Return to site

How I know Verizon fears Santa?

How I know Verizon fears Santa?

Posted on by Jon Colgan

broken image

It’s just a theory, but follow me on this. With Christmas and a flurry of big shopping days approaching, Verizon knows that many of its customers might want to jump ship if they’re gifted some new device or deal from a competing carrier. If this were to happen, Verizon could lose out on the big subsidies it recently paid out to customers for the new iPhone 6.

To combat this, Verizon could pursue one of two options:

  1. Give customers good reason to stay, by, say, beefing up its value proposition.
  2. Give customers good reason not to leave, by, say, amending its early termination fee (ETF) policy.

Which did Verizon choose? You guessed it. Option 2: Verizon chose to threaten customers with even more pain.

According to Kellex at DroidLife, Verizon has amended its early termination fee policy so that customers who switch in the first eight months of the contract would be charged the full, non-prorated $350 per smartphone-line.

The old policy saddled customers with a $350 ETF right out of the gates, and subtracted $10 per month until the ETF plateaued at $100 for the remainder of the contract.

This old ETF pro-ration was all but mandated by the FCC circa 2009 when it told big carriers to either self-regulate for ETF fairness or suffer formal ETF-fairness regulations by the FCC. Ever fearful of regulation, all of the big carriers opted for self-regulation by adopting this pro-ration that reduced a customer’s ETF for each month paid under the contract. This basic pro-ration framework, that began circa 2009, has persisted unchanged mostly–until now.

Verizon’s new ETF policy says that the $10/month pro-ration reduction doesn’t begin until after month 8. So, you sign a contract, pay as agreed for eight months, and then leave; and you’ll be charged the full $350 ETF. Not cool, Verizon. Not cool.

My theory is that this is Verizon’s strategy for getting customers to stick around both through and after the holidays, to make it more painful for folks to switch to, say, AT&T and activate that shiny new device Santa stuffed in their stocking. This also might be Verizon’s preemptive response to what happened at the beginning of 2014 when T-Mobile launched its “Uncarrier” campaign that promised to pay off ETFs. In effect, Verizon is not only making more painful for customers to switch, but also more painful for competitors to steal those customers.

The good news is this: it doesn’t matter how Verizon tinkers with its ETF-policy math. can beat Verizon’s ETFs, allowing disgruntled Verizon customers to get out of their contracts ETF-free. Your move, Verizon.