Verizon to raise ETF?

posted by Alan F. / Nov 03, 2009, 12:03 PM

This article contains unofficial information.

According to BGR, Verizon is thinking of raising the Early Termination Fee it imposes on those who buy a high end handset and sign a 2 year contract to get the subsidized price. The reason behind a hike in the ETF has to do with the BOGO deals that Verizon has been offering on phones like the BlackBerry Storm2. Some are riding on the carrier's coattails by paying for a Storm2, getting a second one free, selling one of the phones on eBay and canceling one of the lines. The ETF is there just for that reason-to make sure that customers adhere to the two year contract that they have signed.

What BGR is hearing is that Verizon plans on raising the ETF for high priced handsets, starting November 15th, to $350. The fee would then drop $5 per month. Again, this has not been confirmed or announced by Verizon. It does make sense for the company to try to recover the subsidies they lose when terms of a signed contract are not followed. Remember, as a division of a public company, Verizon Wireless has obligations to stock and bond holders and this is not the case of a big evil empire trying to put down the man. It is a company trying to stop a flow of red ink coming from those looking to take advantage of it.

source: BGR

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36 Comments

1. steverunner

Posts: 6; Member since: Apr 11, 2008

That seems fair. I don't see a problem with this.

posted on Oct 20, 2010, 1:44 AM 0

4. SDAlpha1510

Posts: 6; Member since: Feb 09, 2009

I agree. People need to find other ways of making an easy buck. I dont hurt me as ill prob never leave Verizon, the coverage is just too good and now they are getting some good phones as well.

posted on Nov 03, 2009, 12:41 PM 0

7. CODYPHOBIA

Posts: 58; Member since: Jun 21, 2008

I agree with this as well. But what happens to the indirect that matches the BOGO offers and takes the risk on the subsidy? We aren't reimbursed when a customer pays an ETF. So Verizon jsut pockets the 175/350 ETF and the Agent is the one left in the dirt. This makes it difficult for an agent to stay competitive with the pricing structures. The risk is all on agents none on Verizon.

posted on Nov 03, 2009, 1:39 PM 0

9. vzw fanman

Posts: 1976; Member since: Dec 11, 2008

i agree also. people are just too greedy in our world and take advantage of good things.

posted on Nov 03, 2009, 1:51 PM 0

15. crd22

Posts: 77; Member since: Apr 15, 2008

I agree with this decision. It's fair enough

posted on Nov 03, 2009, 2:47 PM 0

24. nalu808

Posts: 39; Member since: Jul 14, 2009

most agents abuse the situation anyways.on any carrier

posted on Nov 03, 2009, 6:39 PM 0

29. YouLostTheGame

Posts: 441; Member since: Dec 11, 2008

Well when I worked for an indirect agent a couple of years ago, whenever we did a new activation/upgrade, we make our customers sign a contract that said if they canceled the service within the first six mos. of service, that WE would go after them to collect some ungodly fee of about $400 or so, if my memory serves me correctly. I'm not saying it was right or anything, but that's what they did. I personally hated the idea, and it was due to that and a few other practices I didn't personally agree with that eventually led to me quitting.

posted on Nov 03, 2009, 10:04 PM 0

33. sinfulta

Posts: 279; Member since: Dec 11, 2008

I said this a long time ago. I think cell phone carriers should prorate the ETF's evenly amongst what the total price of the handset costs. Example: Customer buys Motorola flip phone of some sort for $19.99, but Full retail is $219.99 The contract should be $199.99 ETF after the first month, prorated by how many months you complete. Customer finishes 12 months, then the term me would be what's left = $99.99, cause they are halfway through. If it's a higher prices phone like a Storm2, (Let's say) the retail is $549.99, that means if they cancelled after a year, but paid $179.99 originally for the phone. Means the term fee for this person would be $184.99 after one year. Take whatever the total cost of the retail price is , Minus what they paid, equals ETF divided by however long of contract they sign. Makes sense to me at least.

posted on Nov 04, 2009, 12:34 AM 0

2. blackirish24

Posts: 15; Member since: Dec 24, 2008

I know everyone going to hate me ....But this does make since. People could essentially sell a pda/smartphone for more than $175 (closer to $380 is what I got when I went back to my dare). With that in mind, I see why they would want to raise ETF because of the discounts provided on their equipment.

posted on Nov 03, 2009, 12:26 PM 0

3. jskrenes

Posts: 209; Member since: Dec 11, 2008

Wow a phonearea article that actually defends Big Red in a controversial decision.

posted on Nov 03, 2009, 12:38 PM 0

5. bronxbomber

Posts: 82; Member since: Apr 10, 2009

NOT A BAD IDEA

posted on Nov 03, 2009, 1:01 PM 0

23. JackFace

Posts: 190; Member since: Nov 03, 2009

What the hell you talking about? Phonearena has been riding Big Red's junk for the last while! They have their days.

posted on Nov 03, 2009, 5:49 PM 0

6. acipollo

Posts: 34; Member since: Apr 20, 2009

I agree, but the rate hike should only be on the BOGO line of the deal. That's why we were charged 200 for all this time. You are paying you're way out of a contract. Everyone knows this.. And yes, I'm sure some people do take advantage of the program, but for some reason, I can see this as a veiled attempt by VZW to raise it so people will not want to leave for a better or cheaper bill with another cell provider if they have to pay 350. Right now VZW is the HIGHEST charging cell phone provider with the LEAST amount of extra features to come with the high price tag. And the network? Where I live and most people in America use cell phones they ALL have coverage..

posted on Nov 03, 2009, 1:34 PM 0

10. bigred0308

Posts: 1; Member since: Nov 03, 2009

well to be honest big red and at&t are at the same level just compare the prices they are exacly the same

posted on Nov 03, 2009, 2:03 PM 0

11. conman808

Posts: 2; Member since: Nov 01, 2009

so what makes big red any more expensive than AT&T? have you even looked at a coverage map ever? you really cant even compare t-mobile or at&ts 3 g coverage to verizon's.

posted on Nov 03, 2009, 2:05 PM 0

19. HOVA

Posts: 564; Member since: Dec 11, 2008

I don't recall him mentioning AT&T in his comment at all so I'm not sure why you both commented this way... There's a ton of other carriers out there that offer lower prices, which I'm sure is what he's referring to. Obviously they aren't getting the same services/features, but his argument is quite valid. I work in retention and there's always people calling to cancel to go to Boost for their $50 unlimited plans, US Cellulars, Metro PCS. It's a lot bigger deal then the average person realizes. Most everyone that frequents this site is going to be with one of the larger carriers in the US (VZW AT&T), but in reality, these little carriers with their low rates are attracting a lot of customers. That matter aside, I do agree with the higher ETF's for these devices in ALL cases. Most of us realize the retail price, and the high subsidising carriers do to offer them at descent prices, but not everyone does. With the iPhone specifically, TONS of people are opening up 5 line accounts only to cancel and sell them. They pay an ETF and monthly charges, but for what they are selling them for, apparently they are still coming out ahead becaues they are still doing it. Higher ETF's might put a stop to this, and make it easier for carriers to avoid these churn issues.

posted on Nov 03, 2009, 4:19 PM 0

8. jundibasam

Posts: 119; Member since: Aug 05, 2009

It is confirmed that the ETF for PDA/Smartphones will be $350 starting 11/15/2009; however, instead of the ETF going down $5.00 a month as with the $175 ETF, its going to be $10.00 a month decrease for the $350 ETF. Essentially, everything is doubled. Smartphone purchases before 11/15/09, including Droid, Eris, and Storm 2, will still have the current ETF rate.

posted on Nov 03, 2009, 1:45 PM 0

12. jundibasam

Posts: 119; Member since: Aug 05, 2009

The average subsidy price on a Buy One Get One Free offer is slightly less than $400 and the contribution margin is way into negative territory. Based on vzw 3rd quarter earnings report, there is $27.52 expense per line, $51.04 service revenue per line, and an EBITDA margin of 46.1%, it takes 8 months to make up the subsidy and an additional 2-3 months to begin making a profit. Thus, this makes sense from a business standpoint, but some customers may be afraid to upgrade to a smartphone on 2 year contract with the hefty ETF price, but I guess they've crunched the numbers and read the surveys and feel the pros outweigh the cons on this.

posted on Nov 03, 2009, 2:06 PM 0

13. rwrife

Posts: 32; Member since: Sep 25, 2009

This makes sense, it always bothered me that you can get a smartphone, like the Storm 2, for $150 + $175 ETF or pay full retail price of $550....it's more work but it makes sense, and is promoted by VZW tele-sales, to add a line and break the contract vs paying retail. I'd only hope VZW would adjust the retail price of the phones as their value declines.

posted on Nov 03, 2009, 2:09 PM 0

16. CRICKETownz

Posts: 980; Member since: Oct 24, 2009

Verizon doesn't set the retail pricing of a phone since they don't make phones. That is up to the manufacturer to set the retail price. I don't see this new ETF affecting those who are satisfied with VZW's service but for those contract-phobia individuals I see this being one more thing to keep them from wanting to renew their agreement for another 2-yr term even though they wind up keeping the service for 2 years anyway.

posted on Nov 03, 2009, 2:59 PM 0

20. HOVA

Posts: 564; Member since: Dec 11, 2008

Wrong, VZW has a large hand in the pricing. Why do you think the original iPhone with ATT was $600 when it released? It's because AT&T wasn't offering any subsidising on the phone at all. With the introduction of the 3G they did, hence carrier plays a role in the price...

posted on Nov 03, 2009, 4:20 PM 0

26. remixfa

Posts: 14605; Member since: Dec 19, 2008

hova, the difference is that att ATE the 400 difference in the 600 to 200 pricing in order to attract more people and make it up in the long term w/ the contract. I totally understand the meaning and agree with the logic of this move, but with big 4 carriers like Tmobile going to much cheaper plans and no contracts, its probably not the best time for such a move. It could force a lot of teetering customers out the door. granted VZW coverage is the best, but at more than double the monthly cost for UNL, is it worth that much more?

posted on Nov 03, 2009, 8:32 PM 0

27. HOVA

Posts: 564; Member since: Dec 11, 2008

Honestly I think all carriers will lean towards pretty much all prepaid, but it's gonna take a long time. You might be right, and in the US today, the almighty dollar is swinging a big hammer on many familys. They may not even like the move, just have to. But at the same time, these people that are really focussed on the dollar are probably not considering high-end phones like what this may effect. Hard to say considering this hasn't been made official yet, or any details given, but I deffinetly see where you're coming from.

posted on Nov 03, 2009, 8:45 PM 0

34. jundibasam

Posts: 119; Member since: Aug 05, 2009

that isn't entirely accurate dude. If that were the case, tell my why Sprint says the HTC Touch Pro 2 is $579.99 full retail but VZW lists the exact same device at $479.99 full retail? Thats a $100 difference on same exact phone that essentially came out on 2 different carriers at nearly the same time, and I'm pretty sure VZW ended up with less models they purchased considering they're always out of stock. Manufacturer ultimately sets the price so they can be sure to make a profit, but the carriers have A LOT of influence in the development of the device that affects the price.

posted on Nov 04, 2009, 7:35 AM 0

14. rwrife

Posts: 32; Member since: Sep 25, 2009

If they're going to do this, which oddly enough I'm ok with, I wish they would either remove the requirement of a having a data plan on certain phones or just include in the month cost of the service and not make it an "add-on"....so basically just charge everybody ~$20/mo more and give everyone a data plan.

posted on Nov 03, 2009, 2:16 PM 0

30. YouLostTheGame

Posts: 441; Member since: Dec 11, 2008

Have you ever heard of supply vs. demand? If you think ATTs network is "clogged" due to traffic, can you even fathom how much strain that would put on a network?

posted on Nov 03, 2009, 10:14 PM 0

17. rath

Posts: 25; Member since: Aug 14, 2009

Verizon wanted keep new customers for 2 years in the Verizon cage by raising ETF to $350 while other carriers is $250.

posted on Nov 03, 2009, 3:04 PM 0

18. JeffdaBeat unregistered

Make the ETF the discount of the phone...

posted on Nov 03, 2009, 3:04 PM 0

21. Fanboys Suck

Posts: 609; Member since: Dec 12, 2008

Intelligent... right there! However, if I buy a phone from Wal-Mart, and my buddy Joe goes into the retail store... I pay less... what about the ETF then? I think you are headed in the right direction though.

posted on Nov 03, 2009, 4:52 PM 0

22. HOVA

Posts: 564; Member since: Dec 11, 2008

It would also require a seperate ETF for EVERY phone, becuase the retail pricing is generally different for nearly every phone. I think that would create more mis-information from agents and more of a headache then it's worth. This seems to be a good start. Make a smartphone ETF and a standard phone ETF, similar to how some insurance companies have gone to tiered deductibles on insurance claims.