So Big Red had some ‘splaining to do, and recently had to cough up a few answers for a FCC inquiry. The commission wanted to know more about the early termination fee levied on smartphone users, who were singled out for higher fees (up to $350) for breaking two-year contracts. And even if they were just one month short of the 24-month term, they would still have to pay $120.
It doesn’t take a mind reader to know what the carrier was thinking: Smartphones aren’t cheap, and providing low up-front retail prices costs a lot initially. These costs don’t get recouped when users break their contracts early. According to Verizon, that $350 ETF doesn’t even quite cover it, but at least it’s a deterrent — especially to people who try to beat the system using BOGO (or buy-one-get-one) deals. These users may get an extra handset through those kinds of specials, which often require signing up for two lines. So crafty individuals then sell the extra handset, quit one of the contracts, pay the ETF and pocket the difference. Verizon believes this profit is money taken right out of the carrier’s bottom line.
Here’s what I found a little confusing, though: On one hand, the company says that the $350 ETF doesn’t quite fully make up for its out-of-pocket costs, but then later admits that the fee isn’t just for recovering its investment. The ETF is also used to defray the cost of operating a smartphone network, advertising, tech support and managing a broadband network. (It might just be me, but these explanations seem kind of contradictory, no?)
Another point of inquiry had to do with those annoying little $1.99 fees. Upon closer inspection, it looked like those couple of bucks were tacked on whenever users hit up the mobile web — whether intentionally or not. Verizon denies this. The company insists that users who accidentally launch the mobile web don’t get charged. Only users who open the launch page, and then navigate away from it — indicating that genuine web browsing is happening — are assessed the fee.
Sounds good, but here’s the wrinkle: Verizon subscribers (and even employees) say there are still penalties being levied for accidental access. According to a Verizon staffer cited by DSL Reports, those two little dollars have been used to generate millions in extra revenue for the carrier every month.
The FCC is reviewing Verizon's responses, so we’ll find out whether they satisfy the agency. But what about you? Are they up to snuff for you?