Communications Min. out to cut cell phone cancellation fines

Three days after Communications Minister Moshe Kahlon (Likud ) announced he would be drastically cutting the interconnect fees that cellular phone companies charge customers, the ministry has announced another big reform to save consumers even more money.

	Communications Minister Moshe Kahlon
	Photo by: Ofer Waknin

Kahlon is proposing to set limits on the penalties the cellular operators can charge customers who leave before the end of their contract.

The reform already has been approved by the Ministerial Committee for Legislation and is expected to be included in the Economic Arrangements Law for 2011. The Knesset Economic Affairs Committee will also have to approve Kahlon's proposal.

The ministry wants the changes to apply to existing customers, not only customers who sign contracts after it goes into effect.

Until now, the cellular companies have penalized customers who leave for their competitors by charging large exit fees, which they say are to cover the subsidies they provided customers when they bought their phones. The companies are the ones who set the the sum, offering little transparency regarding their calculations. The customers have no recourse.

The ministry's proposal would limit these amounts to no more than 10% of the consumer's average monthly bill during the commitment period, times the number of months remaining in the contract. The companies may of course charge less, though they are expected to go with the maximum.

For the purpose of calculating the fees, the average bill will include only air time and content services. The figure will not include the cost of the phones or other equipment.

The change will apply only to the cellular companies, and not Bezeq and other landline providers.

Kahlon called the penalties a barrier to competition that prevented consumers from switching between cellular providers. He said he believes the change would increase consumers' bargaining power.

The ministry has received a large number of complaints from consumers over the high exit fines.

The ministry also said it was considering placing other restrictions on the cell phone operators' phone sales. For example, a customer who now buys a phone in multiple installments must pay the entire remaining balance immediately when he or she leaves the company. The ministry wants to require the firms to allow customers to continue paying for the phone in accordance with the original payment schedule.