Verizon has gotten on the bad side of US Senator Amy Klobuchar (D-MN), who publicly criticized the company this week for its decision to significantly jack up early termination fees (ETFs) for some customers. Not only did Klobuchar send a letter to Verizon president and CEO Lowell C. McAdam calling the move "anti-consumer and anti-competitive," she also wrote the Federal Communications Commission asking for a review of the decision. Verizon has its reasons for the increase, however, and points out that customers are more than welcome to purchase devices at their full retail price with no threat of an ETF.
Verizon announced last week that, beginning November 15, its early termination fees for customers buying "Advanced Devices" (smartphones) would double from $175 to $350. Every month that passes, that fee is reduced by $10. This means if you buy a Droid with a two-year contract with Verizon, but decide to switch providers after 12 months, you'll find yourself shelling out $230 to Verizon for exiting the contract early. In fact, if you cancel 23 months into the contract—one month before it's over—you'll pay $120. (That's almost the entire old fee altogether.) If you wait one more month, you'll pay $0.
(For reference, most other carriers charge around $200 for the early termination of a service contract, with many offering the same type of pro-rated fee schedule that Verizon offers for every month of completed service. This even applies to high-profile devices like AT&T's iPhone and various BlackBerrys from different carriers.)
This decision rubbed many consumers the wrong way, but apparently none more than Klobuchar. She's behind the Cell Phone Consumer Empowerment Act, a bill that aims (among other things) to bring more transparency to the inner workings of the cell industry and keep early termination fees sane. In her letter to McAdam, Klobuchar said she's concerned that such high fees "unfairly penalize consumers, bear little to no relationship to the cost of the handset device, and are anti-consumer and anti-competitive," and that the move only emphasizes why her bill needs to be passed.
Similarly, in her letter to the FCC, Klobuchar said that the FCC needed to investigate the competitive and economic impact of ETFs on consumers. "Verizon Wireless’ decision shows us once again that the wireless industry cannot police itself and will not, on its own, make its practices more competitive and consumer-friendly," she wrote.
Verizon, for its part, defends the decision by pointing out that users can freely choose between being subject to ETFs or not. "Verizon Wireless customers do not have to have an ETF at all if they do not want one. ETFs allow customers to have it either way: no ETF with full retail for a device, or a greatly discounted device with an ETF," Verizon General Counsel Steve Zipperstein said in an e-mailed statement to Ars. Zipperstein added that many customers choose the subsidized model, allowing them to have easy access to new technology and encouraging wider adoption of mobile devices.
This isn't the first time such an argument has been made—AT&T said the same thing in 2008 when it faced the FCC over this very issue. These arguments may all technically be true, but most people certainly don't see it that way. ETFs remain a thorn in the side of nearly everyone who has a cell phone, though the recent adoption of pro-rated fees has helped customers see the system as more fair. When a carrier pulls a Verizon and decides to double the starting amount, though, those bitter feelings start to come back in full force, and this isn't likely to be the last we hear about Verizon's decision.
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