The Federal Communications Commission (FCC) Tuesday sent letters of inquiry to the country’s leading telecom companies - AT&T, Verizon Wireless, T-Mobile, and Sprint – as well as Google, which recently released its ‘Nexus One’ phone, seeking an explanation of their policies related to early termination fees (ETF) of their contracts.

The ETF is essentially a penalty that is imposed upon the users of the wireless carriers for the ‘premature’ termination of multi-year phone contracts, wherein the users pay the companies thousands of dollars for availing phone and data service.

The discontinuation charge discourages the current users of a particular carrier from abandoning the provider, even if the service is unsatisfactory or if there is a better deal offered by some other carrier.

While the carriers justify their ETF policies arguing that these are necessary to cover the cost of subsidizing phones; critics are of the opinion that these charges basically stifle competition; thereby helping the carrier in generating revenue.

Asking the companies to further clarify their stand on the widely detested ETF practice, the FCC has sent a set of questions to the companies inquiring about the requirement of the ETF in the first place.

With Congress and the FCC both evaluating the ETF issue, the agency said that its letters of inquiry are “an essential step to ensuring that consumers have the information that helps them make informed choices in a competitive marketplace.”