Verizon Doubles Early Termination Fees
November 4, 2009
Posted by Josh Levy
You know those early termination fees wireless carriers charge? The ones that cost you an arm and a leg to cancel your contract?
If you're a Verizon customer, I hope you have a few arms and legs to spare. Early termination fees are about to go up.
A Verizon memo shows that starting Nov. 15, customers with an "Advanced Device" who want to break their contract will be charged an early termination fee of $350. That's twice the current $175 fee.
The fee will decrease by $10 for every month of service you complete. So after six months, you'll only owe $290 if you decide that Verizon isn't the carrier for you. Also, early reports of the memo don't specify what constitutes an "Advanced Device," but my money's on any smartphone that requires a data plan, including the DROID, which is launching Friday.
The fee is outrageous. Early termination fees are universal across the industry, and they're universally detested by consumers. The carriers argue that these fees are reasonable: They sell phones at a reduced cost in exchange for a two-year contract. If that contract is broken, they recoup their subsidy via the fee.
Fine. If these fees are based on the subsidy, then let's see the data — how much does Verizon pay for, say, a BlackBerry Bold? Even at $175, early termination fees seem way too high to be anything other than punitive. In fact, the average subsidy of a wireless handset in 2008 was $14.33 (see p. 20 of our filing with the FCC), so a $175 fee is already more than 10 times the average subsidy. So what justification could there be for doubling the fee?
A lot of regular smartphone users are going to get caught up in this net, and they won't be happy about it. If you don't want to be doubly penalized for the audacity of switching carriers, buy your smartphones now!
Comments
Understand that the subsides
Understand that the subsides on your smartphone is much higher than $350. Some are higher than $500. So if you want to have some judge strike down these fees as crooked, be prepared to pay an average of $600 for any smartphone on the market. iPhones would be starting at $800 for the cheapest 3GS currently available. I do not currently work for any carrier, but have previously, and prefer the current system to the one where you buy the phone outright for big $$$ and then have to send the phone in to the manufacture for service, all the while without your phone. Need an example, look to all the prepaid carriers.
Also I find it interesting
Also I find it interesting that they aren't doing this switch on Friday Nov. 6th to take place at the same time as the launch of the Moto Droid, which is obviously being subsidized by at least $500.
Sounds like Verizon is using
Sounds like Verizon is using the same model to retain customers as the Hotel California.
People should not be forced
People should not be forced into ridiculous contracts and termination fees. If a company does not provide the service people expect, then that company should not be in business.
Customer should have the right to buy the phones from who ever they want. I bet you that if people are allowed to have choices of phones from any company in the world (Japan, etc), people are willing to pay good money for a good, efficient, and quality product. Phones do not have to cost $500 or even $150.00. They phones are designed and manufactured cheaply.
Let's learn from the car experience. Toyota and Honda get record profits and no bail-outs because their business model includes good customer service, reliable and quality cars. Do we have cell phone or service provider companies that can provide good customer service, reliable and quality cell phone?
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