Why Do Mobile Broadband Providers Charge An Early Termination Fee?
One of the most hated contract policies adopted by all mobile broadband providers in the United States is the dreaded early termination fee, or ETF. Customers have the impression that the ETF is a kind of punishment fee for ending a contract with a broadband provider early, when in fact this is not the reason at all.
In most countries a cell phone or mobile broadband adapter is paid in full by the customer. Not so in the United States. Providers offer huge discounts and sometimes give the phone or broadband device free of charge for signing up to a one or two year contract. The mobile provider pays the difference and makes its money back, plus a profit, over the duration of the contract. When a customer terminates the contract early, unless the broadband company charges an early termination fee, it will lose money from having paid the full or partial price of the phone or device and from losing the monthly income of the customer.
But the mobile broadband company does not explain this to the customer. Why? Nobody knows but the companies themselves, but it is thought that the broadband companies simply do not want the customer to think of the great deal they are getting on the discount as being anything less than that-a great deal. The FCC has asked the major providers to explain their ETF policies to the customer, but left with the option, it is unlikely this will happen anytime soon.