Just when it looked like Sprint might be gaining on the top two wireless carriers, they suffered a small setback. I say small even though we’re talking about $17.5 million. Compared to the $483 million the carrier just spent to buy Virgin Mobile, $17.5 million is a drop in the bucket. Regardless of the amount, settling a class-action suit has its pros and cons. It’s good because it allows the company to move forward and focus assets and energy on business development and increasing market share. It’s bad because agreeing to settle without an actual verdict in a case is tantamount to an admission of guilt. Legally it’s not, but in the eyes of consumers it is. And it’s bad PR the number three wireless carrier doesn’t need right now.
Sprint was sued last year over its Early Termination Fees (ETFs). Wireless carriers are no strangers to class-action suits like this. The lawsuit against Sprint just rounded out the set of four class-action suits against the four major wireless companies for early termination fees. Customers say they were unfairly charged flat fees for ending their contracts early. Sprint, as well as other wireless carriers, say that ETFs are necessary to help companies recoup the losses that result from subsidizing handsets. After being sued, all four companies have changed their policies to prorate cancellation fees based on how much time is left on a customer’s contract.
The industry is plagued by lawsuits, though, over many practices and policies. About a year and a half ago, Sprint was also hit with a lawsuit over roaming charges. Now the big four are waiting to see whether the government pursues a wireless antitrust suit against them for monopolistic practices related to exclusive handset deals.
For now, Sprint just has this small bill to pay, with $14 million going into a common fund to be distributed among the class-action plaintiffs. Another $3.5 million will be parceled out through benefits such as discounts or additional minutes, and then the company can move on. That is, until the next lawsuit comes along.
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