Is Verizon's new early-termination fee anti-consumer?

Beginning Nov. 15, Verizon subscribers looking to get out of their smart-phone contracts early will pay $350 for the privilege. That early-termination fee is double the current one, but Verizon insists it's justified because of the higher prices of today's phones.

"The cost of smart phones is considerably higher than feature phones for which the early termination fees were created years ago at $175," said Verizon spokesman Jim Gerace. He added that the new $350 ETF declines by $10 per month through the life of the contract and customers can avoid it by buying their devices off contract and paying full retail price.

(Credit: All Things Digital)

An interesting move for Verizon, which just last year agreed to pay $21 million to settle a class-action lawsuit filed by California consumers over the very early-termination fees it is now increasing. The plaintiffs in the suit alleged that Verizon's ETFs were illegal under California law and that they were designed to unfairly lock consumers into long-term contracts and prevent them from switching carriers. When Verizon settled the suit, it denied any wrongdoing, insisting that early-termination fees are simply a means of recovering legitimate costs. And to some extent Verizon does have a point.

Full retail price for the Motorola's new Droid is $559.99. With a two-year contract, Verizon sells the handset for $199.99. Theoretically, that's a $359.99 subsidy (I have no idea at what price Verizon purchases Droid from Motorola). So if Verizon allowed subscribers to break their contract after a month without paying an early-termination fee, the company would stand to lose money. And subscribers who did so could subsequently sell the device online and potentially make a profit, though a small one.

So it's certainly understandable that Verizon and other carriers want to protect the subsidies they dole out for these new smart phones. And as noted earlier, Verizon's new ETF drops by $10 each month a subscriber remains under contract. But at this rate, subscribers are still bound to pay a $110 termination fee in the 23rd month of a two-year contract. The contract is nearly over, the subscriber obligation to Verizon almost fulfilled, yet the company can still slap its customers with nearly a third of the full ETF if they break it at that time.

By month 23 of a two-year contract, does Verizon really stand to lose $110 if subscribers decide to switch carriers? Doesn't seem likely if subscribers can walk away just a month later without consequence, taking their handsets with them.

Since Verizon is pro-rating the ETF, why isn't it doing so in such a way that it zeroes out by the end of the contract?

And isn't the fast pace of innovation in the smart-phone sector such that prices-for both component and device-are dropping so quickly that high ETFs aren't really justified? Remember, you can get Apple's iPhone for $99 today. When the iPhone debuted in 2007, it commanded a price of $499/$599, depending on model.

I've put those same questions to Verizon and will update here when I hear back. In the meantime, here's what Consumers Union policy analyst Joel Kelsey has to say on the matter: "When people want to switch wireless services, the biggest cost they face is early termination fees. These fees are designed to lock people into long-term contracts and stop them from getting better deals. Early-termination fees make the marketplace less competitive. Verizon's move is painful proof that it's time for lawmakers to crack down on these fees."

UPDATE: Verizon Wireless spokesperson Nancy Stark offers the following answers to the questions I posed above:

Your first question regarding the balance at month 23 or 24 assumes that, at that point, we have recovered all of our subsidy and up-front costs for every device. That simply is not so.

On your second question, while the pace of innovation plays a role in prices coming down somewhat, it also plays a role in driving up costs as more and more complexity that customers want is added to phones-from premium HTML browsers to high-resolution MP cameras with optical zoom; videoplayers; music players; dual processor chipsets; WiFi; very high display resolution, operating systems such as BlackBerry, Windows Mobile, Palm, Android-ALL with the added value (vs a desktop) of mobility, and ALL in one tiny device that ALSO allows you to talk to anyone from anywhere. phew! (by comparison, I recently paid $200 for a camera and all it can do is take pictures, and it has only middle of the road capabilities.)

But getting back to ETFs specifically. The most important point is that Verizon Wireless customers do not have to have an ETF at all if they do not want to. ETFs allow customers to have it either way: They can have no ETF and pay full retail for their device. OR, they can get a greatly discounted device by having an ETF.

Story Copyright (c) 2009 AllThingsD. All rights reserved.

[supoman]

Given that you have the option to wave the ETF and pay the full price for a phone I think Verizon is pro consumer. It's exactly the same as an insurance deductible.

[make_or_break]

Carriers these days seem locked into setting steeper discounts on the hardware on initial release than they used to be. It wasn't that long ago that a smartphone sold "at discount" in the range of $300-$400 (and up) when they first came out, making the so-called subsidy a lot smaller than before. The steep price drops didn't occur until well into the model life of a particular phone. This is the gravy that Verizon wants back.

Unlikely that Verizon--or any other carrier for that matter--is paying anything CLOSE to full retail on any of those discounted phones they offer; they know the market realities and I'm dead sure that they let the phone makers know it too. All the $350 early termination fee is doing is guaranteeing max PROFIT off of the hardware, period. Lose a lawsuit in one place, jack up their rates for everyone else...simple as that. It's disingenuous to read blather like the tripe from Verizon's spokesperson; unrecovered 'subsidy' does not equate to actual red ink, just the gravy profit left on the table. If you can tell them to kiss off once month 24 comes, there's no actual loss to them, regardless of how they try to spin it. Their accounting people aren't THAT stupid to build in an actual red ink loss at the end of the contract, are they?

[abcd9009]

@supoman

To a certain extent I agree with you. Yes you can pay the full price for the phone and not pay ETF to Verizon. However, the idea behind paying a full price for a phone is to get an UNLOCKED phone. Let's go a step further here. Assuming (although highly unlikely in US) Verizon gives you an unlocked Droid if you pay in full. What are you going to do with the phone??? The phone has the useless outdated CDMA technology. You can't use it on AT&T so what's the point in paying full price for the phone.

Now take iPhone for example. It's GSM which means you can use it anywhere in the world including switching to T-Mobile from AT&T within the US. If AT&T offers this choice of buying out the phone and not paying ETF, I bet it will lose ALOT of customers to T-Mobile which is why I can guarantee this is one thing AT&T will NEVER follow in response to Verizon because Verizon has very little to lose as compared to AT&T.

[PeteyBrian]

If phone companies were pro consumer, they would allow the consumer to purchase phones separately (directly from the phone maker), then charge consumers to use their networks. This is how it works in many countries. Why do I have to buy a Droid from Verizon when Motorola makes it. Why do I have to buy an iPhone from AT&T, Apple makes it.

US phone carriers try to lock you up for 2 year exclusive contracts charging abnormally high cost data and minute plans and high ETF to buy their overpriced, marked up phones. ABSOLUTELY ridiculous!

I want to buy an phone separately, then shop for a carrier that best suits my area/needs at the best price. Now that would be a win for consumers!!!

[ac5501]

Last time I asked about getting Verizon service with a Verizon phone that I already own, they insisted on a 12 month contract. Why don't you ask your pal Nancy Stark why they REQUIRE A CONTRACT on a NON SUBSIDIZED phone?

[paulej]

1) Verizon does not pay full retail for the phones -- but they're unwilling to offer you a discount without a contract
2) If you buy the phone without a contract, it is still locked to the carrier and I'm not sure they will unlock immediately for you or not. I know the last time I asked AT&T and T-mobile that question, they said they would not immediately unlock the phone, even if I paid full retail price for it.

I understand the service providers not wanting to get ripped off by customers who go with subsidized phones, but the carriers seem to be unwilling to offer alternatives. At least Motorola sells some unlocked phones, but I never could find an LG phone I wanted unlocked -- unless I go through eBay and buy one from who knows who... the mobile phone market in the US is not terribly customer-friendly, in my opinion. I only want unlocked GSM phones so I can swap SIM cards when I travel. Every time I get a new phone, it's an exercise in frustration...

[ckh1272]

Answer me this Verizon. I bought an unlocked Voyager over the summer. It is mine. How come the rate plans are the same for a PAID phone as they are for a subsidized phone. Part of the monthly bill for subsidized phones is to pay for the phone over the course of the two year contract, yet the monthly costs are the same for a unlocked phone. Why is that? If you do the math on that , it starts getting a little fuzzy on Verizon's part.

[rdwalton]

Not that I work for Verizon, but they subsidize the phone, not the plan.

[subslug]

Good luck getting an answer to that. I asked the exact same question in the Store when I paid, outright for my last phone.

I'm not sure the guy in the store even understood the question. I sort of got the idea that in his opinion I should never doubt the all mighty Verizon....lol
I'm under the impression that Verizon's main goal is get people under a contract that protects them, nothing about this contract protects you the consumer.....it's all about them and protecting their empire. It used to be all about making you the consumer happy....it's so far removed from that now it's screwy.

[johnsbrn1]

rdwalton - you sound like you work for Verizon with that kind of logic.
If they don't want so much crap from consumers, they should make it more transparent. Reduce the cost of all the plans and then allow people to finance their phones over the life of their contract. Then we know exactly what we're paying for. If I already have a phone, why should I pay the same amount as someone who just bought a heavily subsidized phone? We put up with the most ridiculous things from wireless service providers in this country because most people just don't know any better. The quality of our service is in the dark ages compared to Europe and Asia and the carrier lock is absurd.

[XCMeathead]

In the UK there are sim-only deals that literally cost half the amount, and don't have a minimum term contract. I'mn surprised you don't get anything similar over there?

[Button Boy]

I have asked this question several time to ATT, Verizon, Sprint and T-Mo. The answer was always a puzzled look. As if such a concept is unfathomable. So I have my own way of dealing with them and my unlocked phone. It works, and I get my phone bill at a reduced rate.

[faceless128]

the rate is the same because their business plan involves getting you into a long contract. they give you the option to pay more up front and not have a termination fee, or pay more later if you pay nothing up front and want out. just like any other phone company, they only care about your money.

[CCastilla]

The best pro-consumer way would be to always offer the phone at full price, and the get a loan from the cellphone company for the difference between the retail price of the phone, and the actual price you pay. The loan fees would then be added to the monthly rate. If you decide to bring your own phone or pay full retail price, then you would not have to pay the loan fee. Also at the end of your loan (contract) if you don't want to change your phone your monthly fees will decrease. Think about it it becomes very transparent, which is of course the reason it will never happen.

[Mergatroid Mania]

This is the exact question I have been pondering. Suppose I get a two year contract, and at the end of the two years I have a fully paid off phone. Why is it that if I renew my contract, the rate is the same even though I have already paid off the phone?

These companies say the rates are so high because they are subsidizing the phone, but that's only true until the phone has been paid off. After that they blatantly rip off consumers by charging the same rate to renew whether or not you are using your old phone. They are basically forcing you to get a new phone because, after all who is going to pay the same rate for a two or three year old phone when they can get a brand new phone "for free".

And why are there no government people in the consumers corner taking these companies to task for ripping us off?

I have no problem paying a higher rate because I'm getting a fancy new phone, and even a prorated fee for canceling the contract early. But if I pay off the phone and want to keep using it, I should get a discount and the early cancellation fee should be drastically reduced. Same goes for providing my own unlocked phone.

[ckh1272]

Glad to see I am not the only one to ask that question. @rdwalton--Terrible job at spinning that. My point is just like some of the others have said. The rate plan for an "unlocked" phone (which is never truly unlocked in this country) is the same as a subsidized phone. If the point of a two year contract is in part to pay off the phone, then your logic is full of holes. Why isn't the rate plan lower for an unlocked phone. They could still offer a one or two year contract at a lower rate but they don't as long as they have people like you buying their BS spin. If you don't work for Verizon and you truly believe what you said in your post, then you are the perfect customer for the U.S. cellphone industry. Every other country in the world seems to understand this logic and gives the consumer the choice. Why doesn't the U.S.?? To busy to take off the blinders I guess. What a shame.

[anonymous197930]

it's 2 different areas...your monthly service is for actually being able to make or receive calls...if you purchase a phone from the company or notyou have to have a network to use that phone on....when you go to a cell company you are paying for using the network not using the equipment...so thats where the contract comes in....your equipment price is based on your contract term...the contract term has nothing to do with your monthly access because you didn't sign your contract to get a cheaper monthly access you signed your contract to get a cheaper phone

[sharmajunior]

Although I don't agree on paying a higher ETF, but the fees are justified in comparison to the price of the phone.

Also, I think it was a nicely written article looking at both sides of the case.

[lorax1284]

I think there are good points made in the article and in the comments that punch holes in the logic (and, I'll just say it outright, LIES) that Verizon (and all phone companies) use.

So, Verizon purchases a phone at an unknown cost from Motorola, then slaps a $559 price on it. If they are willing to disclose what their cost per phone to Motorola is, I would have one more data point to work with, but I don't.

The whole point of the subsidy is that the carrier gets a PREDICTABLE REVENUE stream from the subscriber. So, the subsidy is made up in the profits from the contract. To suggest that the subsidy + cost of providing cell service is not far less than the revenue generated is ludicrous. However the carrier shuffles the money around, saying that the subsidy isn't fully recovered by the end of the contract is doubletalk bordering on an outright lie.

[worried1]

The price of the phone is high because of the subsidies and the ETF is the only way to pay for the subsidies. If you think about it $500 - $600for a phone intended to be replaced in 2 or 3 years is way too high. Maybe if nobody would pay that price the price would drop.

[ReVeLaTeD]

They would be. That's of course assuming that's the price Verizon paid. Which it isn't.

On a phone that "retails" for $600, Verizon likely paid around $350-$450 wholesale. Let's assume they offer said phone for $200 with a 2 year contract. The customer pays that money either up front or as part of a bill (which has to be paid eventually). That leaves $150-$250 to recoup. An ETF of $350 is clearly inflated to add profit AND to dance around the prorated ETF. I'm a Verizon customer and I know two things.

As an EXISTING customer, my contract had better not change to implement this newer ETF. Otherwise, I'll be getting out of it for breach of contract.

As a California resident, I would be shocked if nobody confronted Verizon about this. It's clearly getting around the basis for the lawsuit by adding more to the ETF fee, which then nets to close to what the older fee was before the prorate requirement. If I were the government I'd slap this down hard - let them increase the ETF all they want, but the prorate amount MUST net out as zero at month 23.

[jaguar717]

"if I were the government I'd slap this down hard" -- Yes, because in a free nation politicians use the destructive power of government to crush anything they disapprove of at whim. Empress Pelosi doesn't control everything quite yet you know...

Verizon is changing the fee for new contracts, not your existing one.
How is it you understand how unjust it would be for them to change the terms they agreed to on their end, but you turn around and demand that you (or some thug politician on your behalf) be able to change the terms YOU agreed to in the same contract?

It's very simple: if you disagree with the terms, you walk away without entering the agreement, and if enough people feel the same way, the market will punish them. That's how a free country works. Forcing someone to alter their terms to suit you means we've moved from rule of law to rule of men.

[Zoobie]

@jaguar717

In a free market, you are correct. However, the cell phone industry doesn't operate as a free market in the US--it's completely regulated by both the government and industry panels that reak of collusion.

As a consumer who refuses to pay the ridiculous contract rates and 2-year contract terms that punish me, I do use pay-as-you-go plans (Cricket has an all you can eat plan for minutes, text, e-mail for $40/month). But, as a consumer, I still don't have the choice to carry an iPhone on the Cricket plan because of our stupid regulations in the US. There is nothing about the current market set up that makes it easy to say "if you don't like it, go somewhere else" because "somewhere else" has a serious lack of choice (more proof that cell phones are more like a government run utility and less like a free market).

[jaguar717]

I agree with you, but you just described a problem of too much government. Why in the world is the solution always MORE government in the hopes that the latest round of control will somehow fix the failings of the last one?

Yes, by all means end the pseudo-utility status of wireless, as well as cable, phone, internet, and everything else. Let the innovators take customers from the dinosaurs, and we all win. Chaining down progress while government picks winners and losers is a path toward Old Europe's stagnation.

Letting the politicians clamp down even harder as a reward for their past failure is throwing napalm on the fire.

[ppartekim]

And according to there radio commercials, Verizon will charge you sales tax on the full retail price of the phone $559 which is another $55 for those of us in california with a 10% sales tax. Didn't get charged that for my iPhone ( which have unlimited data - no cap - for $30/mo).

[gerbache]

You should have paid the sales tax on the whole unsubsidized price of the iPhone; this isn't a Verizon thing. I paid sales tax on the full price of my phone when I bought an iPhone, which did indeed mean a pretty hefty extra on the price.

[Mikeatle]

The attitude in Nancy Stark's update answer is approaching the level of condescension which, I have found, is pretty much the norm when dealing with many Verizon employees. Verizon continues to have excellent coverage across the nation, but that doesn't give the company the right to treat paying customers as if they were recalcitrant employees.

[WhistlingPig]

I didn't find Nancy Stark's response condescending at all. The article neglected the considerations she raised. She raised them.

And condescension isn't an afforded right. I don't see a courtesy surcharge in my invoices.

The anti AT&T / pro VZ opinions here are lame. If this was a new AT&T policy cnet would be all over this...

[mzt1]

I can understand the need for a higher ETF in the first year of a two year contract, but at 22 and 23 months, it is nothing more than a ploy to rip off consumers. Many of these so called hi tech units are practically obsolete or barely functional towards the end of the second year of your contract. They know that and they just don't want you to switch carriers. This way they can sucker you into another two year deal with another phone that won't last two years with the threat of another even larger ETF buried in the fine print. How sad is that?

[opiapr]

i don't even understand it at the beginning. Verizon claim that smarthphone are more expensive than a regular phone. Well in fact when the $175 ETF was put in place a regular phone was more expensive than a smartphone is today. and if you see verizon "full price" at the store you will also see that standard phone goes for almost the same as a smarthphone does.

[b00dah]

If you stand there and take it... then you, quite frankly, deserve it. Verizon is being as anti-consumer as they come. It's called FORCED RETENTION people. Yes, they lost a $21M suit... and you thought they would take it lying down. They're recouping that "payout" by raising the ETF... some will bite and I'm sure you'll complain all the way to the bank, as you withdraw your hard earned money. With an "80 million" customer base, there will be defectors, as there always are.

Welcome to the NEW world of the wireless business model. I wouldn't be surprised if, in 2010, you'll see it coming to a carrier near you. I WAS going to look at the DROID... now I'm just going to "look" at it until the other shoe drops.

[ckh1272]

Exactly what I have been saying. As long as people continue to take it, they will keep on giving it to us (with no lube). They are speaking with their dollar, so we should speak by keeping ours!

[jkbreuer]

I think that the ETF should be variable per customer/contract.

The formula is simple. The ETF should equal the subsidy offered by the company on the phone purchased by the customer when agreeing to the contract. During the life of the contract the ETF should decrease proportionally each month. For example in the final month of a two year contract the EFT would be 1/24 the original fee.

If the customer purchased their phone outright, then there would be no ETF. Verizon should not expect to be able to lock a customer into paying them for a service.

No company should be allowed to build in a punitive fee to early termination. Any argument counter to that is simply an excuse to stifle competition. Other industries are not allowed to do so. Why is the cell phone industry an exception?

[David Dudley]

Because 1. it's a subscription service and 2. they build it into the contract. You have alternatives - pay as you go from the low rent, low coverage players out there.

[Lerianis3]

David Dudley, you are being facetious there. If the other players are 'low rent, low coverage', then they are NOT really an option for 99% of the people out there, period and done with.

[opiapr]

David Dudley

First this are not "contracts" in a contract both party have a voice on the cell market the carrier write write and the write you either sing and pay or go with a prepaid plan. but guess what they do not offer the same phones or prices on prepaid with is outrageous anti-consumer.

But in a world were consumers like you take any a company said as final world is easy for them to keep doing it. You are a shame.

[Mergatroid Mania]

90% of contracts have a penalty for early termination in any industry. Although I agree with most of the original post here, you have to add an amount for a penalty, otherwise there's no point to a contract in the first place if you can just walk out on it any time you want.

[David Dudley]

Nancy Stark from Verizon is lucky - she got a camera that is actually responsive and works versus the one on the Droid that is slow and takes low quality shots.

Sadly, Nancy's feature argument does not hold water.

1. Verizon did not develop the OS, Google did so there goes those costs associated with software features (see point #2 from the Verizon spokesmodel, Nancy Stark). In fact, they don't even have any value added software layered on top of Android 2.0 such as Moto Blur which thereby negates the software costs even more. Verizon could have at least tried to do something useful like fix the subpar music and video playback on the Droid so multimedia offerings versus the iPhone would have been remotely competitive, but no. Your marketing folks don't seem to actually understand what the market wants or else there would be lines to get the Droid. Spin all you want with the usual BS line of better customer experience due to lowered demand, but no lines equals no sales and your company that wants to monetize and create shareholder value. I bet the Pre sold better when it debuted.
2. The hardware is likely mass produced and assembled in China by extreme wage slaves living in crap conditions. Verizon and Motorola are no more guilty of this than Apple or HTC is. They need to cut costs, increase margins, so yes we get that you need to pay below poverty level wages in order to make money. From rice farming villagers to Droid assembling grunts - China is truly a land of menial opportunity.

Let's be frank here: Verizon is the most expensive carrier in the US, they are also against net neutrality, have been sued by their customers for illegal charges multiple times, their unlimited data plans for is actually a 5gb limit, they regularly neuter devices in order to monetize users with their own overpriced on deck offerings, mines data illegally for the NSA and charge exorbitant fees for SMS.

http://www.washingtonpost.com/wp-dyn/content/article/2006/02/06/AR2006020601624.html
http://www.homelandstupidity.us/2006/05/13/verizon-sued-over-nsa-phone-record-data-mining/
http://www.bluetomorrow.com/bluetooth-articles/phones/verizon-wireless-bluetooth-shortcomings.html
http://consumerist.com/consumer/verizon/man-sues-verizons-and-wins-219705.php

[Clumpen]

$350 declining by $10 monthly isn't bad. especially since it's only a 2 year contract. Try disconnecting in Canada, only then will you see an example of anti consumer activity

Look at Rogers Wireless in Canada, minimum $100, or $20 a month up to $400 which ever is higher (then they add sales tax, 12% where I live, soon to be 13%) and that's per line that gets canceled (so forget canceling if you're on a family plan with 2+ phones).

oh yeah, and it's 3 year plans, so you guys complaining about sticking with an "obsolete" phone in months 22-24, try it from months 22-36, and our plans give you nothing compared to plans in the USA.

[faceless128]

that's the cost of free healthcare.

[opiapr]

@ faceless128

Like always nothing smart to said ....

[Mergatroid Mania]

@faceless128
Don't be stupid. Health care does not get paid for by data carriers or cell phone companies. I don't care if your tongue is in your cheek or not.

[ckh1272]

@Clumpen. While I sympathize with the plight in Canada, here's the problem. 24 months at $10/month is $240. There is a difference of $110 at the end of the contract. Do you see the problem here??

[baruchzed13]

Verizon is a ripoff. They constantly add on to my bill and I have to spend an hour a month on the phone with them to get them to remove improper fees. Check your Verizon bill carefully because I'm sure that's part of their business model...scam everyone just a little and it adds up to a lot!

[newstone]

Yea, big ,bad Verizon. I'm sure you feel that they just singled you out. Sounds more like your one of the few self annointed entitled complainers that waste my time demanding credits for charges they run up and deny with every silly excuse in the book. Just in case your interested every time you call and yell at one of us and act with extreme rudness your comments are recorded and documented, so if your wondering why you often get anywhere with your complaint, think before you speak

[Lerianis3]

newstone, get real. The fact is that baruchzed13 is NOT wasting the time of Verizon. I myself have seen the ******** fees that they try to charge people, and it's RIDICULOUS, to be blunt.

[Mergatroid Mania]

@newstone
Man, do you even have a brain? The guy does suggest Verizon customers check their bills, so obviously he does not "feel singled out". Try reading the post next time, and don't be late picking up your paycheque from Verizon.

If you've never had improper charges on any bill you have received, you mist be right out of high school and not had many bills to pay.

[ckh1272]

@newstone--Thanks for the truly unbiased opinion there <sarcasm>. These "fees" do exist and do up in little increments and you know this. I know there are some unreasonable customers out there, but this does not sound like the case here. The industry as a whole needs a good old fashioned kick in the pants and I've got some new boots dying to take part in that.

[pentest]

Verizon hasn't seen a made up fee that it doesn't like. Look closely at the Verizon bill, there are lots of fees that have no basis for existing.

[guitarman2000]

I beg of you to name one of those fees..........The only fee any cell phone company charges is a Regulatory Administration Fee (RAF). The rest are all Federal and State required charges... (universal service fund is for providing cell cites in rural communities, etc.....)

[pentest]

"Your first question regarding the balance at month 23 or 24 assumes that, at that point, we have recovered all of our subsidy and up-front costs for every device. That simply is not so."

What nonsense.

Is she claiming that Verizon is losing money on 24 month contracts?

[WhistlingPig]

No, she's not claiming that.

Does it make sense now?

[warpsix]

I don't like it but i did sign up for 2 years but Not a day longer! . 4 months and 20 days to go!

[Joe Force]

It's no surprise that there is some smugness in play in their decision to double the ETF. And if the smartphones are so expensive why haven't the other carriers followed suit? The condensending nature of Verizon, from the customer service to their pricing (being nickel and dimed for everything), is precisely why I left them. Want detailed billing? There's a charge for that.

I'm amazed they continue to gain customers while carriers like Sprint lose them in spite of offering better plans and phones (like the HTC Hero or Touch2).

[slimshady007]

One word: Coverage. I don't know where you live, but throughout much of Ohio (rural, specifically), VZ is your absolute best bet for a service provider. AT&T? Not a chance. T-Mobile? Never heard of 'em. Sprint? Surely you jest. Next best thing is Alltel. And now even parts of that are becoming Verizon. I want my phone to work; where I live, that means you get Verizon.

[abcd9009]

What happens if I enter into a 2 yr contract with Verizon but I DON'T buy a phone. What if I already have a phone? How does the ETF apply then???

[jture]

The ETF applies to the service contract, not the device.

[drara07]

Hi,

I'm not very sure on this, but can an unlocked CDMA phone be used on Verison. I think with CDMA technology you dont have an option of a sim card so how exactly will it work. Secondly, if an unlocked phone cannot work with verison, even if i break the contract, the cdma phone be it droid will serve me no purpose.i can as well return the phone back to verison. In this case will they charge the ETF?

[aaron_van]

@jture

No it doesn't. You provide you're own phone, you get no ETF. You buy a phone at full retail, you get no ETF. You buy a phone at discount, you GET an ETF.

[aaron_van]

@jture

No it doesn't. You provide you're own phone, you get no ETF. You buy a phone at full retail, you get no ETF. You buy a phone at discount, you GET an ETF.

@ drara07

To an extent yes, but Verizon employees are told not to activate a non Verizon phone on the Verizon network. Reason being, while similar phones with similar OS's on different carriers are largely the same, there are subtle differences that could lead to either technical issues, or more commonly, customer complaints. Example: I am a Verizon employee by way of the merger with Alltel. As an Alltel employee, in the months leading up to the actual merger I was told DO NOT activate a Verizon phone on the Alltel network, due to the functionality of the Verizon phone that would not work on the Alltel network, such as V-Cast and what have you. While, given proper explanation, most customers I'm sure would be ok with the non working features, allowing off carrier phones to be activated on your network opens the door for a segment of any consumer base to do something as benign as complain about their issues, to as stupid as raising a lawsuit.

Understand that this is only my opinion, and I may be off target but I do believe that this is why Verizon does not allow CDMA phones from other carriers on their network. Also understand that I have been deployed to Iraq since VERY shortly after the merger so my information may be a touch dated as well.

As far as returning a phone, a smartphone in particular, I think it is an industry standard to allow a customer 30 days to try the phone out. If you don't like it you can return it for a full refund of the phone minus a prorated monthly fee covering the time that you had the device and the activation fee. At least that's the way it was with Alltel. Again, this information may be a bit dated, I'm not sure.

[lkrupp]

Wait, wait. I thought at&t was the ultimate evil corporation and Verizon was god's gift to smartphone users. At least that's what the at&t bashers have been saying in these forums since the release of the iPhone. Now Verizon has the Droid and they're evil too?

What's this world coming to anyway? :-)

[newstone]

The only logical approach to the consumer angst regarding the new ETF is to boycott the DROID and other such products. Second organize store front sit ins or protests complete with signs. Third involve the media in the campaigns to draw attention to this new practice. Forced fees need to become the practice of the past, periold!

[David Dudley]

Based upon the initial sales volume of the Droid, I don't think there is a need to boycott it. It's just not selling well, like all the other Android devices.

[aaron_van]

@newstone

I don't know if you've realized... CNET is a part of the media, they are involved, and believe it or not... They are drawing attention.

Try word of mouth over a social networking site. Believe it or not, it will probably get you much further much faster than trying to sell the "media" on the importance of drawing attention to yet another price hike in America...

[colin779]

When their rep speaks of all this technology that goes in to these phones and thats why they cost so much and must charge a high etf fee, she forgets to point out a very important fact. VERIZON DOES NOT MANUFACTURE THESE PHONES! they simply sell the service that lets them operate. i bet they dont pay more then $150 for a phone they sell at a full retail of $599.

[colin779]

i forgot to mention, my brother recently left verizon due to lack of service where he lived. after an hour and a half on the phone got out of paying an etf fee because the phone was not usable at his house (yes it is in town, not in the middle of of the hills, we live near seattle). about a 2 months later he gets a bill from verizon for a etf. he calls with the confirmation code he was given when he cancelled, but if you enter the code when it asks you too verizon hangs up on you... so he paid (i have no idea why) he got another bill the next month saying he hadn't paid, same thing, you call, put in the number they gave when he made the payment, and then you get hung up on. now they are threatening to send him to collections. he sent them a letter from a lawyer with proof of his payment back in the payment envelope, and has not heard back.

that is some shady business practice if i have ever seen it....

[colin779]

also, dont try the verizon store for issues like this, they wont help you.

[guitarman2000]

I love how people gripe about this. Its the same thing over and over. IGNORANCE. Its called retail.......Try this: Go to best buy and pick out any item in the store, you will be paying atleast 100 percent mark-up over what they bought it from the manufacturer for, and no one minds doing that or ******* in forums about it like little babies. Now look at it this way: Verizon does not manufacture the hardware/software (though they do build their own software for the phones), but they are responsible for paying for the towers/equipment/technology that cost upwards of a millions dollars a tower every 10-20 miles and paying for the accompanying support, stores, call centers, employees, switching centers, and then have to buy that $599 phone for 150-300 bucks, all while hoping you remember to pay your 60 dollar bill. take all of the cost associated with providing that and still trying to be profitable and maybe you can understand why it does take most of a 2 year contract to become profitable......screw the phone, thats made up quickly, but the cost of you using it and providing the employees and services every month is definately factored in. Its called forecasting......Try going to canada and you will quit complaining.....They do 3 year contracts, are about 50 percent more expensive and most dont even have an unlimited data plan for 29.99, its more like 2 gigs a month or something........ridiculous

[Lerianis3]

guitarman2000, you had better come down a bit with the cost of those towers. They cost MAYBE 1/5 to 1/3 of that price that you mention.
Oh, and yes, I DO have a problem with paying a 100% markup over the cost that someone pays for something....... and I simply do NOT BUY FROM THAT STORE if that is the case, or ask for a decrease in the cost.

[Mergatroid Mania]

@guitarman2000

Don't know where you get your facts from but most of them are wrong.

I am Canadian, and although my plan is way over priced compared to rates in other countries, it is available in 2 years just like it is in the U.S. I chose 3 years to get my phone free. I could have gotten a lesser phone free on a 2 year contract if I preferred. Next year there will be a few more companies providing cellular services in Canada and we will start seeing rate plan fees drop. They have already started eliminating some fees such as 911 and "system access" fees in anticipation of these new carriers.

Also, I work in the retail industry, and I can't speak for the U.S., but in Canada the standard markup in most stores is 35% to 50%.

If you're paying 100% markup on ANYTHING then, well, the word SUCKER comes to mind.

Please don't speak for Canada as obviously you have no idea what you're talking about.