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FCC investigating Verizon ETF rate hike

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.

By Electronista Staff
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  1. malax

    Fresh-Faced Recruit

    Joined: Aug 2006


    comment title

    "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."

    Duh. Whoever suggested that such fees were for any other purpose?

    I do agree that fees for accidentally opening a internet enabled app (and receiving an unwanted text message) are problematic if the user has no way to lock those out.

  1. climacs

    Mac Enthusiast

    Joined: Sep 2001


    caveat emptor

    I guess I am conflicted. I am glad the Obama administration actually has government on our side and not on the side of big business, which is not exactly helpless.

    On the other hand, if you find Verizon's terms onerous... go elsewhere.

    On the third hand, if they all start doing this or if the other carriers have crappy coverage or none at all where you are, you're screwed and you don't really have a choice other than to not have a cell phone.

  1. DanielSw

    Fresh-Faced Recruit

    Joined: Aug 2009


    Sounds fishy

    Here comes Verizon, the bully on the block, boasting about its bad robot Droid, dissing ATT&T, dissing the iPhone, fast like a scud missile, yadda, yadda, yadda.

    But it knows full will that the Droid could very well bomb, so it's covering its bets and hiking up the ETF.

    Now there's a company with real integrity. Really confidence inspiring.

  1. charlituna

    Fresh-Faced Recruit

    Joined: Sep 2009


    something for both sides of the game

    i am not opposed to a $350 ETF. IF that is how much the carrier fronted on the device cost. I think it is only fair for them to be able to set the ETF at that amount. but no more than that.

    what chafes me is the pro-rating. it isn't 1/24th of the ETF. so say I go 20 months out of 24. with the current pro-rate I'd get a credit of $200. but by their argument, I've been paying the upfront over the course of my contract. so that would be 1/24th that cost each month. so I've paid off $290 (give or take a couple of dollars). so they just made a $90 profit. not cool

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