Verizon Wireless Prorates Fairness In Prorated ETFs

from the gee-thanks dept

Fri, Nov 17th 2006 11:59am — Carlo Longino

Verizon Wireless got a bit of praise a few months back when it announced it would start prorating the early-termination fees it charges customers who break their contracts before they expire. Operators use ETFs to ensure they recoup the subsidies they pay to make handsets cheap for users to buy, but the ETF doesn't drop as subscribers get closer to the end of the contract, which seems a bit unfair. Now, Eric writes in to point out that Verizon's finally released the details of the ETF changes, and as you might expect, they're not quite as fantastic as people would have hoped. The changes came into force Nov. 16 -- and will only apply to contracts signed on or after that date. Furthermore, the ETF only drops by $5 per month rather than proportionally to the length of the contract. While it's a step in the right direction, it seems a lot less benevolent than originally thought, and keeps the deck stacked strongly in the operators' favor. Perhaps a better solution would be to charge an ETF in line with the subsidy on each handset, then prorate that proportionally over the life of the contract.

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20 Comments

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OnyxHawke, 17 Nov 2006 @ 12:04pm

ETF 'fairness'
For the most part even a $200 etf is more than fair to customer, expecially as production costs of phones go up as more,and more features are packed in. The current 'entry level' phones most carriers sell or give away with activation cost them around $250 a piece. Add to this the cost of the shipping, inventory maintence, and the inevitable calls to customer service (average cost to carrier $6-$10 per call) because people are to lazy to read their manuals, or threw them, and the box away as soon as they got home and the consumer is still coming out way ahead.
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Anonymous Coward, 17 Nov 2006 @ 12:22pm

Why dont they cut the crap
And just offer a damn month-to-month contract, and just LEASE you the phone?

Why do they have to subsidize it? isnt that the same as making people who doesn'tt want a fancy phone pay for some other guys fancy phone?

I really dont want to pay inflated prices to pay for someone elses 700$ phone.

The phone subsidy is an excuse for an ETF, not a reason for it.
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- Dosquatch, 17 Nov 2006 @ 12:48pm
  
  Re: Why dont they cut the crap
  I really dont want to pay inflated prices to pay for someone elses 700$ phone.
  
  But I really, really appreciate it, this Treo is sweeeet :-)
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- Geren, 17 Nov 2006 @ 2:59pm
  
  Re: Why dont they cut the crap
  Gee, I'm old enough to remember when cell phone companies actually did that........Those were the days, my friend, of $800 per month cell phone bills and $1000 phones.
  
  I like it better the way it is, even if there are some downsides. BTW, most of the cell phone carriers will let you out of the ETF, if you are canceling the service because you are moving to an area that they don't serve.
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  - Anonymous Coward, 18 Nov 2006 @ 1:23pm
    
    Re: Re: Why dont they cut the crap
    BTW, most of the cell phone carriers will let you out of the ETF, if you are canceling the service because you are moving to an area that they don't serve.
    Yeah, right. Just the opposite has been true in _every_ case someone I personally know has been involved in. In one case, the carrier actually shut down the only tower that covered the person's rural home and then demanded an early termination fee that _exceeded_ the cost of continuing the contract.
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arrg, 17 Nov 2006 @ 12:58pm

ironic
I just changed to Verizon on the first. I went with the $80 a month contract. I've had the phone for a little over two weeks and got the bill yesterday. Want to guess how much! $192!!!! What a bunch of BS!! They split my bill in two saying my billing cycle is on the 12th? Hello I started the sevice on the 1st why is the cycle on the 12th? Only thing I can think of is so they could double bill me for my first month. Now on top of the activation fee they didn't tell me about, which begs me to ask (why am I paying them for switching from their competitor?) I'm paying $30 worth of taxes that are for some reason not included in the $80 contract. So now I'm pissed and feel that I don't want to do business with them but because of the ETF I'm stuck and have now power or rights as a consumer.
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- Anonymous Coward, 17 Nov 2006 @ 1:20pm
  
  Re: ironic
  Sure you do. You can fight it if you like. Just because you're in a contact doesn't mean it's not unjust. A HUGE number of contracts I've read from companies have illegal clauses in them - that's why there's an enforcement clause at the end of most which says that if any clause is deemed illegal the rest of the contract stays enforcible.
  
  So, it depends on how pissed you are and whether it's more worth it to keep your mouth shut for the next two years or start yelling. You have plenty of choices as a consumer - you just need to exercise them. Confront them on their contracts. Work to get a court to release you from it claiming it's unjust. Get the media involved - that'll get their attention. Bring negative press. If you're a thorn in their side it'll be more worth it to release you from your contract than to enforce it.
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  - Anonymous Coward, 18 Nov 2006 @ 1:35pm
    
    Re: Re: ironic
    Just because you're in a contact doesn't mean it's not unjust. A HUGE number of contracts I've read from companies have illegal clauses in them - that's why there's an enforcement clause at the end of most which says that if any clause is deemed illegal the rest of the contract stays enforcible.
    Which is why you should ever sign any agreement without having a competent attorney go over for you first. So the next time someone wants to sell you something with a contract, don't forget to figure in the cost of an attorney.
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- Anonymous Coward, 17 Nov 2006 @ 3:07pm
  
  Re: ironic
  Think about...everyone's bill due on the 1st...wont work as that would overtax the system so...each person gets a different due date...did you think about call VZW for an explanation or will you just complain...
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Anonymous Coward, 17 Nov 2006 @ 1:14pm

uhm yeah....
All I can say is google the terms "verizon sucks"
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- Anonymous Coward, 17 Nov 2006 @ 1:25pm
  
  Re: uhm yeah....
  lol - Google the term [insert company here] sucks.
  
  People complain - especially on the net (it's FULL of whiners). It doesn't mean shit. You ask enough people about their experiences with X-Company and you're about guaranteed to find a group who has some bullshit to bitch about.
  
  Besides, most of the whiners on the net don't know their asses from a hole in the ground. They'll complain about ANYTHING just to get some attention.
  
  Google the term [x] sucks. That's good. lol.
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JG, 17 Nov 2006 @ 1:21pm

month-to-month
It should be interesting to see what happens with the iPhone: if consumers start buying their own phones, the phone company won't have the chance to subsidize it. I imagine the carriers will result to charging a bring-your-own-phone tax. Maybe the middle ground is putting an ETF tied to cheaper or less restrictive data plans rather then subsidized phones.
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Josh Wright, 17 Nov 2006 @ 1:57pm

Whiners
Verizon set your bill cycle to the 12th because they have a few set bill cycle dates in order to greatly simplify their billing system. Makes sense to me...

The reason your initial bill was so high was because you pay a month in advance, so, you payed for the 11 days from the 1st to the 12th, then you payed for the next month. You're not going to end up paying for any service you don't get the chance to use.

Taxes are fully disclosed in the service agreement, and you're an idiot if you blame Verizon for the taxes the gov't charges (surcharges are another matter, but they're also disclosed).

In most markets, you're handed a receipt with the estimate of the first bill printed right on it.

And no, I am not, and never have been a Verizon employee. I have occasionally worked as a technical contractor in VZW retail locations, and have witnessed first hand the very complete discloser that takes place when a contract is signed.
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- Anonymous Coward, 17 Nov 2006 @ 2:51pm
  
  Re: Whiners
  Completely agree with you. While Verizon has its setbacks it's got its advantages as well. I always hear people complaining about the service on just about any other company, with verizon you seriously get a pretty large service area, biggest I've seen in fact. However, it's setbacks are well known as crippling phone's full features such as bluetooth and USB transfers - that still didn't stop me from bypassing each and every single one of them. I bought the phone (a moto v325) yesterday, and by the end of the day had enabled everything Verizon didn't want me to know about. Free ringtone, picture, and game transfers xD.
  
  And that's how you fight back.
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  - Geren, 17 Nov 2006 @ 3:03pm
    
    Re: Re: Whiners
    Hmmmm, Mr. Coward. I'd sure like to figure out how to do that with my LG VX8100 .... If I could just use my "sounds" for ringtones, like I'm supposed to be able to, I'd be happy.
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- Geren, 17 Nov 2006 @ 3:01pm
  
  Re: Whiners
  Thank you, Josh. I'm not a Verizon employee, either. But, I am a satisfied customer.
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Richard, 17 Nov 2006 @ 3:29pm

Perhaps a better solution would be to charge an ETF in line with the subsidy on each handset, then prorate that proportionally over the life of the contract.

Why don't they just loan us the money or rent-to-own the phones. I'm sure it would drive more people to use cheaper phones and cut down on the bling, but hardware is getting cheaper for this technology. It's not quite like the start up days of cell phones years ago. It's getting a bit harder to justify all the tech (i.e. camera, mp3, pda ...) when most people would just like the phone to work as a phone.
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Anonymous Wireless Worker, 17 Nov 2006 @ 7:19pm

Phone subsidies
I've worked as a customer care rep. at 3 of the "Big Four" providers and most of the people I work with hate the Equipment subsidies. They attract new customers to make "Churn" look good to the stockholders and then you're almost out of your contract and a new customer gets a better price than you on the phone. Very frustrating but all too common. But there are MANY ways to get out of an ETF and they are usually listed on the terms & conditions. Anonymous is right that most will waive it if you move out of their coverage area. Verizon does have a large one but their map is still just an estimate of coverage and says so in the fine print. Another way is telling the provider that you've died. Most will adjust it w/o proof. But I hate the ETF as much as other consumers and Verizon is moving forward if not fast enough.
As an answer to Ironics question on taxes: Verizon didn't charge the taxes, the government did. The reason they're not a part of your contract is that your contract is with Verizon, not the government. I understand that wireless taxes can suck. The 3 states that have the lowest tax are Mass, New Hamphshire and Oregon and the highest are; California, New York and Texas.
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Anonymous Coward, 18 Nov 2006 @ 1:39pm

Operators use ETFs to ensure they recoup the subsidies they pay to make handsets cheap for users to buy...
I'm pretty tired of hearing this one. If that's so, then why is it they demand contracts and ETFs even when you bring your own phone?
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LOUIS BEASLEY, 15 Dec 2006 @ 4:17am

cheap phones
THEY SAY YOU GET THE PHONE CHEAPER BECAUSE YOU ARE ON A CONTRACT. LG 5200 IS $139 WITH $50 REBATE ON A 1 YEAR CONTACT. 5200 ON A PREPAID PLAN AT WALMART IS $89, SAME PHONE AT BEST BUY IS $69.
I KNOW IT IS A PREPAID BUT IT IS THE SAME PHONE. THE ONLY REASON I DIDN'T GET THE PREPAID WAS THE WEEKEND MINUTES WERE NOT FREE.
I FINALLY GOT THE 8300 WITH 1 YEAR. AFTER ALL THE TAXES FROM VERIZON, MAYBE I SHOULD HAVE GOT THE PREPAID PLAN. THANK GOODNESS IT IS ONLY A YEAR.
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