Verizon to double early-termination fees
Jan 06, 2010 (The Philadelphia Inquirer - McClatchy-Tribune Information Services via COMTEX) --
Verizon Communications Inc., which is rolling out FiOS TV and Internet services in Philadelphia, is poised to double its early-termination fee for new TV and Internet subscribers to $360, according to corporate documents.
Verizon has seen Comcast Corp. and other cable companies stealing back FiOS TV and Internet customers with steep discounts and offers to rebate the termination fee. Customers who cancel TV or Internet service in mid-contract pay the fee.
The sharply higher fee -- the current one is $179 for a two-year contract -- would make the rebate payments more painful for competing cable companies.
Consumer advocates generally view the fees as anticompetitive because they keep customers from freely switching between competitors when they would like to do so.
The $360 Verizon fee would diminish on a sliding scale over 24 months, which means a subscriber canceling in the midst of the contract would not pay the whole amount, according to Verizon's plans.
A FiOS subscriber who signs a two-year contract and cancels within three months would pay $330, according to Verizon documents accidentally posted on the Internet and then taken down. If the customer cancels in 16 months, the fee would be $135; at 24 months, $15.
There would be no grace period for the new fee, which takes effect Jan. 17, according to the Verizon documents. The current grace period is 15 days.
A grace period is the time that a customer has to cancel FiOS service without triggering a termination fee.
Verizon spokesman Richard Young late yesterday declined to comment, other than to say that the company could alter its plans for the early-termination fee and other changes by Jan. 17.
Four pages of Verizon documents obtained by The Inquirer detail the FiOS changes. The new fee and possible FiOS rate increases on Jan. 17 were first reported in the trade journal DSLReports. Current Verizon bundles -- typically TV, Internet, and phone services -- would be grandfathered, the documents say.
Fine print in current Verizon promotions for FiOS TV and Internet says the offers are good through Jan. 16, indicating a change could take place thereafter.
Early-termination fees, or ETFs, have become controversial at the Federal Communications Commission, which is looking at Verizon's early-termination fees in its wireless division.
"I am concerned by what seems to be a shifting and tenuous rationale for ETFs," FCC Commissioner Mignon Clyburn said in a statement on Dec. 23.
Verizon says ETFs cover the cost of wireless phones for customers. In a recent response to an FCC letter, Verizon said they also were used for store and advertising costs and sales commissions, Clyburn said in the statement.
Rick Kaplan, the commissioner's spokesman, said early-termination fees for TV and Internet services had not been an issue.
Verizon secured from Philadelphia City Council a 15-year cable-TV license in 2009. The telecom giant has said early-termination fees cover the cost of installing FiOS -- $500 to $600 per customer.
Joel Kelsey, policy analyst with the Consumers Union, the nonprofit publisher of Consumer Reports, said Verizon should provide an accounting of installation costs if the termination fees were being used to recoup those costs.
He said the higher fee appeared to be "another example of early-termination fees being used to punish consumers rather than being used to recoup costs."
Comcast says that most of its customers pay monthly without a contract and are not subject to early-termination fees. Some Comcast promotional packages carry $179 early-termination fees, according to a published report on the Consumerist blog.
Comcast spokeswoman Jenni Moyer said the cable company's standard early-termination fee is "generally $150" and varies by the promotion. The fee is tied to the incentive offered to the consumer for signing a contract, she said.
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