By Martin H.
Bosworth
ConsumerAffairs.com
December 24, 2009
When word got out that Verizon was increasing its contract early termination fees (ETFs) to as high as $350 for its high-end phones, the Federal Communications Commission (FCC) wanted answers. And now that it's finally gotten a response, at least one Commissioner isn't happy with what they received.
Verizon's senior vice-president for regulatory affairs, Kathleen Grillo, said that the increased termination fees were necessary due to the higher costs of marketing and advertising smartphones, in addition to the actual costs of subsidizing the handsets themselves.
"Verizon Wireless incurs additional costs to sign up customers, such as advertising costs, commissions for sales personnel, and store costs," she wrote. "These costs are higher for Advanced Devices: for example, it takes more time (and hence increases the cost to Verizon Wireless) for sales and customer care representatives to handle customer inquiries regarding the complex advanced features and functionalities of Advanced Devices."
That answer didn't make new Commissioner Mignon Clyburn very happy. In her response, she said that Verizon had a "shifting and tenuous rationale" for its actions.
"Consumers already pay high monthly fees for voice and data designed to cover the costs of doing business," she said. "So when they are assessed excessive penalties, especially when they are near the end of their contract term, it is hard for me to believe that the public interest is being well served."
Clyburn also had questions about Verizon's Mobile Web service. Consumers and tech reporters had noted that the service's usage plan kicked in the moment you accessed the service, even if done accidentally or only for a moment, and the resultant $1.99 charge was a hidden fee for Verizon.
In the telecom's response, Grillo said that "In order to protect customers from minimal, accidental usage charges, Verizon Wireless does not charge users when the browser is launched, and opens to the Verizon Wireless Mobile Web homepage. If the browsing session ends there without the customer navigating to another webpage, the customer will not incur charges for Mobile Web browsing."
Clyburn was unconvinced, saying that "recent press reports and consumer complaints strongly suggest otherwise."
Verizon's ETF hike has put the issue back in the hot seat in recent weeks. For many years, wireless companies have claimed that ETFs were necessary to subsidize the costs of handsets, while critics claimed they were a tactic designed to lock consumers into long-term contracts while companies reaped profits.
A recent report by the Government Accountability Office (GAO) found that 42 percent of wireless customers surveyed would not switch from their current carrier to another for fear of incurring a termination fee. The GAO also criticized the FCC for not doing enough to investigate complaints about wireless service by customers.
Advocacy groups such as Consumer Action have been pushing consumers to pay attention to contract changes and new additions to their terms of service, which can often be used to escape a cell phone contract without penalty -- but only with savvy negotiation.
