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Clearwire Sued Over Early-Termination Fees

Wireless broadband provider Clearwire this week was the target of a lawsuit filed on behalf of five customers alleging the company engaged in deceptive advertising and unlawfully charged early-termination fees.

According to the suit, Clearwire lured customers into long-term contracts for Internet and phone service by advertising its service as a fast, reliable "always-on" alternative to cable or DSL. However, the complaint alleged, when subscribers sought to cancel the service "because they discovered Clearwire's service is slow and unreliable" they were charged a termination fee of up to $220.

The lawsuit, captioned "Minnick et al. v. Clearwire US LLC," was filed April 22 in the Superior Court for the State of Washington in King County. The plaintiffs seek certification of a class action on behalf of Clearwire subscribers.

Clearwire declined to comment, citing a company policy against commenting on pending litigation.

Investors in Clearwire, based in Kirkland, Wash., include Comcast, Time Warner Cable, Bright House Networks, Sprint Nextel, Google and Intel. As of the end of 2008, Clearwire had about 475,000 wireless broadband subscribers.

The lawsuit asks for recovery of the early-termination fees plus unspecified monetary damages, and seeks an order enjoining Clearwire from engaging in the practices alleged. The plaintiffs are represented by Washington, D.C.-based Tycko & Zavareei LLP and Seattle law firm Peterson Young Putra.

The complaint alleges that Clearwire's early-termination fee constitutes an unlawful penalty, stymies competition and is "otherwise void and unenforceable." In addition, the suit charges that Clearwire engages in false advertising because its Internet service is actually "far inferior to cable Internet and DSL, as consumers frequently experienced service disruptions, including dial-up speeds and lack of service entirely."

The five plaintiffs are from Washington, Hawaii, Minnesota and North Carolina. Each were subscribers to Clearwire's pre-WiMax service.

Clearwire currently offers high-speed Internet access based on the WiMax standard in Baltimore and Portland, Ore. Comcast has identified Portland as the initial market where it will resell Clearwire WiMax service to customers.