Verizon Defends Doubling of Early Termination Fee

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."

Comments

Crippling Early Termination Fee

[eldavojohn]

AT&T CEO: So, basically when the new iPhone 3GS++ comes out, people will be leaving other carriers in droves.
Verizon CEO: No matter, every customer signed a contract with more words than the US Constitution which means they either didn't or are unable read it. In that contract, we reserve the right to increase our crippling early termination fee. So we'll juice that up to lock in size and by the time most customers can leave, we'll have an answer to your latest model.
Verizon Shareholder: I approve.
Verizon Customer: Why does my ass hurt?

Don't pay the fee

[Kohath]

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.

Re:Don't pay the fee

[jkgamer]

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.

Re:Don't pay the fee

[Jawn98685]

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.

Re:Don't pay the fee

[db32]

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."

Re:Don't pay the fee

[causality]

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.

The only way you would ever have a free market is if the average person always fully understood both the product/service that is being sold AND any contract that goes along with it. Even that wouldn't be enough. You would then need for all people, as individuals, to be willing to boycott a company (even in the absence of a competitor) and bring it to its financial knees and to be willing to do this over even minor abuses. They must do this individually and not as the result of some organization's decision, and nearly all of them must do so. Then if a corporation even remotely looks like maybe it is screwing someone over, it gets faced with its own bankruptcy and made an example of. This will put other corporations on notice, proving to them that anything resembling bad-faith or malfeasance absolutely will not be tolerated and will be punished at all costs.

This model would not result in more bankrupt companies. It would result in companies complying with the wishes of the people in order to make a profit, just like everything they do now is for profit. The only thing that would change are the particular behaviors that lead to profitability. This would radically change the way citizens relate to corporations. It would fundamentally alter the balance of power. Right now that balance of power favors the corporations -- they are the major players in the market, and most customers cannot truly negotiate with them but must instead accept contracts of adhesion. They have the money and the lawyers and the political clout, meaning they can alter laws in their favor RIAA-style.

Until and unless people come to see it this way, we will indeed need government regulation. Government is about the only thing big enough and powerful enough to deal with corporations that are often larger than many nations. Even then we have the problem of well-funded lobbyists that were not sent to Washington by average citizens, but by monied interests. That's why I think this is ultimately only a partial better-than-nothing solution, as it merely relocates the problem from the marketplace to the realm of public policy.

Where is government now that we need them?

[Herger]

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?

It's a problem with the whole industry

[BadAnalogyGuy]

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.

Re:Customer care

[eldavojohn]

Verizon will go any lengths to protect their customers, even if it means killing them.

"This is an automated message notifying you that on the ... two five of ... November of ... 2009 your husband did conspire to change carriers with willful and malicious intent. Regarding this matter, he has been terminated in order to assure you continuous service. We apologize if you experienced any problems with your service during this technical adjustment. You will receive an invoice shortly for the professional handling of your husband and his disposal. Please remit payment by the end of ... December of ... 2009 to avoid further late charges and fees. To return to the main menu please press star, to talk to a Verizon funeral representative please stay on the line ... "

Oh boo, friggen, hoo...

[mark-t]

"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.

Fairness?

[grapeape]

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:Fairness?

[orlanz]

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?

[Znork]

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:Fairness?

[PopeRatzo]

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.

Re:Fairness?

[EvanTaylor]

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?

[shutdown -p now]

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.

Re:Not a 'Free Market'

[Anonymous Coward]

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 than a minute of conversation.

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

Re:Meh.

[PopeRatzo]

You did read it before signing it, right?

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.