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Update: Verizon jacks up early cancellation fees on smart phones

With a whole new line of smart phones coming onto the market, Verizon Wireless says that starting November 15 it is doubling to $350 the penalty fees for subscribers who leave their contracts early.

James Gerace, a spokesman for Verizon Wireless, the nation's largest cell phone provider, said the fees are for subscribers in one- and two-year contracts on an "advanced device" and that those fees will be prorated $10 a month. That means, if you've made it halfway through your two-year contract, the $350 penalty will be reduced $120 to $230.

Gerace said the company decided to raise fees because phones are just getting more expensive. The firm subsidizes the overall cost of its fastest and most tricked-out phones to make the upfront price more appealing to customers. He said consumers can buy any of the phones that work on Verizon's network without signing a contract. So if you want to buy a Blackberry Storm 2 you could get the device for $180 with a two-year contract or pay $539 to use the phone without any obligation for your term of service.

Verizon is coming out with a slew of new handsets, including the Droid this Friday for $199 with a two-year contract. The phone is made by Motorola using Google's Android software. The phone is meant to take on Apple's iPhone, which runs exclusively on AT&T.

The move could revive debates about early termination fees, the penalties wireless service providers charge users for leaving service contracts early. Consumer groups have pushed for legislation to scrap the fees or at least create standard rules for the practice, which they say is a way for carriers to keep users locked into long-term contracts. Last year, the issue gained steam with Congressional hearings and an FCC review of the issue (The FCC is also looking into early termination fees as part of their review of the wireless industry). The issue died down as AT&T, Verizon Wireless, Sprint Nextel and T-Mobile decided to pro-rate their fees based on length of contract.

By Cecilia Kang  |  November 4, 2009; 4:46 PM ET
Categories:  Consumers , Verizon  
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FTA: "The $350 ETF will decrease by $10 for each month of service completed."

Sounds like they're trying to cover the subsidy of the smartphone. Presumably the rest is recouped with higher data fees.

Posted by: wiredog | November 4, 2009 12:40 PM | Report abuse

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