If it can’t win customers’ loyalty through great devices and service, Verizon Wireless (NYSE:VOD, NYSE:VZ) may do so through exorbitant early termination fees. The carrier reportedly is doubling its ETFs — penalties consumers must pay if they back out of their contracts early — from $175 to $350. According to a memo (below) obtained by the Boy Genius Report (BGR) blog, VZW will charge a $350 ETF for “advanced” devices, most likely smartphones, beginning on Nov. 15. The $350 will decrease by $10 per completed month of service over the life of the agreement.
About two years ago, forced by lawsuits and regulation, AT&T, VZW, T-Mobile and eventually Sprint began pro-rating their ETFs and stopped requiring contract extensions when their customers made changes to their calling plans. At the time, it appeared ETF’s days were numbered — or, at the least, canceling early was less financially prohibitive. Today ETFs still rank among consumers’ biggest pet peeves with wireless, but they have been necessary for a lot of carriers to keep their customers from jumping ship every time a hot new device comes to market. BGR pointed out that a lot of consumers try to “work the system” by buying new BlackBerrys on sale, opening a second line to get a new advanced phone, paying the cancellation fee then selling the device on eBay for twice as much. But, then again, there are also a lot of honest consumers that simply want out early.
The past two years have also seen a rise in prepaid, a decline in contract prices and a slew of new hero devices increasing the attractiveness of one carrier over another. Unlocked devices still struggle to make it in the U.S., given their high price points, but all things told carriers have been steadily moving away from the contract. Considering that, VZW’s plan to double its ETFs is especially surprising. If other wireless operators follow suite, it looks like the contract may rise again.