Verizon Defends Doubling of Early Termination Fee 319
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."
So what if you have a basic phone? (Score:1, Interesting)
Is the fee prorated more aggressively because the phone doesn't cost as much or are you subsidizing the super phone users?
It's a problem with the whole industry (Score:4, Interesting)
The total lack of customer service, the terrible coverage, and the relatively subpar implementation of cellular service in the US compared to other countries is not just a problem with Verizon. It is a problem industry-wide, and it is only getting worse.
With the economy in the toilet, these companies are losing customers like the Bucs lose football games. This means they don't have the financial wherewithal to build out the necessary networks. And due to this, customer service continues to decline.
Maybe it is time to nationalize the whole wireless carrier system and slowly parcel out contracts to private companies for the day-to-day operations. If we can punish these carriers by taking away their networks, we will see real change in customer service and subsequently real competition and improvements across the board.
As long as private companies run these networks, we're stuck with the worst possible system for cellular phone users. It may be a cultural thing because Asian and European companies don't seem to screw over their customers so badly, but it's our culture and we should (as a nation) take it back.
Fairness? (Score:5, Interesting)
Fairness would be selling the phones at standard unlocked prices and letting people buy their contracts ala carte. Of course that would also mean much higher phone prices, how many people would buy the iphone or Droid at $600? In the long run consumers would be better off for it, but many seem to want the latest and greatest but don't want to pay more than a couple hundred bucks to get it.
In Verizon's defense, they are likely looking to stop some of the scamming that goes on with newer phones. I know of a couple local discount cellular stores near me that was having employees buy iphones, keep them 30 days so that the return policy is no longer in effect and then pay the early termination fee, for a 32gb 3gs they nearly double their money. Perhaps a better option would be a tiered ETF?
Re:Crippling Early Termination Fee (Score:3, Interesting)
I often see threads on slickdeals.net saying something like "Get out of your $wirelessprovider$ account free!". People there look out for changes in the small print (or in the case of termination fees...big print) which opens you up to something like 30 days to break your contract without penalty.
Of course, they like to do this on slickdeals because they can go jump into a new contract for another free/subsidised phone that is however much newer than their old one. If you weren't interested ins signing a new contract or getting a new phone (remember that in the US, your verizon phone will not work with the other major providers that use GSM), this might not be a great option because I don't know if they will let you call them up and break your contract without canceling service...i.e. you can't just break your contract into a month to month deal--you need to leave for another provider.
Re:Meh. (Score:5, Interesting)
And did you also read the 11 "addendums" to your contract that you agreed to when you logged in to your account to pay your bill?
If the phone companies weren't trying to gyp you, they'd tell you exactly what your bill's going to come to every month instead of saying you're buying a "59 dollar unlimited plan" that for some reason comes to $110 every month.
The extent and quality of phone service in the United States grew exponentially when the phone company was basically a government-regulated utility. Then we were sold a bill of goods when we were told that only by creating "competition" could there be any technological advancements, so we end up with a small handful of mobile companies overcharging people for phone service while working to suppress the technological advances that "less free" countries in the rest of the world enjoy.
Re:Where is government now that we need them? (Score:1, Interesting)
Unlike other markets of the world where people got used to modern cellular practices, the US was the first nation with a cellular network. So a lot of Americans viewed cell service as ungainly expensive for a long time, and were happy with anything. So for a long time, cellphone providers could get away with selling low end units with little functionality and charging a premium. This is why Motorola raked in the cash with their RAZR line for so long. American consumers for the most part only demanded phones that could call out, SMS, have a couple downloadable games for sale, and some stuff for download at a store. So, cellphone companies provided just that. Want new wallpaper? $1.99. Want the ringtone from whomever's latest album? $4.99.
Fundamentally, these expectations didn't change until 2007 and the iPhone when Apple set the bar of what people should expect in a phone.
Even though these days, basic RAZR-like phones are relegated to the "free with two year subscription", or the rack of prepaid devices, US consumers are still used to throwing away a device at the end of the contract, then buying their new toy from another provider. So, if someone has an iPhone and wants a Droid, they either wait until they are OOC with AT&T or pay the ETF and jump providers.
The second reason is that the US has only two GSM providers. The other two providers are CDMA, and this generation of technology does not allow for exchange of phones between carriers in an easy fashion. For example, with T-Mobile, I can buy a phone, unlock it, drop in my SIM card and be online. With Sprint or Verizon, the device has to be put on their CDMA network on their end so changing phones is more difficult.
Because of Americans being used (until recently) to low functioning cellular networks, and the incompatibility between providers (even the two GSM providers have different bands), consumers here tend not to bother with moving phones across networks, and instead will just switch providers when they switch phones.
Re:Meh. (Score:3, Interesting)
I remember twenty years ago that an in-state call to a town 200 miles away cost thirty cents a minute. Calling my parents on a phone card from a ski trip out West was about $1.50 a minute. And those were AFTER competition had started.
There are problems with the American mobile phone market - in particular, the different communication technologies and the different 3G GSM bands fragment the market so that effective competition is greatly reduced. But our market has some significant advantages, too: every plan sold today is nationwide without roaming charges. When you find me a European operator that will cover me from Moscow to Gibraltar for the same price Americans pay, then we'll talk about apples-to-apples.
Re:Fairness? (Score:3, Interesting)
Furthermore, customers can actually benefit from using their phone beyond the mortgage period! The current system is designed to scam consumers, as you pay the same price for service if you bring your phone or get one subsidized by the carrier.
An early termination clause is reasonable for some non-subsidy costs, but since they already charge you an activation fee, it is pretty hard for me to believe there is residual customer acquisition costs. (Customer retention costs should not be paid by a departing customer...!)