Verizon to FCC: hey, you said ETFs were okay!
By Chris Ziegler 
posted December 18th 2009 3:50PM
posted December 18th 2009 3:50PM
- The company justifies the advanced device ETF a couple ways; it starts out by referring to some 2003 statements by the FCC in which the Commission says that it doesn't support the concept of customers breaking contracts and that carriers have a right to recoup those fees. Of course, that really doesn't drive to the point here, which is that Verizon's now charging two completely different ETFs based on a rather arbitrary line in the sand drawn by Verizon; to that end, the carrier says that the additional cost it incurs to procure the devices on its advanced list is greater than the difference between the two ETFs ($175) on average. It also says that it needs that extra guaranteed revenue to keep its broadband network up to snuff, since advanced devices are more likely to strain it.
- Regarding the weirdness at the end of the contract -- where a customer still owes $120 23 months into a two-year deal -- Verizon says that it's still losing money (read: we should be thankful they're prorating at all). As an example, it says that its average loss for a customer canceling 12 months into a contract is about double the $230 prorated ETF on an advanced device, and that statistically speaking, customers are far more likely to cancel early on than late. While we don't doubt that, we think they're trying to divert the conversation here just a bit.
[Thanks, Daniel P.]
77 pages?? This is why everything costs so much. We end up paying for Verizon's lawyers.
@(Unverified)
We end up paying for Verizon's lawyers AND FCCs lawyers too ;).
In the end, we're probably paying more than the price of a movie ticket for this entertainment~
@(Unverified) Love all the "omg 77 pages?!" comments in here. If you guys bothered to get past your ADD, you will find that 13 pages (with footnotes) are written and the other pages.... well I'll let you find out.
@(Unverified) This math is nonsense. Where is the money for all those employees in "The Network" and shareholders?
Am I the only one who doesn't think Verizon is wrong to do this? Verizon is subsidizing a $500+ phone and selling it for $200; if there wasn't a huge ETF, what's to stop people from getting the phone, paying the small ETF, selling the phone and making a profit?
@(Unverified) Perhaps Verizon (and all phone companies) should stop subsidizing phones. All it is doing is artificially raising the prices of the devices. You think that the latest Android phone would be $599 if it had to be sitting on a shelf in Best Buy or Target next to 30 other phones, that all worked on any carrier?
The phone companies are the biggest scam in America, short of perhaps the collusion between ISP's and the entertainment industry (RIAA/MPAA). Subsidizing phones made sense when they sold 20 phones a year, they came in a bag, and legitimately cost $4,000. All they're doing now is trying to legitimize a reason to charge you $30 a month for phone service, $40 a month for data service, and $10 a month for text messaging. "Oh, but we had to pay for your phone! We have to make our money back!"
Please...
Sure, they are subsidizing the phones, but making it up TEN TIMES OVER on usage fees. You really think it costs $1200 a year per person to use their network, bandwidth, etc?
It's not even close. Verizon is MAKING MONEY. Not losing money.
@(Unverified) I'm with you on that, Verizon will let you out of your contract early if theres a real reason anyways, such as no coverage in the area or death. But whats insane is how people think there shouldn't be a contract, People who are Against contracts need to take a look at Europe and see how much phones cost, I would gladly be in a contract for two years then have to pay $559.99 for a Moto Droid or get a contract and get it $400 less. People need to understand $175+$199= $374 VS $350 + $199 = $549
Its easy to see why they cant keep it at $175, Don't be surprised when AT&T and Sprint do this as well
@Noah K
Is a business, if they gave stuff away then why would they do it?
Businesses are here to make money
@Hexydes
UK£ 538.30 = 865.69406 U.S. dollars For iPhone outright
UK£ 73.41 = 118.057962 US$
3000 mins 500 texts Data Unlimited
Id quit complaining since you get Unlimited everything for less than that and have a $199 iPhone. The thing thats annoying is how everyone seems to think we are getting hit so hard but if you compare us to other countries we pay far far less for more
@airtime You need to be more specific when you say Europe. In the UK, there are contracts and subsidised phones. I dare say many other countries are the same. It's not the wild, untamed frontier you suggest.
But while we're talking about Europe, you might want to note how for the most part, they have their shit together when it comes to 3G. If I buy a phone in the UK, I can guarantee that bar actual locks on the device, it will work just fine on any other UK network: http://en.wikipedia.org/wiki/List_of_Deployed_UMTS_networks
I would happily pay more for a phone if I knew I had actual choice when it came to the carrier I used that phone on.
@Dale P Yes you would because you have basic knowledge of how a phone plan works, but for every day people, if someone breaks there Droid and goes into a store and tries to buy another one but finds out they are in contract and cant upgrade they just break contract and save them selfs that $200, which then forces Verizon to raise it because they are getting hit $200 from thousands of people at once.
@(Unverified) I used to work for Verizon back in the 1XRTT days. I think my boss mentioned something to the effect of "If we charged $25 for the customer to have unlimited voice, text, and data, we'd still make a substantial profit."
@(Unverified) I understand the ETF, but how come its $130 to cancel 1 month before your contract is up. The subsidy should be divided evenly over the 24 months. Makes no sense!
@(Unverified) I think the FTC has problem with the phone company trying to recoup cost of the PHONE they sold at a low price but hiding it in an ETF for the SERVICE. We smart people that read Engadget know that that EFT is to recoup the subsidized phone cost, but and average person looking at the contract wording would not know that, that is not how the contract is marketed or presented, which is a fair trade issue.
Personally, I think companies should have to tell you the true monthly bill amount... including taxes, government fees, and company fees. They should also include all "optional" fees (paying late, early, changing a line) in clear line item formatting. I'd go so far as to say it should be a standardized form (fine print should be disallowed) for all telcos to make comparison shopping easier as well as helping old ladies understand what they are paying for.
Nah
the biggest scam in the USA has been the banks little charade to take all your houses and land and to force te government into effective bankruptcy to take control
@airtime Frankly, this naive "its just business" belief is why we are all continuously being ripped off by these giant corporations who sit back and watch their already HUGE profits rise as our bills get higher and higher for the same service.
Cellphone service providers are a damned racket. Look no further than SMS messaging we are all still paying high premiums for...it's old technology attached to the voice network you already pay for (hence the character limit) and costs the provider nothing. You're just paying for some estimated value...literally a made up number based on how much they believe you are willing to pay.
Subsidies? You think the provider paid full price for that phone you bought at a discount with your contract? Trust me, they paid even less than they charge for the phone in some cases (unless the phone is completely free). And if subsidies are such a big deal, why then - for example - does someone who purchased an iPhone elsewhere pay the same monthly bill as someone who got theirs discounted through AT&T?
With people canceling contracts, are they actually LOSING money? No. Not at all...
They are merely not making as much of it as they could have if the customer stayed.
It's merely a moneymaking scheme to keep you locked into paying a set amount over a long period of time. Nothing more.
Once you cancel your service with a provider it isn't like you can keep using it without paying, it is cut of completely. They aren't spending any more money on you...technically you owe them NOTHING...UNLESS the phone you got was subsidized and they could show proof that you owe money. Then by all means they should feel free to charge you the remainder, with interest if necessary.
Of course all that would be fair...fair isn't quite as profitable as tricks are. People would flock to the best of the group. Whenever a great phone comes out people would all jump ship and get it (actually the whole concept of carrier-locked phones would fall apart in this model, manufacturers would find it far more profitable to sell phones on their own). Whenever someone is unhappy with service they could switch over to a better provider no questions asked, the lesser of the group would have to struggle to keep up or simply go under. Meaning the providers would actually have to compete more and improve on a more steady basis.
These contracts and super high ETFs? In a word (or two): Bullshit.
But feel free to go ahead and continue eating it up. Don't complain, though, when the bills keep increasing and you continue getting less and less for your hard earned dollar.
@Hexydes
How is it "artificially raising prices?" That doesn't make any sense. You could buy a $600 unsubsidized phone or $200 subsidized phone.. the monthly costs are not going to change. The only way ETFs artificially raise the prices of phones is if you break every single contract that warrants you a big rebate on an overpriced phone. Even then, your statement isn't correct because it doesn't include that clause; ETFs still wouldn't be artificially raising the prices of phones for those that stick with the network for the term of their contract.
Don't get me wrong, I think phone companies are generally skeezy in their business practices... however, that doesn't excuse people from saying things that are outright wrong.
@Hexydes
not to mention that, yes, these phones DO cost that much regardless of subsidy. Contract rebates aren't a world wide thing; there are countries that sell unsubsidized, and they still cost far more than in America on a contract. Check out eBay. If unsubsidized phones are *really* valued less than the retail price before the contract rebates are applied, why are even LOCKED phones selling for full retail price?? Let alone unlocked.
Now, of course Apple showed us that it doesn't cost $600 to make an iPhone. I remembered reading that they were making 50% profits from the first gen iPhone before the price drop. But if you really think they are going to start selling phones for the cost of manufacture if we drop contracts and ETFs, you are mistaken.
I reeaallly hate it when something that everybody agrees on ARTIFICIALLY makes dumb comments like that OK.
Ill gladly accept the ETF if you don't force me to pay for the data plan on a smartphone. But since you're forcing me to pay for a flat rate plan regardless of if I use it or not then screw your stupid ETF!
@yulebellow What is the point of owning a smartphone without a data plan? Are you the one trying to buy phones and then resell them?No, then in the end what does it matter if they raise the fee, Trust me i hate Verizon more then you would even know, but the more people who buy phones then break contracts and then resell them online for $300. The higher they make shit to try and balance it out,
@airtime A smartphone without a data plan would let me carry just an iPhone in my pocket instead of an iPod Touch and a dumbphone.
@airtime A smartphone is still a smartphone without the data plan. It loses some functionality, sure, but with a lot of phones you have WiFi now. I am RARELY outside of a free WiFi network when I am using my phone. Sure, no WiFi while traveling by car, but that doesn't bug me in the slightest. Usually it is me who is driving and I refuse to even answer my phone while behind the wheel.
I wanted to get an iPhone about a year ago. I had a friend with two iPhones (got one as a gift, shortly after he had bought himself one) who was going to sell me his spare for $125. I was all for it, since I needed a new phone anyway and was looking at a $100-$200 subsidized phone anyways. Due to my location (Marquette, MI), I absolutely HAD to go with AT&T, so no unlocking would have worked. I can't afford $80 a month for my phone that I barely use for anything other than texting, I can barely afford the $55 a month I am paying now. I would have been a happy man if I could have skipped the stupid mandatory $25 data fee. Instead, I get stuck with a QuickFire, a phone that AT&T was touting as the greatest texting phone on the market. Do yourself a favor and read up on the QuickFire and you'll see why I got pissed.
Needless to say, I will not be reupping with AT&T and will NEVER go back to them. If they had allowed me to use that iPhone without a data plan, they wouldn't have lost money on a subsidy, and they would have likely had a happy customer. Mandatory data plans are the bane of the smartphone market, in my honest opinion.
@Apocalyptic 0n3
The reason its required is yet again for idiots who use it, then do the whole "OHHH SORRRY i didn't realize i hate to pay for it" and then laugh stupidly, The iphone has to much stuff turned on all the time like, Push email,GPS, Safari, almost all the apps try and connect to get new info. I agree, there should be an airplane mode on the iphone that just disables data so if you buy it outright you can use it as a phone, the problem though yet again is people are stupid or sneaky and Phone companies always have to limit crap to pretty much cover there ass from being sued
@Apocalyptic 0n3 Just wanted to reciprocate what you posted. I've had some form of smartphone for the last four years, and the last two have had wifi. I use them to play music, play audio books, play games, talk on the phone, use the GPS for directions, and if I am in a wifi hotspot (which is often), I'll check e-mail/webpages. I have no need or desire to be connected to a data network 100% of the time. If the price was right, I might consider it, but I'm not about to pay $30 x 2 per month (for each of our plans) on top of $60 for line 1 service and $10 for line 2 service. I'm sorry, but my phones don't provide nearly enough use to be paying almost $150 a month. This is on top of regular Internet...
@airtime This could be easily resolved by the providers simply allowing you to disable data on their end at the time of registration. They know this, they just want to force people to pay for expensive data plans.
You seem to be VERY sympathetic to the wireless industry's cause...any specific reason for that?
@Hexydes
I work in a phone store, not one of those corporate stores where your forced to sell so much a day but one of the smaller ones with all the carriers and on a day to day basis I deal with people who do shit, for example the Evy Touch doesn't require data, but i had a guy come in and scream at me for 2 hours because he went on and downloaded a bunch of games and looked up all this crap on the internet and got charged for it and wanted us to wave his bill. I think its stupid, he did it he knew he did it, but because he claims now that he "didn't know" He wanted free stuff. And trust me lol im not sympathetic in the slightest when it comes to me calling them out on adding extra fees that people didn't want or when they try and pull shit on people. But this actually makes sense, people as a whole get a phone, come back in a year and then upgrade thats how there lives are, then there is a group of people like here on Engadget who are smarter when it comes to these things, and work the system more. So like i said before I agree with the ETF Change, I believe it should be higher when it comes to phones in a higher price range, thats why when it comes to getting insurance its higher when its a higher price range phone, I also believe if your buying a contract they should require you to have a data plan or turn off data 100% from there phones. Because before AT&T just changed there mandatory data plan back in sept, I would get parents who were upset they gave there kids some windows mobile phone to use as there main phone and then they went and downloaded all these things and refuse to pay for it. So Yes, Required Data plan or Disable completely
@airtime I very strongly disagree.
Basically, what you are saying - is we should all pay the same flat rate because a many customers are idiots and don't understand (or don't care to understand) how their carrier bases data charges.
That does not make sense at all. I don't pay for other idiots (except when I pay taxes). US cell carriers are getting out of hand with these charges and fees. NOT to mention, you're data is no longer unlimited. I have had two blackberries, and a G1 without any data. In the last three years I have had these devices with wifi, and I have not ONCE paid for a single kb of data. But now, if I want the CLIQ, I have to pay an extra $30 a month? I'm sorry, but that's not how it should work. If the phone "needs" data for extra functionality (total bs) - well then fine, I'll add it on after I realize I absolutely can't live without facebook when there is no wifi available (which is rare for this area).
Data should be an option for ANY phone. Forcing people to pay for anything is out of the question. If these people that come into your store and yell at you want a credit - most of the time they will not get that credit. They'll call customer service and CS will say tough luck. Then, idiot consumer learns about the data plan and may just as well add it on. OR - they'll learn their lesson and stop using the data if it costs so much. We're forcing people to be ignorant with this "mandatory data plan."
@cbizarre
GPS typically needs data for two reasons. 1- many phones use AGPS so simpler GPS chips can be used. 2- The maps that make GPS useful come from the internet. Although you could use wifi for this data, how often do you get lost near a wifi hotspot?
@m854
Alright, well we're assuming too much here. We're assuming:
a.) The phone has GPS, (not necessarily all smartphones have GPS).
b.) You are a person who uses the GPS. Most people I do business with have rarely used the GPS on their smartphones.
Now, I do realize that many people use it, but we're talking about the people who would benefit from the data plan. What I was saying in my previous post is that the data plan is not a NECESSITY - especially for casual users. It also does not change the fact that carriers should not force people to have to buy the (ridiculously overpriced) data plan if they want the phone on contract - in my opinion.
Obviously if you are a cheapskate like me, and don't feel the need for a data plan - GPS isn't of grave importance.
I have a very basic Samsung Slider with built in GPS for TMO without a data plan, and I can use TeleNav without accruing ANY data charges - and I don't even have WiFi on the phone. A rare instance? Possibly, but I'm just sayin. I still don't use it though.
@Hexydes "This could be easily resolved by the providers simply allowing you to disable data on their end at the time of registration. They know this, they just want to force people to pay for expensive data plans." Up until September of this year you could with AT&T, they just had to disable MMS messaging as well. I did this on my wife's BlackJack II because the data connection kept disconnecting and you had to either restart the phone or manually disconnect the data connection to get it to work again. The same thing was happening with my Tilt, but I could easily reset the data connection on a touchscreen WinMo phone. You just had to go to a corporate store or call customer service and have them turn off data for that line. Then in September I started getting statements on my bill that indicated that AT&T requires data plans for all smart-phone and PDA phones and that if a valid plan is not on a line AT&T reserves the right to add one and charge accordingly. So its not just the iPhone they are forcing data plans on, its anything they can make you pay for one on. Granted they haven't added a plan yet and that line is up for renewal in March. I'm sure at the time of renewal they will force the data plan onto the line if I get another smartphone/pda phone. Because of this BS I probably will not be. I am not paying $60 a month for two cell data plans with 5GB caps, I pay that much for 18Mb down/2Mb up uncapped internet at my house.
You guys went through 77 pages of legal jargon? On a Friday? All that jealousy I feel when you guys get your hands on shiny new gadgets is somewhat mitigated now.
Until the next hands-on.
cell phone companies will get money from you whenever and wherever they can regardless of their costs.
been the same way even back in the 90s
@hexideciml cell phone companies will get money from you whenever and wherever they can regardless of their costs.
been the same way even back in the 90s forever.
There, fixed it for you. :)
@jjsavage Dangit, engadget doesn't allow HTML tags in comments. I meant to cross out "cell phone" and "even back the 90s"...
If I held all the cards (like the FCC ultimately does), and some company sent me a 77 page response full of legal mumbo-jumbo, I'd just throw it out and send them to hell...
...no doubt where all the lawyers who helped them draft this will be waiting...
I like Verizon's coverage but abhor their business practices such as very expensive ETF's. $350 is unconscionable and it even applies to phones that aren't "smart phones"!
@dave1812
Then go to Boost mobile or Net10. If you don't want to pay for the coverage then you don't get to use the coverage.
@dave1812
Consider yourself lucky down there in the U.S. Try TELUS up here in Canada - if you're on one of our famous three-year contracts, and decide to cancel your service after one month, your ETF'll be $20/month x 35 months, or a lovely $700. And if it's an 'advanced device,' (smartphone) add another $200 to it, for a cool nine bills total.
Now THAT is unconscionable.
Here's an idea, stop subsidizing phones and charge full price. People will stop bitching about the ETF pretty quickly.
@nukee I would love to pay Full Price for a phone and not be tied to a Contract. Please. Please. Please let this happen!
@Noah K you can do that now--Verizon lets you buy a phone with a contract....
The problem is that they don't lower the usage rates and charge you the same price that users that pay for subsidized phones pay. That defeats the purpose of buying an unsubsidized phone...
@nukee
I fully agree.
But, then the people would complain about a $700 iphone
http://www.att.com/gen/press-room?pid=1574#tab4
or a $1328 HTC Touch Pro2
http://www.htc.com/www/press.aspx?id=92374&lang=1033
Can never please everyone, even when trying to help.
@Rick James meant to say without a contract--sorry!
@skotm
I'm just glad you're willing to state in a public blog how the HTC Touch Pro2 is almost twice as valuable when compared to the iPhone. It should only take a few more years before all of the Jobs rump kissers figure it out.
@Rick James EXACTLY. (re: rates being the same whether pay for the phone outright or not) And this complete negates the, "Oh, we're just trying to make back our money on the subsidized phone!" garbage that the phone companies are pushing. If I bring my own phone to the table, using their logic, I should be paying something like $20 total per month for voice/text/data.
Of course, again, the phone companies know this. Just like the movie industry with DVDs, they feel entitled to continue screwing over their customers because they enjoy an oligopolistic position in the market.
@skotm
If the carriers are supposedly only recouping costs of the phone by including the price in the contract, then the carriers really shouldn't have a problem selling the phone at full price and then charging less for the service.
Except they do have a problem, as they are making more than enough to cover the phone's cost. Do you really think a 3GS should 'cost' $700, when the iPod Touch 32GB is $300, and pretty much the only difference is a camera, cell radio, and plastic back?
You can get a 3GS from AT&T with the $30 data plan and the cheapest voice (450 min) and messaging (200) plan for ~$75/month, which equates to $1800 over 2 years, not including taxes or whatever other fees.
If you buy a 3GS for $700 unsubsidized, I think you should then be able to pay AT&T $1100 over 2 years, or only about $46 a month, as they aren't subsidizing anything.
I think many people would gladly pay the full price for a phone and have a much cheaper non-contract plan to go with it, somewhat like what T-Mobile is doing with it's Even More Plus.
@DaveBach
I'm probably a feeding the troll here, but the "value" of those phones is just a stupid figure made up by AT&T. Do you seriously think a phone should cost more than a MacBook?
@Noah K
T-Mobile's new plans let you do that. You pay less for the plan , there is no contract, but you have to either pay the full price of the phone all at once, or they can break it into 24 payments.
@skotm
Overpriced considering the cost of components for iphone is only $180
http://finance.yahoo.com/family-home/article/107263/consumer-electronics-teardowns.html