17 thoughts on “FCC Wants to Know Why Verizon Increased Termination Fees”

  1. Duh – they raised the ETF to prevent people from signing the 2 year contract to get the discounted phone and then bolting. Is it really that tough to figure out?

    Retail price of the Motorola DROID: ~$600 (depending on where you go)

    Price if you break contract: $200 + $175-200 termination fee = $375-400

    Price if you break contract now: $200 + $350 = $550

    I don’t get the big to-do about ETFs. The consumer signed a contract, and agreed that if they break it, they’ll pay the ETF. If you don’t want to have to pay the ETF, don’t sign the freakin contract. You can still buy the phone and get the same monthly fee.

    The problem here is that American consumers don’t have any sense of financial responsibility anymore. Look at the credit crisis, and listen to FM radio for 20 minutes to hear 10+ ads for ‘Credit Consulting Services’ that promise to eliminate your credit card debt, no matter how much you have. The message going out is ‘don’t worry how much credit card debt you build up – just call us and we’ll make it go away’. It’s horrendous.

    1. Well, its not entirely the fault of the customer either.
      Readnig Verizons response, I still have a nagging question which you might be able to answer.

      If I get my own phone (doesnt matter from where, but def. not from verizon), then why cant I subscribe to verizon at the monthly price that a 2 year contract guy pays? If the ETF is for the price of the phone, well I am not getting a subsidized phone from them.

      1. Srini,
        Whether you provide the equipment or you get a subsidized phone your service and monthly costs are exactly the same. The only difference would be that if you provide the equipment you don’t have to sign any contract.

    2. @Ricky – not tough to figure out at all, but the real problem with ETF’s and the phone subsidies that they enable is that they make the price of the phone artificially high.

      You quote the Droid price around $600, and an unsubsidized 32GB iPhone would be $699 per the Apple website. Both are fine hardware, but not worth anything near those prices. For comparison the 32GB iPod touch is only $299. Is the difference (a 3G radio chip) worth $400. No way in hell.

      I’m not picking on Apple, every regular and smart phone is the same way – if consumers had to upfront the retail cost instead of amortizing it over a 24 month contract – phone hardware would be substantially cheaper because few would do so.

    3. All the carriers are tinkering with ways to recoup their upfront expense in buying phones and building networks. The core problem is the flat rate data model, and the fact that 20% of their customers (smartphones and aircard users) consume 90% of the capacity. Sell market-priced services by application (i.e. browsing, email,downloads) and you now have a market-based model, with no artificial gimmicks that alienate customers. If you know up front what you buy for a price, (rather than undifferentiated data buckets) you’re less apt to complain, and now Verizon (or the other carriers) can recoup their investment in an economically sound fashion. Government intervention in pricing is a non-starter because it stifles innovation if there’s no payback.

  2. You guys are missing another important issue.
    I purchased a smart phone out side (Ebay) and wanted to use it for a month with no contract. They refused.
    The way it works is , you will start a contract for a year or two to begin with. This is regardless of the fact that you pay full price for your phone or not.
    Once you complete the original 1 / 2 year obligation , you are free to go month to month. You can then buy your own phone and activate it.

    The whole thing is designed to lock your monthly payment for a year or two. If not , pay them $ 350.00 or whatever the pro rated fee.
    Verizon has most expensive plans to begin with , on top they are charging double ETF ?

    I hope they loose few customers so that they reduce these ETF prices.

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