Verizon Wireless raises Early Termination Fees (ETFs) on Smartphones, Blackberrys, and Netbooks
Early Termination Fees continue to be an issue of contention between consumers, the wireless industry, and regulators. This time it’s Verizon Wireless who has caused a stir by creating a $350 Early Termination Fee for “advanced devices.”
First question right, what is an advanced device? Verizon has provided a list of what it considers advanced devices at http://www.verizonwireless.com/advanceddevices, but essentially an advanced device is a smartphone, Blackberry, or netbook.
The next question is who does this apply to? Well according to the Verizon Wireless Terms and Conditions: Individuals who purchase an advanced device with a contract term after November 14, 2009. However, if you already own an advanced device watch for notices that these higher contract rate could apply to you. The advanced device list includes a number of devices that VZW is not currently selling on its website, leaving open the question if VZW was just being thorough or if an additional contract change is on the horizon.
Regardless, if you are planning to purchase a phone from VZW you have to question whether purchasing a smartphone on contract is worth it given the new ETF. For instance, you could purchase a Motorola Droid on 2 year contract for $299.99 or for no contract for $599.99, a difference of $300.00. Last time I checked $300 is less than $350. Yes, yes I know the ETF is prorated $10 a month over the life of the contract, and that you cannot use the phone with another carrier, but that should make you question purchasing the phone, not encourage you to buy a contract.
As a consumer, you should resist agreeing to such a high ETF. Currently, the best way to do that is to choose a phone that is not an advanced device or pick a different company. Verizon Wireless will not want you to do either, but sometimes companies hear you best through your purchases you make or perhaps in this case don’t make.
For the regulators part, they are at least asking questions. The FCC recently sent a letter to Verizon Wireless asking them to provide a rationale for the increase as well as describe any notice available to consumers. Senator Klobuchar has also sent a letter to Verizon Wireless calling the decision anti-consumer and anti-competitive. She has also introduced legislation with Senators Feingold, Webb, and Begich to set limits on ETFs, require pro-ration, and clearly notify consumers of the fee.