Verizon on FCC hot seat about raising ETF?

Verizon on FCC hot seat about raising ETF?
The FCC is considering sending Verizon to bed without dessert. The governmental agency, in a letter to Big Red, wants to know why Verizon had raised the Early Termination Fee on advanced devices to $350 starting November 15th. The letter includes a questionnaire to fill out (Verizon has to use a number 2 pencil, we assume) about the thinking and logic that went into the decision. Now, the FCC pencil pushers aren't totally without reason. Certainly they can figure out that the reason behind Verizon's decision was to prevent Mr. John Doe from taking advantage of, say, a BlackBerry Storm BOGO. Mr. Doe signs the papers, lays out cash for one Storm and gets two phones. The second Storm is sold on eBay and the extra line is canceled. Under the old ETF fee, this scenario was making money in the wonderful game of cellphone arbitrage. The problem is that cellphone arbitrage is a zero sum game meaning that the profits going to Mr. Doe were coming out of Verizon's hide.

Instead of looking at this logically, the Feds are taking a purely mathematical approach and want to know why, with Verizon's sliding scale, a customer who has stayed on for 23 months out of a 24 month contract will still owe $120 if he calls it quits before the 24th month ends. The Feds say that the ETF is designed purely to get back the wholesale cost of the phone over the life of the contract, so why charge $120 for quitting 1 month short of the expiration of the contract? That's a good question that the nation's largest carrier will need to answer at some point. But certainly the FCC should understand that Big Red wants to stop getting scammed by those BOGO bandits. Want to read the entire original letter from the FCC to Verizon? Click on the sourcelink. Oh yes. The FCC also wants to know about the $1.99 charge some Verizon customers were billed for accidentally accessing the mobile web. Unless there is a Tiger Woods sized skeleton in Verizon's closet, this should all blow over like a summer storm in South Florida.

source: FCC via WSJ, BGR


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44 Comments

44. dbb10001

Posts: 9; Member since: Apr 16, 2009

Nice post. I wanted to respond by addressing, in particular, those people who are facing ETFs because their wireless service was too expensive so they had to end their contracts prematurely. For these people, avoid both the ETFs and the expensive plans by seriously cutting your wireless costs; an intuitive but often realistically tough proposition. However, I work in the consumer advocacy division of the Houston-based company Validas, where we electronically audit and subsequently reduce the average cell bill by 22 percent through our website,http://www.fixmycellbill.com (and I'll add that 22 percent equates to over $450 per year for the average user). You can find out for free if fixmycellbill.com can modify your plan to better suit your individual needs by going to the website. Check out Validas in the media, most recently on Fox News athttp://www.myfoxtampabay.com/dpp/consumer/conlaw/lower_cell_phone_bills_072409 . Good luck to everyone reading on retaking control over your wireless expenses and potentially freeing up some extra cash this holiday season. Dylan Consumer Advocacy, Fixmycellbill.com

43. killingthemonk

Posts: 52; Member since: Feb 19, 2009

There should be a space on credit reports where a cell phone company can advise that a person does not honor contracts. Then, companies can take into account in the future whether a customer is to be trusted.

42. narley

Posts: 357; Member since: May 14, 2009

How much do all you wanna bet if the FCC drops it by next year every other carrier will do the same? Quit complaining.

41. jundibasam

Posts: 119; Member since: Aug 05, 2009

@phoneuser- in the cases of smartphones and advanced devices, the $350 ETF is actually better than getting charged the full retail price. Droid is $199.99 after $100 rebate but full retail price is $579.99. Thus, with your "suggestion" a customer who cancels the line and doesn't return the phone would get charged the difference of $579.99 minus $199.99 price they paid, which is $380.00 that price stays the same throughout the entire contract since you can't prorate a price someone pays and the actual retail price. If they get a BOGO, its even worse because then it would be a $579.99 charge, minus $0.00 since it was the free one, and you're talking an ETF of $959.99 for two lines through months 1 to 23 of a 2 year contract as companies would not have to prorate. Since you can't charge both an ETF and the full retail price of a phone, any customer who wants to cancel regardless of their intentions would suffer at having to pay the difference in full retail price. The only difference is those canceling to sell their phones on ebay will make some (most) of their money back.

26. PhoneUser

Posts: 78; Member since: Dec 11, 2008

I agree that the new ETF's are a bit much. I mean is that really necessary? Why can't big red be simple like.... Sprint. Sprint aint stupid if they had the BOGO and the customer cancels the 2nd line before the 30days the customer HAS to bring the phone back or else they will get charged for the full retail price of the phone. IF for some reason they customer can't bring back the phone cause he sold it on ebay then they can't cancel the line until he brings the phone back or else Sprint will Lock the phone from ever being used. Its in the contract they signed so they can do that to protect them selfs from scams. Verizon is a CDMA carrier also so why dont they Lock phones from being used instead of going through all this. All these comments are very entertaining cause some people are trying to justify why they did this and well to me it don't make sense. If a customer cancels the 2nd line have them return the same phone back or charge retail price for it.... there i settled this dispute for Verizon. Hope an excecutive from Verizon is reading this so i can get a job with them in the "common sense department."

32. Illyich

Posts: 167; Member since: Oct 13, 2009

I'm sure Verizon customers are supposed to bring it back too. The problem is that within the first 30 days, that's buyer's remorse. You return the equipment and the ETF is waived. After that, you keep the phone, and the ETF is waived. i work for AT&T, and there's plenty of people that were gaming iphones... they'd start up 5 lines, all iphones, go home, and call until they found someone that would cancel the account and waive the ETFs. Reps aren't supposed to, of course, but a lot of people in call centers don't care and just want you off the phone.

33. PhoneUser

Posts: 78; Member since: Dec 11, 2008

yeah people do that alot and thats why Verizon should charge people that do that full retail price of the phone so they will think twice bout doing it again. Raising the ETF will not only hurt the scammer it will hurt EVERYONE even the ones who are not doing anything to scam the company, they jusy wanted a change in service but can't cause they have to pay 350 to get out of the contract. That's not right to punish everyone cause a few people scam.

34. Illyich

Posts: 167; Member since: Oct 13, 2009

Well it may not be right but that's the way it goes, unfortunately. I personally would much rather have a subsidized price on a new phone than be able to switch carriers without a penalty. I did enough research that I knew what I was getting when I signed up with AT&T. If something went wrong, I knew how to fix it.

24. WirelessCritic

Posts: 7; Member since: Nov 30, 2009

I don't know which stores you work in (to the VZW employees here), but when I was employed inside those stores, it was dirtier in there than the prenup Tiger's wife just reworked. Several times I was told not to mention anything to customers. "Don't tell them they have to cancel the free data promo after 30 days, don't tell them you've seen this problem with their phone before, don't tell them they have the right to switch to a different phone if they issues with 3 phones in 90 days." VZW is dirty as hell and I know from experience. Several times I was told to add the 10 dollar internet plan to phones and not tell customers to get our data numbers up. Getting laid off from there was the best thing that ever happened to me. I could not work there and a part of their scams anymore. Their phones are trash, their commercials lie, and there are hidden charges all the time. It's about time they get called out on their BS 3G claims.

25. VZWEMP

Posts: 158; Member since: Dec 11, 2008

sounds like you came from a "dirty" district. It all starts with your DM basically. we disclose everything at our stores in the district, because guess what? if you dont people get pissed and go to other stores or leave verizon all together and that means we make no money. i dont know about you but my commission check is the reason i disclose everything...nothing worst then starting the month with a bunch of charge backs because you lied about something

29. Homotechual

Posts: 65; Member since: Oct 27, 2009

Their must be a LOT of dirty districts because I experienced the same thing as Wireless Critic when I worked at Verizon. I wanted to leave so bad, but was scared because of the economy. Thankfully they layed me off and 2 months later T-mobile offered me a job. It feels so GOOD to work for a company who's customer service is so powerful and will do anything I ask as a Sales rep to help the customer. Verizon I wouldn't even bother calling in because the answer was ALWAYS no, and the one time my manager helped me take care of a customer she was fired for discounting the phone.

36. VZWEMP

Posts: 158; Member since: Dec 11, 2008

Well its called having a backbone folks. If my mgr asked me to do something unethical or something that might get my ass canned I would say no. Put it this way if someone asked me to do something that I wouldn't want done to lets say my grandma then the answer is no.

13. tonyc_42

Posts: 61; Member since: Aug 18, 2009

all you little whiney babies need to shut up about this deal. it's from a business stand point. yeah so what if you cancel a month before your contract is up and you have to pay $120. other companies charge $200 etf whether you cancel within a year before your contract ends or even a day. if you don't plan on leaving the company what's the big deal??? how many people actually jump ship from a phone that they are in a contract with anyway? you know about the terms up front so if you don't like it then don't sign!!!!!!

35. Illyich

Posts: 167; Member since: Oct 13, 2009

Well, all companies used to charge a flat ETF, now I know that Verizon and AT&T have diminishing ETFs... don't know about the others. And you'd be surprised, a lot of people switch to another carrier for various reasons.

7. tuminatr

Posts: 1189; Member since: Feb 23, 2009

jeff you need to think it through if you made the etf equal to cost/ retail price that would be more than the $350 in most cases for example the droid eris retails for $489. $489- $99 (the price after rebate ) = $390 now if you did a bogo $489 etf for the second one. I think verizon is loosing money on smart phones and they have two choices 1 make it up in etf fees 2 charge more for the smart phones to give you a example I dropped my storm and broke it. I don't care what my number is, I have had the phone for six months and did not buy the insurance. I decide to cancel my service pay the $145 disconnect fee and get a new storm for $50 after rebate with a new number. rather than pay $489 for the storm outright do you see the difference I am $294 ahead of the game

12. BrokenImaege

Posts: 173; Member since: Jul 27, 2009

Thank you!!!! This is the reason we did it. We aren't trying to steal from customers. We are just making sure we get back what we paid and what we pay out to companies like Blackberry and Google. Here is the funny part to all this. All other companies have ETF's of $250 plus and never decelerates. I don't see people complaining about that but when the upfront is higher but is lower at the end, people complain now? If that is the case, why don't we just make our ETF like our competitors and everyone be happy???? I would like to see this happen to just shut everything up.... Y don't we just do no contracts and full priced phones from now on line 80% of the world??? This would stop it all and no more issues with contract breaking or ETF's..... How does that sound everyone? $300 to $800 a phone..... :-)

6. vzwman

Posts: 385; Member since: Oct 26, 2009

mmmm i did the droid bogo deal yesterday should i bale? hehehehe

17. Kiltlifter

Posts: 742; Member since: Dec 11, 2008

Personally I think it is rediculous to have a contract... PERIOD! how about we stop subsidizing phones at all and make everyone purchase them retail? Sounds likea plan to me, becuase they vzw wouldn't make people have data plans to make up for the subsidization, Little whiners like you could stop complaining about gettinga 599.99+ device for $200.00 then complain about having to pay a ETF. Sounds good to me... So unless you are willing to pay full retail for your device, quit whining or complaining about the ETF policies by any mobile carrier. if you aren't willing to pay full retail for the device then it isn't for you.

22. zr1vette

Posts: 26; Member since: Aug 22, 2009

STFU. you dont have you repeat yourself every other post.

38. E.N.

Posts: 2610; Member since: Jan 25, 2009

Henprobably thinks he's being persuasive

5. JeffdaBeat unregistered

Make the ETF equal to the amount of the total discount of the phone(s). Prorate the ETF accordingly. It's that simple. I think the stance T-Mobile is taking where there is no contract and pay the price of the phone monthly is also a good solution. An even better one would be to give the customer the ability to set the time frame in which they want to pay off their phone as well. I just don't see how the government can really stop this. People effectively sign up for this knowing that this will be their ETF. The customers who signed up before this was instituted were not effected what so ever. Thing is, what if Verizon just shot back at the government and said, "If you don't like our ETF's then we will do away with discounting phones all together." Then the government can start getting complaints that phones are too expensive. Either way, people won't be happy unless the regular price of a phone is $29.99. I honestly wish this was something all the carriers would adapt. Stop putting phone problems in the hands of the service providers. Have LG, Samsung, and RIM have their own stores just like Apple and let them discount the phones in the way that they want to. The carriers can have retail stores, but unless they are willing to take the hit for the price, the phones should be sold under the regular price with no contract. People would complain, but they would also hold on to their phones longer. If people didn't like the prices, let the manufacturers handle those complaints. If this were the way, I'd have my phone until it fell apart and most people would. But then the carriers wouldn't be about offering the best phones, but rather the best service and prices.

18. Kiltlifter

Posts: 742; Member since: Dec 11, 2008

I agree with you

21. dandirk unregistered

MN senator is working on a national bill that would do just that. Require carriers to charge ETF based on discount. I assume verizon just wants one easy number to use... Not that it matters cause in the states such a large portion of phone are subsidized and carriers could litterlly ask for ANY msrp they want... that droid costs 1 million dollars but we will give it to you for $200 + 2 year contract... at 23 mo you can pay the prorated ETF based on discount/cost which will be $75000 (no I didn't do any math # just to make a point). hmmm verizon will tell you that the droid costs $500, yet there are reports that verizon pays $450. I am not saying they shouldn't make a profit but most people assume these subsidies are purely to make money on the service...

30. gba2000

Posts: 49; Member since: Dec 28, 2008

On AT&T the ETF is $175(and prorated), the discount off phone is normally $150(iPhones are $400 discount). About the same.

4. lolipopjones

Posts: 51; Member since: Jun 21, 2009

This is not about being ripped off on Bogos. Verizon even had a little email sent to their employees stating that they were not to talk about the ETF with customers unless brought up. Not only that but in the last Vid they had from the Arkansas meeting at the Verizon Center the execs admitted the ETF was designed to keep people from jumping ship....

8. VZWEMP

Posts: 158; Member since: Dec 11, 2008

thats funny because i received no email instructing us not to discuss the raised ETF. and if the etf were to prevent people from jumping shit then why wouldnt we raised the etf on ALL handsets? think things through before you post. WE were the first carrier to implement prorated ETFs and all other carriers followed suit. so shut your mouth because you just another consumer you thinks that you should be able to do whatever youd like at any company's expense.

9. htc-guru

Posts: 3; Member since: Oct 29, 2009

dude really you are telling others to think things through before you post. why dont you go back and read what you wrote. really jumping shit. thats what verizon is SHIT and you are a SHIT_HEAD.

10. vzw fanman

Posts: 1977; Member since: Dec 11, 2008

Verizon isn't shit.

11. BrokenImaege

Posts: 173; Member since: Jul 27, 2009

You are an idiot!!!!! I work for Verizon and I can tell you that when we raised the ETF's, we were told that we needed to inform the customer clearly about the increased ETF on those devices. I remember the store meeting we had concerning it. We don't hide anything from anyone. It is clearly in writting and is available on websites and booklets. I don't know what call center you are in, but please let me know so I can send an email over that way for you. Also, the ETF fees are there to prevent people from buying bogo and disconnecting immeditely to make profit off of phone. The ETF is still decelerated as it was before. Nothing has changed in that matter. Clearly you are an idiot!!!

20. E.N.

Posts: 2610; Member since: Jan 25, 2009

How about getting rid of the BOGO deals in smartphones all together. It will solve all problems all together. I think that's an unfair advantage to boost phone sales and get more customers. A few months ago the Storm was one of the top selling devices despite all the returns and that is because of the BOGO deals. And now Verizon has the BOGO deals and the high ETF rates. That will greatly increase their profit and increase the number of customers that hate their carrier/phone and want to leave/change phones but can't afford to. It's still about $250 dollars to cancel after the 1st year. That's ridiculous.

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