Recently Verizon upped their Early Termination Fee (ETF) for ‘advanced devices’ on two year contracts. They used to charge the industry standard $175 pro-rated at $10 $5 a month over two years if you cut your contract early, they now charge $350 for devices that are generally considered smartphones. This change has brought them under the scrutiny of the new commissioner of the FCC, Julius Genachowski.
The big reason for the scrutiny, I believe, lies in the fact that with the increase of the ETF, if a customer cancels their contract in the last month of their two years, they will pay a $130 cancellation fee. Many people have been justifiably outraged at this anticompetitive behavior. The big V also appears to be padding their coffers with a slightly unethical design to many of their phones that allows them to hit their customers with a $1.99 fee many months due to an accidental key press. David Pogue has started a movement to question Verizon’s new choices.
Verizon has responded[pdf link] to the FCC’s query into these matters with a laughable reasoning. Verizon believes they are following the spirit of the national broadband plan in aiding “those of more limited means” to gain “access to a range of exciting, state-of-the-art broadband services and capabilities”. I’m sorry, but subsidizing phones like every wireless carrier is aiding in nation wide broadband? That’s preposterous, the only reason Verizon subsidizes the equipment is because every other wireless carrier in the US does it. The vast majority of users who have a smartphone also have some sort of broadband access from a different source.
The reason stated by Verizon for increasing their ETF is that Verizon pays more for the advanced devices than they do for more basic feature phones. This I can accept. However this reasoning falls apart when the ETF is not eliminated by the last month of the contract. Here Verizon cops to the costs associated with selling the devices.
“In addition to the difference between the purchase and selling prices of devices, Verizon Wireless incurs additional costs to sign up customers, such as advertising costs, commissions for sales personnel, and store costs.”
So are you telling me that customers that are unhappy with Verizon for any reason and decide to leave have to pay extra to help pay for the advertising, commissions and stores?? That’s absolutely ridiculous! That would be similar to having to pay a termination fee to Comcast to cancel your service to help them cover their normal operating costs. Why should Verizon get anything extra to cover their normal operating expenses?
For the conscientious consumer, many things go into a purchasing decision. Even before these laughable changes took place I was very wary of Verizon. The Big V always seemed more like Big Brother to me. From the artificial limitations they place of the phones they allow on their network to the arbitrary pricing structures they use, I passed by them when I left AT&T to go to Sprint. I’m very happy with my Palm Pre and Everything Data plan on Sprint. I just hope the FCC does their job in protecting the people’s communication infrastructure from those who want to monopolize it for their gain at the expense of the people who use it. The airwaves that Verizon are using to make money hand over fist belongs to the people, they are not Verizon’s private frequencies.
Till Next Time
Update: In reading Verizon’s response to the FCC’s inquiry, I found that their standard device ETF is only reduced by $5 every month meaning that in the last month of a two year contract there still exists a $55 ETF.