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Verizon Defends Doubling of Early Termination Fee 319

Posted by Soulskill
from the we-decided-we-liked-money dept.
I Don't Believe in Imaginary Property writes "Verizon is defending its decision to double its Early Termination Fee from $175 to $350 after being called to account by the FCC. They claim it's because the higher fees allow them to offer more expensive phones with a lower up-front cost (PDF), and they also say that because they pro-rate the fee depending on how much of your contract is left, they still lose money. Apparently doing something about the Verizon customer service horror stories isn't as good a way to retain customers as telling them that they have to pay several hundred dollars to leave."
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Verizon Defends Doubling of Early Termination Fee

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  • by TubeSteak (669689) on Saturday December 19, 2009 @12:14PM (#30498856) Journal

    Maybe consumers would have a better chance at fairness if Verizon had to justify itself to the FTC.

  • Meh. (Score:4, Insightful)

    by RightSaidFred99 (874576) on Saturday December 19, 2009 @12:16PM (#30498872)

    Verizon sucks anyway. Their plans are laughable. Try pricing out a smartphone plan with them. Oh, and don't forget the (lol) extra $24 for the data plan. For an average family plan with smartphones they come out to like $40+ more than Verizon for just two lines, and it goes up as you get more lines.

    Verizon can rot in hell. Can you hear me now? Yes? Well, what I said was "fuck you, Verizon".

  • by Guido del Confuso (80037) on Saturday December 19, 2009 @12:18PM (#30498890)

    If they didn't get you on the back end, they could just charge you more up front to buy the phone, then amortize the up front cost through lower monthly bills, until in the end you pay the same amount. That way, they could even offer "no termination fee!" But I'm sure somebody would still get pissed at call it deceptive business practices. It's a free market, and they can charge anything they like. This is a total non-story.

    Please, Slashdot, can we have a way to filter out stories by submitter? I don't think I've ever seen a story from "I Don't Believe in Imaginary Property" that doesn't irritate me with its smug sanctimony and total irrelevance. Personally, I don't believe in imaginary news.

  • Don't pay the fee (Score:4, Insightful)

    by Kohath (38547) on Saturday December 19, 2009 @12:22PM (#30498914)

    If you don't want to pay the fee, you should avoid it by not signing an agreement with Verizon. If you don't like Verizon's customer service, you should avoid it by not signing an agreement with Verizon. Or sign an agreement and live up to your obligations and avoid the fee that way.

    Don't hire the government to force the people at Verizon to do things against their will -- unless the people at Verizon have truly defrauded you, personally, out of a significant amount of money. Because forcing people to do things against their will is (almost always) morally wrong.

  • by Herger (48454) on Saturday December 19, 2009 @12:25PM (#30498930) Homepage

    The FCC and FTC definitely need to step in the the wireless market. Policies like this promote stagnation and high prices.

    Why should the customer be bound to a wireless contract when this doesn't apply to landlines? I've said before that wireless contracts are keeping prices artifically high, allowing providers to charge quite similar rates for similar plans, because it is so difficult to switch. If customers were not tied to contracts, the ensuing price war might bring wireless rates down closer to prices that I have seen outside the USA.

    Speaking of other countries - Why is the USA one of few countries where I can't just pop the SIM or UICC card out of my handset and put it into a new one? Why did it take intervention by the Chinese government to force device manufacturers to standardize chargers to minimize electronic waste?

  • by shog9 (154858) on Saturday December 19, 2009 @12:30PM (#30498970)

    IIt's a free market, and they can charge anything they like.

    It's not a free market, and folks getting upset over the dissemination of phone and plan prices aren't making it any freer.

    Another commenter already pointed out that other network providers offer better better deals... The hard part is getting this information to consumers in a form that's clear and easy to understand, when the providers themselves seem dedicated to obfuscation.

  • by mark-t (151149) <markt@lynx.b c . ca> on Saturday December 19, 2009 @12:33PM (#30498984) Journal

    "they also say that because they pro-rate the fee depending on how much of your contract is left, they still lose money"

    Wow... that's the biggest load of BS I think I might have seen all week.

    They don't lose money off of the pro-rated fee... at absolute worst they lose money because they lost a customer, and even that's unlikely unless the company is teetering on the edge of bankruptcy. Heck, if a customer terminates early and the company collects that fee, they can actually earn interest on the whole termination fee sooner instead of collecting it over a period of several years.

    I'm not sure in what sort of reality they think saying something like this would be likely to make anybody feel even slightly sorry for them.

  • by jkgamer (179833) on Saturday December 19, 2009 @12:57PM (#30499160)

    I agree with you 100 percent, well almost. Forcing Verizon to do anything that isn't in their corporations best interest is morally wrong. Because we all know that large corporation are only looking out for what is best for the consumer! If you get a "free" phone from Verizon for your aging mother so that she can stay in contact with you more easily, well then you SHOULD have to pay the early termination fee of $350.00 for that $29.99 piece of electronics when she passes away on the 21st month of your contract. And while we are at it, let us remove those other pesky regulations that the goverment has placed upon these large corporations. Let us remove the one where they are required to pay a minimum wage to their employees. We all know that this is just costing us jobs. Hell, my cousin Bruce could be making as much as 50 cents an hour AND have a job if it wasn't for that pesky goverment interference. Shame on you Mr. President (Because we all know that he REALLY makes all the laws, the Congress and Senate are just for show.) Let's remove the regulation that says Verizon must provide access to their lines from other competitors as well. I don't want no stinking Sprint customer to be able to call me. (You and your aging mother are using the SAME provider, aren't you?)

    My point is that a truly and totally free market is a farce. There has to be a balancing act performed to keep the market truly competitive and profitable. Unfortunately, one groups idea of fair and balanced differs from another groups idea of fair and balanced. That is why we need regulation. Maybe this particular case isn't one that requires regulation. Maybe this particular case works as it currently is implemented. Obviously not everyone believes that, especially the person who DIDN'T get a DROID and then for whatever reason had to cancel their contract two months early.

    Oh and one more thing. Maybe forcing PEOPLE to do something is morally wrong, but corporations are NOT people. People generally have to live with their actions, a corporation can merely disolve itself and start up as a completely different corporation. It is a lot more difficult for a person to simply disolve their identity and reappear under a completely new one free of all legal and moral obligations of their past actions. If the US goverment is going to provide corporations with that type of benefit then they do have a MORAL responsibility to make sure they don't abuse it.

  • Lower Cost Phones? (Score:3, Insightful)

    by eatblueshell (1702842) on Saturday December 19, 2009 @01:01PM (#30499198)
    Absolute horse-crap. Phones are one of the most arbitrarily priced pieces of hardware on the market. Take for example the 'free phone' it is 'retailed' at 200 plus dollars. It has not touch screen, no wifi, no app store, no legit mobile browser. When in reality, you could buy, for that same 200 bucks, a iTouch, which gives you applications, wi-fi internet, Texting, and a significantly larger screen (touch screen even). Hell, with Wi-Fi, as long as you have access to a router, you can run Skype and Call anyone, FOR FREE! Hell for 200 bucks you can get a netbook! Cell-Phones are a huge, dare I say, price-fix bonanza. Friggen Rip-offs.
  • by Anonymous Coward on Saturday December 19, 2009 @01:02PM (#30499216)

    IIt's a free market, and they can charge anything they like.

    Your right It is not a free market if only one carrier has service in your area. It is a fucking monopoly

  • by Jawn98685 (687784) on Saturday December 19, 2009 @01:13PM (#30499278)

    Don't hire the government to force the people at Verizon to do things against their will -- unless the people at Verizon have truly defrauded you, personally, out of a significant amount of money. Because forcing people to do things against their will is (almost always) morally wrong.

    Obviously, you missed the part about "the agreement" being intentionally and maliciously complex, to the point that it is indecipherable to the average customer. Said customer, having been assured by the friendly sales rep, "It just says [insert standard salesman bullshit rap here]", signs anyway, in the mistaken belief that he's dealing with a fair and honorable business.
    There are laws against trying to cheat customers. Hiding your draconian terms in an indecipherable "agreement" is anything but fair and honest. It should be illegal.

  • by vvaduva (859950) on Saturday December 19, 2009 @01:13PM (#30499284)

    I couldn't say it better; the contract people sign with Verizon is voluntary...nobody is holding a gun to your head, so go to a competitor. The market will sort things out in the end.

  • by db32 (862117) on Saturday December 19, 2009 @01:18PM (#30499326) Journal

    Forcing kids to do homework or eat vegetables or stopping drunk drivers, rapists, murders, thieves, genocidal dictators, slave owners/traders, and so on is all morally wrong? To say "almost always" is a little overboard, not that I disagree with the notion you are trying to get across. I just think the situations in which it is not morally wrong to stop someone happen a lot more often than you imply.

    In this case...the trouble is that the government is giving verizon special permission in order for them to operate their service (frequency usage, tower locations, etc). Additionally, the whole notion of contracts that one side can unilaterally change at any given time is pretty stupid too.

    That said, fraud is one of those things that should be stopped. There are plenty of conmen that tell "the truth" but do it with so much smoke and mirror tapdancing that people still sign up. What you are attempting to do is blame the victim by letting verizon totally of the hook. So...they say it is to help subsidize the phone. Why is it that I would get subjected to the termination fee if I brought my own phone? This also adds to the issue that they claim they recoup the cost of the phone through their rates and the ETF makes up for the people who leave early. Well...why don't I get a lower rate for bringing my own phone? Or why don't I get my rate reduced after I have paid back the subsidized portion of the phone? I am guessing you haven't seen the leaked meetings where they talk about how many billions they make using various fraudulent billing tactics. They force people to burn minutes as they sit through the ever growing "welcome to your verizon voice mail and blah blah blah and blah and blah blah blah pres blah blah blah" messages.

    I agree that we shouldn't hire the government to force Verizon to do things against their will. However, calling them out for deceptive and fraudulent bullshit is not the same. (Their argument for why they hide the ETF is that it is 'not important' and they got busted on that when it was decided that big ETFs qualify as materially important pieces of a contract). I think the best solution would actually to slap "users of any service provided using these frequencies cannot be subject to early termination fees or have their service terminated for excessive roaming" in the fine print of the agreements they have with the FCC to even operate. I bet they would scream bloody murder at such a one sided contract change...and then we can tell them "Well you shouldn't have signed anything with the FCC, you could have started your service in the Sahara where there is no FCC."

  • by lorenlal (164133) on Saturday December 19, 2009 @01:33PM (#30499444)

    so go to a competitor. The market will sort things out in the end.

    What's interesting here is that those competitors have similar contracts, setups, fees, etc. At what point does regulation step in and say, "You aren't playing by the rules?"

    Suppose the major vendors decide that when one of them raises prices, rather than compete with an advantage, they raise their own prices to match? At what point does it become collusion and price gouging?

    I ask because it appears to me like the market is nearly impossible for new players to jump into.

  • Re:Fairness? (Score:5, Insightful)

    by orlanz (882574) on Saturday December 19, 2009 @01:47PM (#30499564)

    I think a better deal would be to split the discount you get for the phone and the charges for the actual service. Its that simple. On your bill, you get your Phone mortgage and your plan charges.

    Then we can discuss further separating the link between the phone and the plan. The phone aspect should be treated like a straight out loan. You pick one of: the monthly payment, interest rate, or duration of loan and the provider picks the other two. Of course you should have a "buy out" option on each statement that tells you how much you need to pay to completely OWN the phone.

    THEN we can realistically compare and discuss the discounts that providers give for service contracts. Right now, the system is too hidden and vague. It severely prefers customers who jump providers every 2 years and creates a lot of waste (useless phones). It punishes current and future loyal customers. Customer acquisition is a LOT more expensive than keeping current customers, and the system prefers the former with the later bearing the additional expense burden.

  • Re:Fairness? (Score:4, Insightful)

    by haruharaharu (443975) on Saturday December 19, 2009 @02:02PM (#30499654) Homepage

    Of course that would also mean much higher phone prices, how many people would buy the iphone or Droid at $600?

    Lots - nothing stops verizon from financing the thing separately and adding the payments to your account. Pay off the phone? Your bill goes down.

  • by SanityInAnarchy (655584) <ninja@slaphack.com> on Saturday December 19, 2009 @02:05PM (#30499672) Journal

    But the world doesn't run on wishes. You can't escape the necessity for people to be responsible and informed, first and foremost, and when they are that makes the need for regulation unnecessary.

    That just about made me do a double-take.

    The world doesn't run on wishes. You can't escape the reality that people won't be responsible and informed. Informed is important here, too, and is part of the job of regulation -- for example, we have laws about food safety, so I can walk into any restaurant with some confidence that the food there is safe to eat. You could have a totally free market, in which independent organizations certify particular restaurants as "safe", but then the customers would have to constantly be checking those certifications.

  • by SanityInAnarchy (655584) <ninja@slaphack.com> on Saturday December 19, 2009 @02:13PM (#30499714) Journal

    The frustrating fact is that if you actually avoid every market that's either regulated or in massive collusion, you'll find yourself giving up many modern conveniences. Not just cell phones, but the telephone in general -- just why do you think land lines are reasonable now?

  • by cynyr (703126) on Saturday December 19, 2009 @02:14PM (#30499718)
    "Their service, Their terms"

    Good, now they can give back all the federal funding they have recived to roll out the networks. Those should be the terms of the federal money. Really just like the internet the service provider, and the owner of the actual infrastructure need to be separated.
  • by SanityInAnarchy (655584) <ninja@slaphack.com> on Saturday December 19, 2009 @02:21PM (#30499760) Journal

    Even if you're not an Apple fan, you have to give them credit for recasting the cellphone world and removing the chokehold the carriers had on costs, phones, customer service, etc, etc.

    Sorry, what? No I don't.

    What, exactly, has Apple done to help that situation?

  • by DrYak (748999) on Saturday December 19, 2009 @02:29PM (#30499802) Homepage

    I mean, the iPod touch is $199

    With no camera and no GSM/UMTS radio.

    Yes, an iPod touch doesn't have GSM/UMTS. But factor in the next piece of information

    and you can get a cheap throw away phone for $20

    TracFone and Virgin Mobile phones are subsidized and provider-locked in the hope that you'll buy more minutes.

    I think the original post wasn't referring to the heavily subsidised smart-/feature- phones, but to the crappy phones that only provide basic voice & SMS. Basically they are only a GMS chipset connected to a speaker/microphone/keypad combination. You can find such in very low price-ranges.

    Thus, according to this reasonning, adding GSM/UMTS radio to iPod touch to convert into iPhone, should cost something in the same range as the sum of the above products.
    Creating a smartphone out of something which looks like a PDA should raise the cost from the initial ~200$ to ~300$ max.
    Not a price jump from ~200$ to ~600$ as its currently the case.

  • by Anonymous Coward on Saturday December 19, 2009 @02:31PM (#30499818)

    Spoken like a true living-in-moms-basement capitalist.

    When it comes to cellphones, it's not so much a free market as it is a fiat market. There aren't that many providers, their terms are all more-or-less similarly rapacious (some people might even say collusively rapacious). This is not some some Middle Eastern Bazaar where you can haggle for the deal you want - it's Their Way or the Highway.

    Sure, you can opt out entirely, but is that really going to have them trembling about losing market share?

    Let me put it this way. People dump Wal-Mart gift cards on me. Even with Free Money I won't set foot in Wal-Mart. So tell me, have I terrified them into switching back to USA-made products, yet?

  • by nexuspal (720736) on Saturday December 19, 2009 @02:54PM (#30499940)
    It's an oligopoly (with a high risk of collusion)...
  • Re:Fairness? (Score:5, Insightful)

    by Znork (31774) on Saturday December 19, 2009 @03:00PM (#30499970)

    how many people would buy the iphone or Droid at $600?

    As many as buy cars, TV's, or any other consumer item on credit? It wouldn't be much different for cable networks to offer TV's with their subscriptions, or, to have a car analogy, gas companies that give you a car and require you to pay for an amount of gas each month.

    But either way it's pretty much a scam; financing baked into the price which makes it easier to trick consumers into non-competitive rates for both the consumable and the financing.

  • Re:Meh. (Score:3, Insightful)

    by Ogive17 (691899) on Saturday December 19, 2009 @03:00PM (#30499972)
    We should also be paying $6/gallon for gas... pricing is relative.
  • by Anonymous Coward on Saturday December 19, 2009 @03:09PM (#30500010)

    It's an oligopoly (with a high risk of collusion)...

    You think? A couple years back, text message cost 10 cents on AT&T, Sprint, T-Mobile, and Verizon Wireless. Then surprise-- they all go up to 15! Then 20!

    500 text messages take up less bandwidth [consumerreports.org] than a minute of conversation.

    I'd say there's a high risk of collusion too.

  • by Darth_brooks (180756) <clipper377@gm a i l . c om> on Saturday December 19, 2009 @03:26PM (#30500084) Homepage

    USMC applies here too: U Signed the Muthafuckin' Contract.

    Don't like it? Don't buy a Verizon phone. Or better still, don't buy a phone with a contract.

  • by Guido del Confuso (80037) on Saturday December 19, 2009 @03:26PM (#30500086)

    Oligopolies are perfectly capable of being formed in a free market economy. A free market refers to the lack of governmental intervention except in cases of force or fraud. An oligopoly is a market segment (whether in a free market, a socialist economy, or even anarchy) that is dominated by a small group of entities. The two concepts are not incompatible, or even comparable. Saying "it's not a free market, it's an oligopoly" is a non-sequitur. It's kind of like saying "it's not a car, it's blue".

  • by mlyle (148697) on Saturday December 19, 2009 @03:29PM (#30500094)

    No, because the margin on a gift card that is never spent is way better than anything else they could ever sell you with it. Way to go! Down with the man!

  • by KarmaMB84 (743001) on Saturday December 19, 2009 @03:39PM (#30500152)
    They already got the money for the card. Essentially anything you'd buy with it was already paid for. Not using the card means you let someone give Wal-Mart free money.
  • by jimicus (737525) on Saturday December 19, 2009 @03:50PM (#30500204)

    The hard part is getting this information to consumers in a form that's clear and easy to understand, when the providers themselves seem dedicated to obfuscation.

    Of course they are. Mobile phones are essentially a commodity. An expensive one, but nevertheless a commodity.

    Obfuscating your product in the name of offering choice when there fundamentally isn't much to choose between competing products is a common tactic when you're selling commodity items.

  • Re:Fairness? (Score:5, Insightful)

    by PopeRatzo (965947) * on Saturday December 19, 2009 @03:59PM (#30500238) Homepage Journal

    No, it seems like a good deal when it's a good deal.

    Because the phone companies are owned by big institutional investors that require big dividends and steadily increasing profits, they have to make it harder on consumers, who basically don't have anywhere else to go.

    Phone companies need to be publicly regulated utilities, like they are in countries that have more advanced phone systems than the US.

    The "Free Market" has kept us technologically behind much of the world when it comes to wireless phone service.

  • by bzipitidoo (647217) <bzipitidoo@yahoo.com> on Saturday December 19, 2009 @04:23PM (#30500362) Journal

    Informed? I have a few words for you: Confusopoly [wiktionary.org]. Shrink wrap contract [wikipedia.org]. "Doubt is our product."

    That's right, these businesses are actively trying to prevent us from informing ourselves, sowing confusion. When called to account, they often try to weasel out with disclaimers about no real harm having been done, that they didn't intend to keep people in the dark, that it was all an innocent mistake. Inexcusable, and very evil. Be careful about implying it's all the customer's fault with that "won't" assertion you made.

  • Re:Fairness? (Score:5, Insightful)

    by EvanTaylor (532101) on Saturday December 19, 2009 @05:29PM (#30500620)
    Uhh. There is no free-market in the US for just about anything. Cellphone companies license spectrum that no one else can use and become defacto monopolies.

    I have traveled a bit and only one country that I have been to had a free-market of any kind. Ghana, West Africa.

    Ghana has between 4 and 6 cell phone providers that compete with one and another.

    Ghana would not give exclusive rights to any cellular company when they first approached the country before there was cellular technology in the country.

    Instead Ghana started it's own government-run cell company because no major provider would agree to anything but a monopoly position.

    Strangely enough... 6 competing companies are there now making money hand over fist, and the Ghanaian government just sold their old government phone/internet company to Vodacomm.

    Privatization does work, in a real free market. We live in a completely socialized state that pretends it is a free-market driven economy.
  • Re:Fairness? (Score:3, Insightful)

    by poetmatt (793785) on Saturday December 19, 2009 @07:26PM (#30501080) Journal

    cost of the droid (build cost) for verizon to obtain them is probably not above $100-150 absolute maximum, and likely under $100. The magic 600$ is a number pulled out their asses to imply value and to rationalize the ETF as they are trying to do. It's a bunch of doublespeak and hopefully people will learn eventually.

  • by tomhudson (43916) <barbara.hudsonNO@SPAMbarbara-hudson.com> on Saturday December 19, 2009 @08:19PM (#30501340) Journal
    Two points:
    1. In many jurisdictions, what the salesperson said is legally binding on the company, even if the actual contract says otherwise;
    2. Back in the day, Borland had a simple license. You don't have to have a license be overly complex if both sides are dealing in good faith.
  • Re:Fairness? (Score:5, Insightful)

    by shutdown -p now (807394) on Saturday December 19, 2009 @08:33PM (#30501392) Journal

    The moral of your story seems to be: free market works, when the state occasionally intervenes (not necessarily with direct regulation - the case you described is a wonderful example of how else the market can be affected) to keep the competition going.

I'd rather just believe that it's done by little elves running around.

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