Network News

X My Profile
View More Activity

Washington to Verizon Wireless: Can you hear us now?

The Federal Communications Commission sent a letter to Verizon Wireless Friday morning asking the company to explain why it has more than doubled its penalties for customers switching carriers.

The inquiry follows pressure by lawmakers, including Sen. Amy Klobuchar (D-Minn.) who introduced a bill Thursday to curb the penalties known as early termination fees (ETFs).

Last month, Verizon Wireless, the nation's largest cellphone service provider, increased its ETFs for smart phone customers to $350 from $150. The company said smart phones had become more expensive to subsidize, making it more costly when customers with discounted phones left long-term contracts early. No other wireless companies have introduced higher ETFs.

In its lengthy letter to Verizon Wireless vice president of legal and regulatory affairs, Steven Zipperstein, the FCC asked him to explain "the rationale" behind the higher fees. The agency asked for details on the economics behind the ETF scheme and how the costs of subsidizing phones specifically correlate to the ETF.

And it asked whether the company is providing clear guidance to its customers about the higher fees. The agency also asked whether Verizon is clear about the prorating formula for its new ETFs.

Answers to these and other questions are due to the FCC by Dec. 17.

Verizon Wireless has said that it continues to prorate the fee to lessen the ETF in a way that helps those who stay in contracts longer.

But lawmakers and consumer groups say users may be left with too steep a fine even with prorating. And users shouldn't be saddled with high fees, particularly if the rules aren't clear and if a user moves to an area where coverage isn't available.

"Changing your wireless provider shouldn't break the bank," said Klobuchar in a release. "Forcing consumers to pay outrageous fees bearing little to no relation to the cost of their handset devices is anti-consumer and anti-competitive."

In the bill, a wireless carrier would be prevented from charging an ETF that is higher than the discount in a cellphone that the wireless company offers consumers for entering into a multi-year contract. For example, if a wireless consumer enters into a two-year contract and receives a $150 discount with the contract, the ETF cannot exceed $150.

Further, the lawmakers propose that customers in two-year contracts would have their ETFs reduced by half after one year and prorated to zero by the end of the contract.

The wireless trade group CTIA responded that Klobuchar's bill is unnecessary because wireless service providers already prorate their fees.

By Washington Post editor  |  December 4, 2009; 11:42 AM ET
 
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Comcast-NBC hits first hurdle: Washington
Next: Cable industry urges FCC to include teleco, satellite in set top box review

Comments

Now they should go after DireTV!!

Posted by: Angryman | December 4, 2009 12:28 PM | Report abuse

Nobody likes paying higher fees, but with that said it's perfectly rational and fair. Its being done to recover the equipment costs. Sen. Amy Klobuchar should have done some cursory research before making claims of "outrageous fees".

People want expensive devices for nothing and no penalties for invalidating their contracts.

Example
Verizon Moto Droid
Full cost of the device $560
with 2/yr contract a customer pays $200 for this. If the termination fee was $150 Verizon and their agents would eat a loss of $210. Even with a $350 ETF , they're still in the hole $10.

Posted by: MarkPB | December 4, 2009 12:48 PM | Report abuse

I hardly believe Verizon paid $560 for the Droid.

Posted by: Allec | December 4, 2009 1:01 PM | Report abuse

This should be based on what it cost Verizon, not what the retail price is. Many of the devices can be found at discounters for not that much more than the "discounted" price that Verizon sells it for.

Posted by: mdembski1 | December 4, 2009 1:06 PM | Report abuse

I really loathe Verizon and their approach to dealing with their customers. They're hardlined, arrogant way of doing business just makes me sick. I'm with ATT now and the more of hear of Verizon pulling these pathetic maneuvers to recover lost capital due to the iphone sales on ATT, it just reinsures my customer loyalty to ATT. Some may disagree with me, but I will never do business with Verizon and their arrogant, and cocky attitude towards the customer.

Posted by: ryanst530 | December 4, 2009 1:06 PM | Report abuse

@MarkPB
Perhaps you too "should have done some cursory research".
Verizon does not pay $560 for the device. That is the retail price.

Posted by: pl23 | December 4, 2009 1:11 PM | Report abuse

Alternatively, I've always gotten sterling service from Verizon. When my ex-partner (who was on my joint phone acct) passed away this year, the service rep was compassionate, respectful and did everything he could to not only close out his account with no cost to me, but also looked at my bill to help me reduce my own bill dramatically. Service at the store has been excellent as well. Given my friends' issues with ATT service and dropped calls, I'm happy to stay with Verizon. I just hope they get the iphone soon.

Posted by: clwaldmann | December 4, 2009 1:13 PM | Report abuse

When I picked up the Droid was explained the draconian early termination penalty. Surprised, but did the deal. Very happy with the phone, but would like it if the FCC could get it for me without the monthly data fee, without any service charges and those pesky taxes.

Oh, and thanks for the amazing maps, GPS turn by turn navigation, and great browser -- all included for free. So all in all, if we're not going to take off the monthly stuff that puffs up my bill, FCC, don't get Verizon too mad -- it took them this long to just get a decent smartphone.

However, in all seriousness, it would probably increase competition and innovation if Verizon (and ATT, etc.) had to fight every minute for my business.

Posted by: tommariner | December 4, 2009 1:17 PM | Report abuse

Verizon must have forgotten that there was an election last year and that its FCC cronies were put out of power. Consumers actually have someone looking out for them now. Get a clue!!

Posted by: PepperDr | December 4, 2009 1:38 PM | Report abuse

The USA has the most screwed-up model for cell phone pricing. In most other places, you buy a phone -- a phone that works with ANY carrier -- and then you shop around for the best service. If you change carriers, you can keep your phone.

By locking phones to carriers, and bundling phones with service, the American cell phone carriers make it MUCH harder to shop around for the best deals, and so protect their profits. It's all disgusting, really, and infuriating to someone whose traveled around the world and seen MUCH BETTER OVERSEAS.

Just one more area where the US is falling behind the rest of the world.

Posted by: DupontJay | December 4, 2009 2:02 PM | Report abuse

Verizon has been sued by the Fed. Gov. over 10 times in the past 75 years. It's time to put them down. They could care less about the laws or their customers. Wait for the next big suite for over internet usage billing. They advertise one amount but then charge 10 times that amount. It's suppose to be a tenth of a cent but they bill as a penny 9 times more than advertised. Check your bills if you don't believe me. The sad part is, if they provided even some what of a good service people wouldn't be leaving. The fact that so many are leaving proves they have terrible service and terrible customer service. FIOS is a joke. It's good idea but the customer gets beat on so it takes away from the quality of the service. Verizon is an old school company meaning that they are use to NOT PROVIDING CUSTOMER SERVICE as it was not necessary. They we're THE ONLY PHONE COMPANY for many years. They still run their customer service with this attitude. I know well over a 100 people that have left Verizon FIOS and returned to their cable providers, I know even more that have dropped Verizon's cell phone service and taken their business to other providers. If you ask any of them why they'll all say the customer service is horrible. Bankrupt these POS and put them down.

Posted by: askgees | December 4, 2009 2:05 PM | Report abuse

Verizon is the worst communications company that I have ever had to do business with. My long relationship with them ended two years ago after they held hostage my phone number of 20 years. At that time, they would not answer my calls or redirect me to as many as 15-20 different people, some of which hung up on me. I will never-ever do business with these azzzwholes again.

This all started with a simple addition of a phone and transferring of my phone number. They caused my number, a business phone number, to go out of service!!!!! My clients were trying to reach me, and a recorded message said my service was discontinued!!!!!!!!!!!!!!! Goddammit it makes me mad thinking about this!!!!!!!!!!!!!!

Posted by: johng1 | December 4, 2009 2:05 PM | Report abuse

Verizon's arrogance is just astounding... time for free-market competition to kick in gear and give them a reality check.

Posted by: ryanst530 | December 4, 2009 2:11 PM | Report abuse

Finally, an FCC with the baseballs to work for consumers. Verizon has been getting away with murder, as anyone with a cell plan in other countries would tell you. They are waaay too fat and happy -- and anti-competitive. See more details of this letter here: http://www.pcworld.com/businesscenter/article/183736/fcc_examines_verizons_doubling_of_early_termination_fees.html

Posted by: forestflyer | December 4, 2009 2:23 PM | Report abuse

Even if you use the retail prices, which is not the price Verizon pays for the phone, it doesn't make a lot of sense to me. Lets compare the HTC Droid Eris to the LG enV Touch.

Eris retail is $470 - 2yr contract price of $200 = $270. Oh there is a mail in rebate of $100, so I don't know if we should count that, but its not going to matter for this comparison. This phone has an ETF of $350 now. So if you include the rebate, Verizon loses $20 if you term the 1st month.

The enV touch retail is $410 - 2yr contract price of $200 = $210. There is also a rebate of $100, but like I said, compare how you want. This phone has an ETF of $150. With the rebate, Verizon loses $160 if termed after the 1st month.

Now lets talk about the mandatory data plans. The Eris is $30/mo for 24 months = $720. The enV is $10/mo (or more) for 24 months = $240.

Looks to me like this ETF is to lock customers into the $480 difference in contract life data charges rather than the $59 difference in handset prices to me, since they're willing to lose much more on the enV.

Now don't get me wrong, I like that companies subsidize their handsets because I don't really want to pay $400 for a phone. My problem is more with the required data plan. Having recently lost my job, my blackberry is no longer such a necessity, but my contract won't allow me to drop that data without buying a new phone.

Posted by: zarins | December 4, 2009 2:31 PM | Report abuse

@askgees

Verizon wireless is a 55/45 partnership between Verizon Communications and Vodafone. It was only founded in 2000. Fios is not an offering of VZW. VZW consistently ranks #1 in wireless customer service.

Posted by: zarins | December 4, 2009 2:40 PM | Report abuse

All early termination fees and other "fees" should be outlawed - with hefty prison time and fines for Anyone charging one.

Posted by: UnitedStatesofAmerica | December 4, 2009 3:04 PM | Report abuse

Interesting comments.

@Dupont.Jay ; You can buy an unlocked phone from any manufacturer and use it with any carrier as long as it is compatible with the network. You're just not going to get a discount, and different carriers use different network technologies. It's called innovation, and we encourage in the U.S.

In general: Better get used to Verizon. The droid phones are a better paradigm than the iphone, and Verizon is our best hope of a competitor to the new Comcast. Everyone I know is switching to Fios. The only other hope is Google and their, in-part, upcoming satellite internet --read: communications-- service(s).

My one complaint with Verizon is that they AUTOMATICALLY sign you up for a term agreement after your 2-yr expires. I've never heard of such a thing. Normally, there's a month-to-month relationship, but now we're locked in for another 2 years. Luckily, with Wi-fi and related techs proliferating so much, and the availability of Wi-fi smartphones, the cell phone and it's service providers will either drastically modify their paradigm, or it's dodo time.

Posted by: NovaMike | December 4, 2009 3:11 PM | Report abuse

DupontJay:

I agree 100%. It's time to throw out the current model and start from scratch. The US is so far behind in the cellular market, in terms of consumer choice and competition. It's quite sad, really. And the whole "contract" concept is ridiculous.

Posted by: floydboyd | December 4, 2009 3:14 PM | Report abuse

I have had Verizon cellphone service for years & amnot switching. Sprint & Cingular coverage were both unsatisfactory, "no service" or dropped calls. A coworker has AT&T which coverage is not very good & can never hear at her desk; I have no problem & sit next to her. No trouble with VZW, customer service always good over the phone & instore. Fees & taxes are same as any other cell service. Have seen new plans such as Consumer Cellular but don't trust any other company's coverage like Verizon based on my previous & others experiences. I travel all over the country & my kids are in different states so I need to be sure of good communication & will not switch. I think it's a case of you get what you pay for, go with someone else & you probably won't get consistent phone service. VZW must have the most cell towers to give that good service so naturally it costs them more to run it.

Posted by: Barbie63 | December 4, 2009 5:42 PM | Report abuse

@NovaMike: I don't want to defend Verizon, but their current customer agreement says: "Once you've completed your contract term, you'll automatically become a customer on a month–to–month basis for that line of Service."

http://www.verizonwireless.com/b2c/globalText?textName=CUSTOMER_AGREEMENT&jspName=footer/customerAgreement.jsp

Posted by: cyraxote | December 4, 2009 6:27 PM | Report abuse

Just in time Verizon!
About as smart as the US automakers waiting till after the election to ask for money. (The banks got all they wanted)
Google is setting up to blow these rip-offs out of the water. AT&T and the rest will hang themselves from their phone lines as technology leaves them where they belong, in the swamp.
Verizon will squeeze the last ETF's out of us when we all bail to google for near FREE service. We will be happy to pay it!
Getting charged by the minute, ETF's, sad customer service, overage charges and the like will go the way of George Bush and his cronies, out with the wash water.

Posted by: tosch | December 4, 2009 6:34 PM | Report abuse

First, be advised they did not prorate until being forced to because the company encourages unethical behavior to enhance profits. If only someone would really audit their internet billing practices they would discover they have defrauded their customers out of millions of dollars. But hey, why bother, its just the American way.

Posted by: thinking1962 | December 5, 2009 2:22 PM | Report abuse

DupontJay is absolutely correct.
The US may have lead the way into the world of cellular communications but it was passed years ago.
Friends have GSM phones with SIM cards and can keep their number and make and receive calls across Europe, Asia, and the Pacific Rim.
AT&T Sprint, and Verizon need to pay attention and catch up with the rest of the world.

Posted by: bvi2002 | December 6, 2009 10:07 PM | Report abuse

While they're at it. Has anybody noticed the incredible rate that Verizon blackberries, especially the storm,crashes and locks up. It's un-fathonable that this product would still be so defective.

Posted by: davidmoore1 | December 6, 2009 10:21 PM | Report abuse

A step in the right direction. I prefer to avoid long term contracts due to the bad business practices of the cell phone companies.

I buy my own phone and have to ability to tell my provider to take a hike anytime I feel like it.

Screw em

Posted by: dontsendnofarkingspam | December 7, 2009 1:21 PM | Report abuse

We ended our business contract with Verizon in late July, and we are still getting billed by this “company.” Since we had internet, two phone lines and an 800-number, they told us we would be charged from the beginning of our three-year contract if we ended the contract a day earlier or the same day the contract ended. That “charge” would make up for the discount we “received.” The charge would have amounted to a couple thousand dollars. I asked to see this in writing, but they never sent this information. And I did not find it in our original contract.

I was so happy to call and cancel our service the day after our contract expired. Then, I found that, even though we lost Verizon’s internet service quite frequently, they kept our Verizon internet connected, assuming we wanted an internet backup. I found this out from a new monthly bill they sent us.

Yep, that’s how they treat their business customers! I too would never do business again with Verizon. If they are the only game in town, I’ll check out the post office!!

Posted by: ummhuh1 | December 7, 2009 1:48 PM | Report abuse

Verizon is going to buy AT&T, then what? Sprint or T-mobile? Cry babies!

Posted by: mrpnizut | December 7, 2009 11:30 PM | Report abuse

Cecilia, nice article. I wanted to respond by addressing, in particular, those people who are facing ETFs because their wireless service was too expensive so they had to end their contracts prematurely. For these people, avoid both the ETFs and the expensive plans by seriously cutting your wireless costs; an intuitive but often realistically tough proposition. However, I work in the consumer advocacy division of the Houston-based company Validas, where we electronically audit and subsequently reduce the average cell bill by 22 percent through our website, http://www.fixmycellbill.com (and I'll add that 22 percent equates to over $450 per year for the average user).

You can find out for free if fixmycellbill.com can modify your plan to better suit your individual needs by going to the website. Check out Validas in the media, most recently on Fox News at http://www.myfoxtampabay.com/dpp/consumer/conlaw/lower_cell_phone_bills_072409 .

Good luck to everyone reading on retaking control over your wireless expenses and potentially freeing up some extra cash this holiday season.

Dylan
Consumer Advocacy, Fixmycellbill.com

Posted by: dbb10001 | December 9, 2009 2:59 PM | Report abuse

The comments to this entry are closed.

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company