Verizon has replied to the FCC’s inquiry on the hike of its earlier termination fee (ETF) for advanced devices.
Earlier Termination Fee (EFT) is the charge customers have to pay when they want to end their contract before the ending terms. The provision of EFT supports the wireless company to offer phones to customers at lower and discount prices than the original retail prices and minimizes its losses when customers break the contracts before termination.
In its filled response to FCC Verizon mentions that even with this increased fee they would also be the suffers as they will still be losing money for every termination because carrier prorates the EFT.
Defending their hike they also mentioned that additional revenue from the ETFs is useful to keep its broadband network strong and reimburse costs associated with advertising, sales commissions, store costs which are higher for advanced devices as they need to spend more on customer service for helping those tied in an issue with web-enabled phone.
Verizon increased the EFT for advanced devices like those including HTML browser; high-resolution MP camera with optical zoom; dual processor chipsets; Wi-Fi etc. those like Motorola Droid and Blackberry. Earlier they use to charge $170 which is increased to $350 now.
According to Kathleen Grillo, senior vice president of federal regulatory affairs for Verizon, “It would generally be more economic for them (customers) to do so… Moreover, customers who terminate walk away with a device that retains value.”