updated 02:15 pm EST, Fri December 4, 2009
FCC asks Verizon to explain move
The FCC today sent a letter to Verizon asking it to explain its recent decision to double cancellation fees for smartphone users. It comes prompted by existing investigations and a recently introduced bill by Senator Klobuchar that would force pro-rated fees. The letter expresses concern that Verizon may have inflated the fee to keep customers for phones like the Droid attached to the network for as long as possible.
Additionally, the letter asks what Verizon has done to address frequent complaints from customers being charged $2 or more for accidental Internet access. The New York Times' David Pogue and others have chastised Verizon for making it comparatively easy to launch some phones' web browsers by accident and to charge them a minimum $2 fee even if they close the app immediately.
Verizon and most other carriers have long argued that early termination fees (ETFs) for phones are necessary as they recoup the profit that would otherwise be lost from subsidizing phones on contract. Many devices are available off-contract but often cost as much or more than the subsidized price, providing little incentive to avoid committing to the long-term deal. It also hasn't explained why it now costs $350 to quit the plan for a smartphone when similarly expensive devices have only had a $175 fee as recently as a month ago.
Subsidies have been key to the recent success of the iPhone as AT&T's $299 and lower prices fall well under the likely actual costs of buying Apple's handsets outright.