Verizon defends pricey early termination fee to FCC
Verizon Wireless, which doubled its early termination fee for smartphones like the Motorola Droid or Blackberry Storm 2 from $175 to $350 last month, is now answering to the Federal Communications Commission. The commission is reviewing Verizon's customer policy and will determine if the company violated consumer protection rules.
While many consumers hoped the inquiry would cause Verizon Wireless to question and possibly lessen its ETF, instead Verizon is refusing to budge, saying the pricey fee balances out the high cost of providing the smartphone at a discount and that the fees help keep its network up and running.
"The overall cost to the company for providing and supporting devices to customers at low, up-front cost has increased substantially," wrote Kathleen Grillo, senior vice president of federal regulatory affairs for Verizon, in a letter to the FCC. "Verizon Wireless incurs additional costs to sign up customers, such as advertising costs, commissions for sales personnel, and store costs."
When asked why Verizon doesn't prorate its ETF over the life of the two-year contract (since consumers would have to still pay about $120 if they canceled 23 months into their contract,) Verizon stated, "Customers as a whole would be worse off if Verizon Wireless were to [pro-rate the ETF to zero] because early terminations occur disproportionately in the early part of the contract term, and relatively few customers terminate near the end of the contract term."
Essentially, Verizon does it all to help the consumer!
While some are surprised at Verizon's audacity, by saying ETFs are their bread-and-butter Verizon clearly shows it does need FCC oversight. The FCC recently started looking at the wireless industry as a whole, working on becoming more of a consumer watchdog by dissecting fees and enforcing consumer protection rules.
Currently, the FCC is reviewing Verizon's defense of its policy. Hopefully we will learn if the commission will force Verizon to modify its ETF costs soon.