Verizon To Raise Termination Fees - InformationWeek

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11/6/2009
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Verizon To Raise Termination Fees

Early-termination fees for Verizon Wireless smartphones and other mobile devices will double this month.

Verizon Wireless will be doubling its early-termination fees (ETF) to $350 for subsidized smartphones, 3G netbooks, and other advanced devices for purchases made after Nov. 15.

The nation's largest cellular operator previously had a prorated $175 ETF that kicked in if a customer cancelled their service before the end of the contract, and it said the increase is necessary to help defray the costs of the devices it sells to customers at subsidized prices. For example, Verizon customers can buy the BlackBerry Storm 2 for $179 with a new two-year contract, but the handset can be purchased outright for $539 without a contract or ETF. The unsubsidized price is likely close to what Verizon pays per Storm 2 unit, although it undoubtedly receives discounts for bulk purchases.

"The higher ETF associated with advanced device purchases fairly reflects the higher costs associated with offering advanced devices to consumers at attractive prices and investing in our network to support these devices," said Verizon Wireless spokesperson Thomas Pica in an e-mailed statement. "Remember, wireless devices have gotten increasingly complex over the years and now are like carrying around a mini computer in your pocket."

The higher ETFs will impact consumer and business smartphones and other devices such as personal digital assistants and netbooks with embedded mobile broadband that are subsidized by Verizon. The ETF will decrease by $10 per month for the life of the contract, and the increased fees will not impact normal cell phones, or USB 3G modems, Verizon said. The company also said new customers can still cancel service within the first 30 days without having to pay an ETF as long as they return any subsidized equipment.

The move comes as Verizon is making a bigger push in the smartphone space. It just released the high-profile Motorola Droid handset to go head-to-head with AT&T's iPhone. Smartphone users generally produce higher average revenues per user than regular cell phone customers. The higher cancellation fees may hinder Verizon's smartphone adoption, as rivals AT&T, T-Mobile, and Sprint have ETFs that range from $175 to $200.

ETFs have long been a contentious issue in the wireless space, as consumer advocacy group claim these fees hinder choice. Multiple class-action lawsuits have been filed over ETFs. The issue has also caught the attention of the Federal Communications Commission, which is mulling a nationwide policy over cell phone cancellation fees.


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