By BRUCE MEYERSON, AP Business Writer
Targeting a top gripe by cell phone users and breaking ranks again
with its industry, Verizon Wireless plans to prorate the fee it
charges subscribers who break a contract so they only pay an amount
proportional to the time left on their agreements.
The change in the early termination fee will be implemented this fall
for all new customers and any Verizon Wireless subscribers who sign a
new contract, the company announced Wednesday in tandem with a speech
by CEO Denny Strigl at an industry conference.
The company, owned jointly by Verizon Communications Inc. and Vodafone
Group PLC, also said it was addressing another customer frustration by
enabling existing subscribers to upgrade to a new handset at the same
steep discounts being offered to lure new customers.
U.S. wireless companies, their subscribers trapped by contracts and
early termination fees, typically offer much smaller savings, if at
all, on upgrades while they're under contract. Verizon's new
flexibility will be available to subscribers with calling plans of $50
after 12 months.
Wireless cancellation fees are a longtime sore point among consumers,
provoking lawsuits and legislative proposals to prohibit and cap them.
Earlier this month in California, a state court decided to allow a
class action suit seeking to recover early cancellation fees from
Verizon Wireless and Sprint Nextel Corp., according to the seniors
advocacy group AARP, which is providing legal assistance for the
plaintiffs. And in early June, Democrats in the Michigan Legislature
proposed a bill that would limit termination fees to $20.
About 50 million of Verizon Wireless' 53 million subscribers are under
contract, and nearly all would face an early termination fee of $175
if they decided to change carriers or just close their accounts.
"The number of complaints on this issue is the single largest that our
customers have," Strigl said in an interview before the speech,
referring to the termination fees as a "black eye" for the
industry. "It's a legitimate complaint: If they leave in month one or
month 23, they pay the same charge."
The change to prorating the fee isn't as big a gambit for Verizon,
which boasts the industry's best customer retention rates, as it might
be for many rivals with heavier subscriber defections.
Wednesday's announcement marks at least the third time that Strigl has
used the annual Yankee Group wireless conference to break ranks with
his top rivals.
In 2003, Strigl came out in favor of giving cell users the right to
keep their phone numbers if they decide to change providers, an edict
from the Federal Communications Commission that all the top wireless
companies were trying to fight in court. The sudden reversal by
Verizon Wireless scored a public relations coup, with its rivals left
looking less customer friendly.
Last year, citing customer privacy concerns, Strigl said Verizon
Wireless would not participate in an effort to create a directory of
cellular phone numbers like that in the traditional wireline industry.
Asked if the latest move on termination fees might provoke more
consternation, Strigl said, "That's what industry leaders do."
Copyright 2006 The Associated Press.
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[TELECOM Digest Editor's Note: Also see in this issue an abridged
version of this story, submitted by correspondent Monty Solomon. PAT]
Bruce Meyerson AP (ap@telecom-digest.org)