Verizon Wireless has some explaining to do to Federal regulators.
The FCC said in a letter that it would like to know why, exactly, the cellco has doubled its early termination fees (ETFs) for users with smartphones like Blackberries and the Motorola Droid. Regulators are also curious as to why those customers without smartphones are charged $2 for accidentally accessing the Internet.
Verizon Wireless has been asked to explain its approach by December 17.
Starting Nov. 15, the carrier doubled its early termination fee to $350 for those with “advanced devices” and a one- or two-year contract. It’s the highest fee ever imposed by a major wireless carrier. That said, the penalty decreases by $10 for each month of the contract that’s fulfilled.
For its part, Verizon said the hiked fee is simply a way to ensure that it can continue to bring upper-end devices to market at reasonable pricing. A subsidized Blackberry for instance can go for $99. But Verizon pays much more than that to Research in Motion Ltd.. And so, to recoup the loss, the carrier needs to keep the customer on the network for a reasonable amount of time. Or, have that customer defray some of the loss should he or she decide to leave before paying for his or herself.
Consumer groups have called the practice “punitive” and unnecessary, particularly considering that the monthly contract payment for a high-end device is rarely inexpensive.
Are Verizon devices costing the carrier more than subsidized devices cost Sprint or AT&T? The standard industry ETF is between $175 to $200. The iPhone’s is $175, by way of comparison. Verizon has argued that that fee level is out of date, and spokespeople have been quick to point out that the fee is avoidable by paying full price for a device at the outset. Consumers can also avoid the penalty by simply sticking with the contract, which one would presumably do if one likes the device, which more likely than not would not be portable to another carrier.