When the Federal Communications Commission (FCC) a few weeks ago asked Verizon to explain why it doubled its early termination fees, I thought it was a good idea that the FCC was raking the wireless giant over the coals. You know, keeping them honest and whatnot. My stance prompted one Verizon spokesperson to jokingly (or not) refer to GigaOM as the the Pravda of the technology world. I wonder if he privately refers to FCC as the central committee.
Verizon responded to the FCC with a letter that reveals nothing but tries to pass itself off as a manifesto that anything it does is good for the people — I mean, consumers. I didn’t expect anything major anyway, but still, the 13-page response (plus exhibits) is a good way for you to replace any melatonin your body might be missing. I have been cracking up at the content of the letter, which quotes FCC policies set by a very telco-friendly FCC Chairman and ex-telco lobbyist Kevin Martin. For example:
The Commission held in 2003 that “carriers may include provisions in their customer contracts on issues such as early termination and credit worthiness.” In that order, the Commission disallowed wireless carriers from restricting the number porting process, but also stated, “We do not sanction or encourage consumers to breach their contractual obligations. Nor do we prevent carriers from collecting any outstanding fees or charges from consumers pursuant to traditional contractual remedies.”
That same year, in upholding the lawfulness of an ETF, the Commission noted “the history of Commission approval of early service termination provisions similar to the one at issue here, and the reasonable goals that they generally serve.” It also stated, “……the Commission has allowed carriers to use early service termination provisions to allocate the risk of investments associated with long term service arrangements with their customers.”
The most ludicrous response is to the question of why Verizon charges $120 in early termination fees even in the 23rd month of a 2-year-long contract.
The new ETF structure for Advanced Devices begins at $350 and declines by $10 per month for a two-year contract. Thus, a customer terminating in the last month of a two- year contract term could be assessed an ETF of $120. This ETF structure is fair and reasonable for several reasons. First, taking customers who terminate their contracts before the end of the contract term as a whole, Verizon Wireless still incurs a financial loss from early terminations, even with the $350 ETF.
Second, prorating the ETF to zero in the last month would mean that, to recoup the same amount of the losses caused by early terminations as a whole, Verizon Wireless would have to set the starting amount for the ETF higher than $350.