FCC Interrogates Verizon About Increased Early Termination Fees
Earlier this November, Verizon Wireless announced that it was increasing its early termination fees for “advanced devices” – advanced devices being the hot new smartphones and PDAs that are flying off the shelf this holiday season. PCWorld reported that Verizon had increased its $175 to $350 as of November 15, 2009, which was rationalized by the higher costs of subsidizing such high end mobile phones.
There is certainly some merit to this argument. For example, you can get the Verizon Droid ERIS by HTC for just $19.99 with a Verizon plan. That phone normally retails at $499.99. Other similarly priced phones, such as the LG Chocolate Touch, BlackBerry Curve and the Motorola Rival are free with a plan.
But it’s impossible to raise your rates without facing a large outcry from the public – especially when equally fetching phones from competing cell phone plan providers, such as HTC Touch Pro2 from T-Mobile and the Palm Pixi from Sprint, might entice users to switch cellular services. As it stands now, a customer would still owe $120 as an early termination fee after 23 months of paying for the phone service.
If what Verizon says is true – that it takes 24 months of service to compensate for the profit they lose by offering you a discounted or free smartphone – shouldn’t that be reflected with a zero dollar early termination fee if you leave in your final month? Or is Verizon purposely taking a loss when providing you cell phones for low, low prices? If that’s the case, perhaps they should just take the hit and chalk it up to the risks of offering a loss leader product.
With that being said, the FCC has certainly listened to the uproar and is now asking Verizon some pointed question. In a letter dated December 4, 2009, the FCC asked Verizon’s legal department to explain why it raised its early termination fees and also why it charges customers for inadvertently using Verizon’s Mobile Web service (accidentally clicking on a Web-enabled program can result in a $1.99 fee, since charges are rounded up to the nearest megabyte).
Mobile industry experts predict that this pressure will convince Verizon to back down, which is good news for anyone who has signed up for Verizon or is considering a switch. After all, in spite of their high fees, Consumer Reports ranked Verizon with the highest ratings for customer satisfaction. By responding gracefully from this consumer resistance, Verizon can maintain their top dog position.
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