But what do I know? I'm just a twice clicken brown shirt teabaggin tjroll. Right? --PatP

Not now. There are dirty, swaying men at my door. They’re looking for Brian. I need to go deal with that. --Thor

If Joss Wedon was near me, I'd of kicked his ass. --PaulC

Sunday, December 27, 2009

Verizon’s “outrageous” Early Termination Fee

First, here’s the link to the horseshit that sparked this rant. Within, there is the full (brief, unrevealing, biased, dataless) text of an FCC press release.

Second, here’s the rant. A DROID retails for 600 dollars. I paid two hundred for mine. Verizon makes up that 400 bucks by me subscribing to their service. If I open a new line for a DROID and immediately cancel it, VZW charges me 350 dollars. They're out fifty bucks. The ETF needs to be that high for Verizon to protect themselves from staggering losses. It not only covers most of their loss if I terminate my contract, but also discourages me from doing so. Not much "investigation" to be done there. Mignon Clyburn needs to learn some basic economics.

Also, this is not a "hidden fee." You know when you signup for a plan that the ETF is huge. If you don't like it, go to AT&T and be part of "the world's fastest 3G network." Verizon is overall the best mobile carrier for smartphones. If you want a good selection of devices, a comprehensive data network and an equally-comprehensive online user portal, you're going to pay more than you would for an outdated network, an iPhone and an orange box store.

Bottom line: Verizon isn't doing anything shady, and no one's being forced into a contract. If you don't like having an enormous ETF by which the carrier could still potentially take a loss, maybe a you shouldn’t have a phone that’s smarter than you.

My question is: how do other carriers protect themselves from this kind of crippling loss of money? Some carriers do it by selling their subscriber information to law-enforcement agencies. Some do it by holding on to their customers with misleading advertising.

The FCC needs to stop demonizing legitimate business practices and get on to important issues. For example: the obsolescence of the FCC. Anybody else remember the whole “Saving Private Ryan” debacle (in which, when asked by ABC affiliates “will we be fined if we air Saving Private Ryan un-edited?” the FCC’ responded: “dunno. Do it and you’ll find out.”)?

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  1. Damn.
    You can't paste into a comment. I'm trying to copy and paste into this comment from an e-mail. That sucks. OK here is the gist of it.
    Verizon did not pay $400. They probably paid $100 or less. If the ETF equals their loss plus, say 10%,I would be ok with that. And what about people who are in a financial situation where they can't afford the phone and service? For instance,loss of job or catastrophic illness. If there were exceptions to the high fee, like loss of primary income,the fee might be ok.

    It is good to see the business point of view but you need to see the little people point of view too.

  2. Just a month or two ago, I got out of paying an early termination fee by downgrading my phone. I went on ebay, bought a nothing phone for 5 bucks, and activated it on my old line. Now, instead of paying 50 bucks a month for a BB Storm, I'm paying 10 bucks a month basically just to keep the line open.

    And while VZW may have paid only 100 dollars for the phone, on their ledger it's worth 600, because that's what they charge for it. If an employee breaks one on the shelf, they calculate a loss of 600 dollars, not 100. If I pay them 200 dollars for the phone and then cancel my contract, they haven't made 100 dollars. They've lost 400, because instead of having an item on the shelf that someone would have paid them 600 dollars for, they have 200 dollars in their pocket.

    My point is this: VZW is in business to make money, not to make your life easy. If you cancel your contract early, they charge you a large fee, and they still lose money. And that's taking into account nothing other than the price of the phone.

    If you lose your job or have a catastrophic illness, that sucks for you. I bet (though I don't know) that if you called verizon and told them you lost your job, they'd freeze your account for you. They did it for me and I didn't lose my job, move or have a horrible disease.

    If they won't, your credit card company (well, mine anyway) will be more than happy to float you for up to six months while you get back on your feet.

    You can't tell Verizon they have to change their business practices because sometimes people lose their jobs. Yes, that happens. But you can't expect businesses to base their SOP on it. The fact that a lot of businesses are understanding when people lose their jobs is fantastic. But that doesn't work with every business, or even every industry.

    E-Trade doesn't give me a by because I slammed my right hand in a door and can't dial a phone or type any more (okay. Maybe they do, but you get my point).

    You can't make it SOP to be nice to people who are down on their luck because if you do, people who aren't down on their luck will take advantage of you and you'll be out of business.

    You can help out the little guy and still make money is what I'm saying. Your official policy has to be "you pay now." But because you're such a large business, you can afford to take the occasional hit when someone, through no fault of his own, is in trouble. Just don't put that on paper and say your policy is "pay if you can."

    Verizon's policy is "350 dollar early termination fee." If you lose your job, they'll compromise. But they don't advertise that or you know some jackass would get fired on purpose just to get out of paying his cell phone bill.

    Also, we're not talking about "gramma who has a cellphone just for emergencies and uses it twice a month." The 350 dollar ETF is on smartphones. If you can afford a smartphone, you can afford either a) to downgrade your phone and let your contract ride out or b) 350 bucks to cancel your contract. If you can't, you can't afford a smartphone from Verizon.

    Nobody is forced into a cell-phone contract. If you don't like paying extra for a better product, stay with AT&T. I'm all for helping out the little guy. The stupid guy is on his own. Don't gamble with money you don't have.

  3. For those you who can't paste into the comments, stop saying that. If you want, you can say "I use firefox and I cant paste" ok, that helps. But just saying "I can't paste" brings no value. For example, I use Chrome and paste works fine for me.

    Now, on to Verizon.
    First, its NOT a $600 phone, thats bullshit and we all know it. As Melanie points out, it prolly cost Verizon something like $200, (motorola needs to make money too) and they are making plenty of money on the service contract. And lets just say that it IS a $600 phone, then why don't they drop the ETF $16/month? That would mean that at the end of the 2 year contract, we would be even. But they don't, IIRC they drop it $10 month, so at the end of two years you are in the hole $160. THATS bullshit.

    The fact is that this is JUST like the recording industry trying to be tools about MP3's and artists rights. The recording industry is killing itself by stifling innovation and crippling their artists. They need to see the writing on the wall and be creative; well the same thing applies to Verizon. The technology and the market are changing, go with it.

    Verizon is saying "We make money by selling handsets AND by selling access to our network AND by keeping our network as closed as possible." Hmm, that sounds shitty. How about you take a page from the Kodak book (give away the camera, charge for film and processing), GIVE users the phone at cost (Droids for <$200? woo hoo!) and even let people activate any old phone they want, then charge them for the service. Not GOUGE, but CHARGE. For example, charging for texting? Yeah, thats gouging.

    "hey, here's an inexpensive phone, if you sign a two year contract, the SERVICE will cost you $30/month, no contract its $60/month. Terminate early and you owe us the additional $30/month for the used months." NOT "you owe us and additional $50/month for the used months" (for a total of $80.) Quid pro quo.

    I get the "Let the market sort it out", and in this case I don't really care either way. Verizon is wrong and they are trying to prop up an old business model. If they would innovate, they could take over the world, but instead they whip their customers. Uh huh, good idea. Should the FCC get involved? Shit. I WANT them to (StarTrek defense) because it will get us to a better place, but on the other hand, its not like Verizon is gauging for baby formula or heating oil.

    But again, the ETF does need to drop at a fair rate, ie at the end of the contract you are even, not $160 in the hole.

  4. At the end of the contract, it's the end of your contract. If you say goodbye after two years of service, there's no early termination fee because you didn't terminate early.

    I don't personally care because I'm not going to terminate my contract early. If you're the kind of person who might, this is Verizon's way of saying "we don't want you." I dunno.

    My feeling is... Yeah. Just what you say. Let the market sort itself out. If people really care about having a sky-high early termination fee (which I really doubt), then they won't use Verizon and they'll start banging on AT&T's door shouting "we want data! We want Droids!" One of two things is likely to happen. Verizon will cave and lower their fee, or AT&T will quietly widen their eyes and say "holy shit! Look what they did! And it worked!" Then they'll raise their ETF to somewhere around the same level because, come to find out, they can.

    I guess my big, big picture point is: Who the hell cares? Yeah I guess 350 bucks is a bit steep. But how many people cancel their contracts early? I honestly don't foresee any circumstance under which I would.

  5. But they are CHARGING $16 per month for early termination, and they are CREDITING $10 per month. Know what I mean?
    So if I get a contract and I terminate it at day one, I pay the full ETF. Bummer. If I wait 30 days, then I only pay the ETF minus $10. Well, thats nice. BUT, here's the rub, if I terminate on the day before my contract is up, I still have to pay $160. Yes that would be stupid, but I am just showing how the math works.

    Anyway, I am with you Andy, I don't care as I wont cancel, ALL cell phone providers suck, period, so why switch? (unless its free to switch) And they KNOW that, so rather than lock us in with good service, they look us in with ETF and continue to suck. And I find that offensive in the extreme. For this I will call into service the famed "dvorak keyboard" defense. As in, "QWERTY is SO inefficient that it offends me", well, Verizon's business practices are so stupid that they offend me. And on TOP of that I would apply the StarTrek argument. I feel as if that should more or less seal the deal. :D

    Which reminds me Andy, I need to document the various argument shortcuts, would you be so kind as to email me the "Battlestar Galactica" argument, or just blog it and I will link to it. Examples would be nice.

  6. Hey,
    Note the times on these comments, they appear to be off by 3 hours, do you have the timezone set correctly in the blog control panel?

  7. Andy if you don't change the color of your font on comments I will not be reading them any more. Sorry but it is too hard for me to read.
    For the record, it is definately good business practice to make allowances for people that are cancelling their contract for a reason that is beyond their control. Many companies do this. I'll give you a list if you want. Businesses that show a genuine concern for their customers/clients have a much better public image and for many consumers this is an important factor when deciding which company to buy from. BTW I don't believe Verizon would give you a reduction in the ETF if you told them you lost your job or have a huge medical situation that was breaking you financially. They don't strike me as that kind of company. And it is very possible to have a policy that states the ETF will be waved or reduced under certain circumstances.
    That is all.
    Over and out.

  8. IIRC, the Verizon policy on ETF is to drop the ETF by $10/month.

    The only time that Verizon gives you an discount is when you are buying, NOT when you are cancelling.

  9. Thank you for changing the color of the font on comments!!