Money Matters, Simplified.
Verizon faces FCC's wrath for doubling up ETF
by Ayurdhi Dhar - December 5, 2009 - comments
Verizon’s excuse for the harrowing move was that their decrease in handset prices has led to the company suffering loses
Washington, December 5 -- The trap to “lock in” customers has been long played in the U.S. market, and the most recent company to participate is Verizon. The result is Obama administration’s FCC coming down knocking at their door.
FCC ensures the protection of consumer rights, and has directed its wrath at Verizon that has decided to double up its Early Termination Fee, that is, the penalty that one has to pay for getting bored with their phone in lesser time than when the company deems it right.
Fuming FCC
The FCC has given Verizon till Dec. 17 to provide a “rationale” behind the move. Verizon had decided that post Nov. 15, the registrations will face an ETF of $350, up from $175 earlier. For the users who have a basic calling plan, the amount is close to a year of service by the telecom provider.
FCC’s move is in response to a bill submitted by Sen. Amy Klobuchar (D-Minn) for a reduction in the penalty that a customer would pay if he breaks the two-year contract.
Verizon’s story
Verizon’s excuse for the harrowing move was that their decrease in handset prices has led to the company suffering loses when customers break their contract and go to another service or handset provider.
The FCC had issued a letter to the service provider on Friday, and in curt words, has asked them to explain the logic behind the new ETF.
“It appears that if a customer cancels a two-year contract after 23 months, the customer would still owe an ETF of $120. Is this correct? If the ETF is meant to recoup the wholesale cost of the phone over the life of the contract, why does a $120 ETF apply?" the Commission asked.
Questions asked
The FCC has also questioned how the customers would be made aware of the ETF and other business agreements between them and the company, and prodded the fact that such important issues were too integral to be left unattended.
A few other questions that the FCC has raised are: "What information about the higher ETF does Verizon Wireless provide to prospective customers, and when? How do consumers know whether the increased ETF applies to the device and service plan they would like to purchase?”
Another sample is, "Please provide a description of whether or how a customer seeking to sign up for Verizon Wireless service by first selecting a device or service plan on the Verizon Wireless website would be able to find out about the levels and terms and conditions of the ETF, other than by calling up the formal Customer Agreement accessible in small type at the bottom of the web page.”
Verizon is facing the heat from Washington, and has led to hopes in heart of many that the fee hike will be rolled back. Other “lock-ins” that companies take part in to trap the customers, like the iPhone which is locked in with iTunes, might also be taken care of soon.