By Martin H.
Bosworth
ConsumerAffairs.com
December 4, 2009
A month after news leaked that Verizon Wireless was enacting sharp increases to its contract termination fees, the Federal Communications Commission (FCC) wants answers from the company as to why it made the price hike.
In a letter addressed to Verizon Wireless vice-president and general counsel Steven R. Zipperstein, FCC wireless telecommunications bureau chief Ruth Milkman inquired as to why the termination fee was hiked, how and when customers would be made aware of it, and if it was done to recoup costs from selling high-end smartphones, as the company claimed.
"Please provide the details of any trial period in which customers may discontinue service without being subject to the increased ETF," Milkman wrote. "Do customers have an opportunity to review their first bill before the trial period expires? How is this information communicated to prospective and current customers?"
The FCC also inquired as to whether or not Verizon was charging users $1.99 for accessing its Mobile Web service unintentionally, through pushing the wrong key combinations.
The question was raised by New York Times tech columnist David Pogue last month, who received comments from both Verizon customers and workers claiming that pressing certain button combinations would connect to the Web, and end up charging customers for the data usage."The recent article also suggested that, even if a consumer asks to have the Mobile Web feature turned off, charges are incurred for transmission of a blocking notification," Milkman wrote. "Is this correct? If so, are consumers informed that they may incur charges even after turning off the feature?"
In a response published on technology blog GigaOm, Verizon Wireless said that it "[fights] day-in, day-out to meet and exceed our customers' expectations. We do that by constantly improving how we do business."
The spokesperson said that ETFs were necessary to subsidize selling discounted wireless phones to people who might not own a personal computer or have regular Internet access.
"Nobody is required to pay an ETF," the spokesperson said. "You always have the choice of buying a mobile phone at full price with no ETF. Or you can buy a device at a discount with a 1- or 2-year contract."
Verizon Wireless also said it was changing its service plans to prevent users from being charged for data services if they hit keys unintentionally.
Termination fees remain a sore spot between wireless customers and companies. Most telecoms claim, as Verizon does, that the fees are necessary to subsidize the costs of developing and selling the handsets. Critics claim that the fees are designed to lock customers in to contracts and prevent them from taking their phones with them to other providers.
When news of Verizon's termination fee hike was announced, media watchdog Free Press pointed out that the average cost of subsidizing a handset was only $14.33, and even the old fee of $175 recouped the cost more than ten times over.
Under pressure from consumers and threats of regulation from Congress, all four of the major wireless carriers in America -- AT&T, Verizon Wireless, Sprint, and T-Mobile -- agreed to prorate their termination fees over the life of an average two-year contract. But the Verizon fee hike would mean that a customer seeking to end their contract after two years might still pay $110 for the privilege.
