon was the first to begin a prorating system in 2006, followed by AT&T in April.

Sprint says it will implement a prorating system, however no official announcement of its plans has yet been made.

Both AT&T's and Verizon's offers prorate their fees down $5 per month from an initial $175 fee. So at a time comparable to when T-Mobile begins cutting its rates, the ETF for these competing plans would be $85 at 180 days, $70 at 90, and $55 at 30 days.

T-Mobile is also offering its customers ways to get around monthly contracts using plans similar to what it and other carriers offer in Europe, where contracts are much less common. Called FlexPay, these alternate plans offer the same features, however users receive no discount on their phones, as opposed to those who sign annual contracts.