Verizon Defends ETF Smartphone Fees
Verizon continued its strenuous defense of its ETFs (early termination
fees) for smartphones in a Dec. 18 response letter to the FCC
(Federal Communications Commission). Verizon's Nov. 5 decision to
double the penalty fees to $350 for smartphone subscribers who
leave their contracts early has prompted calls for federal legislation
limiting ETFs.
According
to Verizon's latest defense, the carrier says the company's pricing
structure promotes the national goal of fostering the greater adoption
and use of mobile broadband services by making advanced devices and
services available to those who could otherwise not afford them.
"Verizon Wireless' term contracts with ETFs promote consumer choice and
broadband deployment. This pricing structure enables Verizon Wireless
to offer wireless devices at a substantial discount from their full
retail price," Verizon wrote in response to the FCC's Dec. 4 inquiry about the fees.
"By reducing up-front costs to consumers, this pricing lowers the
barriers to consumers to obtaining mobile broadband devices. It thus
enables many more consumers, including those of more limited means,
access to a range of exciting, state-of-the art broadband services and
capabilities." "Changing
your wireless provider shouldn't break the bank," Klobuchar said in a
Dec. 3 statement. "Forcing consumers to pay outrageous fees bearing
little to no
relation to the cost of their handset devices is anti-consumer and
anti-competitive." Klobuchar and four other Democratic senators introduced legislation Dec. 3 to set limits on ETFs. The Cell
Phone Early Termination Fee, Transparency and Fairness Act would prevent wireless carriers
from charging an ETF that is higher than the discount on the cell phone
that the company offers consumers for entering into a multiyear
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. The legislation would also require wireless carriers to
pro-rate their ETFs for consumers who leave their contracts early so that
the ETF for a two-year contract would be reduced by half after one year
and pro-rated down to zero by the end of a contract term. In addition, the bill would mandate wireless carriers to
provide "clear and conspicuous disclosure" of the ETF at the
time of purchase.
Verizon also said customers are fully informed of the ETFs.
"Consumers
are protected by Verizon Wireless' detailed disclosure practices...by
the Worry Free Guarantee, which allows customers to terminate within 30
days of activation without an ETF, and by the monthly reduction in the
ETF amount," the letter states.
The FCC inquiry follows a Nov. 10 letter from Sen. Amy Klobuchar (D-MN) to Verizon Wireless President
and CEO Lowell C. McAdam and the FCC, criticizing the company's decision to double
ETFs for certain smartphone customers.
