Verizon whittles $350 ETF 'advanced device' list a bit, FCC pressure paying off?
By Chris Ziegler 
posted January 19th 2010 5:29PM
posted January 19th 2010 5:29PM
posted January 19th 2010 5:29PM
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The $350 is a bit steep, but I understand why they did it. With more people buying smartphones that are much more expensive and therefore much more heavily subsidized, they don't wanna be losing money from people buying a $500 phone for $200 and then bailing with a $175 ETF (for those that don't feeling like doing the math, 200 + 175 = 375 < 500).
I think this is a fair compromise. Say you're 23 months in your contract and decide to switch to [insert carrier] at the end but don't want a break in service between, at that point you'd be only paying a $120 ETF, and VZ would have still gotten the value of the phone back by that point
@KeegdnaB
Agreed. The ETF will always be bull until it covers the cost of the phone and nothing more, with a monthly deduction from it until Verizon has been paid for the phone in full.
@KeegdnaB
True but people are still taking it up the arse for the prices of the plans
@KeegdnaB
I too agree with what you are saying...
On one hand, $350 is steep. However, I think this was initially more of a knee jerk reaction on Verizon's part to the customers flipping the free phones from the Bogo deals on ebay.
My only qualms with this policy is that by the 23rd month of the contract, the phone should have a $0 fee to break the contract at that point late in the term.
To all the free-market people that complain the 'customers shouldn't be idiots and sign a contract they can't uphold' I do agree with you to an extent. However, the telecom industry is far from a 'free market' where there are only 4 major carriers. Then when you take into consideration service coverages, customers are typically limited to only one or two carriers. There really just is not much choice for customers when it comes to telecoms (hell, its even worse for cable companies in most markets). I'm completely a free market guy and feel consumers should be smart and intelligent enough in their decisions, however I feel that until there are more cell carriers for customers to choose from, we should have the FCC regulate them. Hopefully in the near future the telecom industry will have more competition and less regulation as that would benefit consumers in the long term.
@Rick James
I still hold that this is all just hiding cost from the customer. Personally I would prefer if they simply gave a "loan" termed over the 24 months. This way we can compare actual costs of plans aside from the phone. Once I'm done paying for the phone I don't see how its fair I should have to keep paying the additional cost... (and no, I don't want to hear about how great TMo is dammit).
@KeegdnaB
An $120 ETF on the last month of a contract is nowhere near reasonable.
I actually don't have a problem with ETFs, though I think $350 is a little out of hand, But the carriers want it both ways.
Either the handset is free and they will never recoup the cost, in which case an EFT doesn't make sense as they wouldn't get that money even if you stayed through the contract.
Or the handset is subsidized, and they are charging you for it each month, in which case your bill should get lower when you've paid off the phone.
I don't care which one they pick, but they can't have both.
@Rick James - I think the issue is, if after 24 months, you upgrade your phone with the same carrier (i.e. V), you owe $0. Carriers are under increasing pressure to provide very sophisticated smart phones to their customers. And these phones are getting quite expensive to build. The component costs are high (close to $200). The contract manufacturer has to make money, in addition to those costs. And the phone supplier (for example "Palm") has to also make money. Then the carriers (e.g. Verizon) have to have all of the technology in place to support different application stores (e.g. for Palm's Palm Pre Plus or Palm Pixi Plus smart phones based upon webOS operating system or Google's Android phones).
Think about Intel, when you buy a high-end PC, you pay around $2,000. But when you get their very high-end processors, the price goes into the $3,000 range. As they say, you cannot have your cake and eat it too! So I do not see a problem. The additional cost only comes in if you decide to leave the carrier. And that cost is a very small fraction of what you would have paid for a two year service.
@Rick James
I disagree...the free market system still works. Despite the prevalence of the cell phone in society, it's not a necessity like having electricity is. It's a convenience that one doesn't have to have. If you can't uphold a two year contract, even if Verizon is the only carrier in your area, then don't get the phone. Or, you could just pay the full price of the device and say screw the contract.
@Thinker
With Verizon, you can upgrade after 20 months. In addition, many customers are eligible to upgrade after 12 months with nothing more than a $20.00 fee. Just FYI for your argument above.
So, is this retroactive for all that signed up between 11/14/09 and now?
@pbase
It's been there from the beginning.
http://www.engadget.com/2009/11/04/verizon-looking-to-bump-early-termination-fee-to-350-on-advanc/
Here's an idea: if you are signed to a 24 month contract, the price of the ETF could drop by *gasp* 1/24th each month. If the ETF is $350, and I break my contract on month 23, why should I have to pay $110?
I hate government involvement, can't stand it. However, as long as the government is taking over all aspects of our lives, the least they could do is stop letting cell service providers sell devices. Force the device manufacturers to sell them in retail stores, and leave the service providers to selling service. There's too much damn collusion and price-fixing going on in the industry. Make Apple, HTC, Nokia, Samsung, Motorola, LG, and others sell their phones in Best Buy and Wal-Mart. Then you'll see just how long that "MSRP" hovers above $600.
If that happens, and consumers are forced to buy unsubsidized phones, most users will buy underpowered phones, and the high-end phones will cost much more. Also, most users will keep their phones for 5 or 6 years (the same thing they currently do with their computers), and there will be much less money in the industry to fund the current rapid pace of research and development. Do you see yourself buying a $550 phone every two years? If so, read the scenario below.
Ok, so you go to the store and pickup at $550 smart phone. I go to Verizon and get the same phone for $200. Two years later I leave Verizon and pay a $130 penalty. My total cost is $330; I still end up paying less than you. If you get your phone for $550 and after 2 years you decide to renew your contract and buy the latest device, it will cost you another $550. So in two years, you would have paid a total of $1,100. While my total cost would be $400 if I also upgraded my phone.
Verizon is about to release the new Palm Pre Plus smart phone, and it is speculated that it will sell for about $150. If that is the case, my two year cost to upgrade will be $300. And your two year cost to upgrade will be $1,100. The point is, Verizon has been pricing their smart phones aggressively low, and have introduced a lot of buy-one-get-one-free deals. This is a boon for families. If you have a family of three or five, you could end up saving a lot of money. So beware of what you wish for.
@Thinker
The problem with your argument is that it doesn't account for the fact that the MSRP of phones is artificially inflated to support the ETF excuse used by service providers, for the purpose of locking people into guaranteed contracts. How do I know this? Just look at the iPod Touch. It costs $189 on a good day at Best Buy. How much is the iPhone? $499! What is different between the two? GSM radio chip, crappy phone-quality camera, a few circuits here and there, and potentially an FCC license. You can't tell me, with a straight face, that all of that adds up to over $300.
The bottom line is that the cell service providers are getting these phones a LOT cheaper than MSRP, and then using the MSRP to support their ETF shell game. The cell manufacturers go along with it because, what do they care, they end up making the same (or more) either way, so why go against what currently works? The ONLY ones getting screwed are the consumer.
If cell phone manufacturers had to compete in retail stores, rather than the cell service stores, they would have to compete directly with each other. If Apple can sell the iPhone for $299 and make a profit (and they could), then the rest of them can too.
As far as people buying phones less frequently and thus stifling technology innovation is concerned...if that logic were true, then we'd still be using Pentium computers clocked at 133MHz. The fact of the matter is, there are enough people every year looking for new computers that it creates a never-ending cycle of increased technology at similar or lower prices. The same would absolutely hold true for portable computers (or "smart phones" as some people like to call them).
@Hexydes
The actual cost of the phones is higher than you think.
If you are going to break your contract, don't sign it.
@Abe : what if you get ATT and for whatever reason you have to move to a rural area that ATT doesn't serve well? like say... San Francisco or NYC? Should keep the crappy service or should you bail and get a carrier that works better in that area?
@xtasi
I know that with Verizon, if you move to a place outside of the Verizon footprint, you can break contract with no ETF. In fact, there are many reasons you can break contract with no ETF. However, simply not liking the service is not good enough. It has to be a verifiable problem with the service that can not be resolved within a short reasonable timeframe.
Yet Google will charge you an ETF along with the ETF you'll pay tmobile if you get a N1. Adn thats fine with the FCC.
But if you dont want to be stuck on Verizon for 2 years get a 1 year contract.
As Keegandnab noticed late into a 2 year contract you'll actually pay less of an ETF then you will with Verizon's older policy ($175 even in the 23rd month).
"Big Read"
@Evan
Maybe they didn't proofred the article.
@Evan
That contract's a "Big Read".
End the device subsidy, and make it an extra charge with your bill. Want to terminate your contract? Zero ETF, but you're still paying off the device. Have your own device? Get a cheaper monthly plan.
It's a bunch of crap that people who already own phones have to pay the same monthly rate as people who are paying back the cost of their device.
@mullingitover basically what t-mobile is doing with the have your own device part.
@AwlAmericanDawg
And judging by Verizon's time to addition of T-mobile myFaves, something Verizon will do in 2015 or so.
I say if you pay 200 for a 500 dollar phone, you should have to pay a flat contract termination rate of 50-75 dollars plus 3 hundred for the subsidy.
The $10/mo drop off the $350 ETF was announced at the same time.
http://www.engadget.com/2009/11/04/verizon-looking-to-bump-early-termination-fee-to-350-on-advanc/
It should be $15/mo or $20/mo until the $350 is paid off. That would be more acceptable and an actual concession.
It should be a phone by phone basis have the ETF based on the model and price of phone at purchase date with it displayed on the reciept and contract stating that if you leave before XX date you must be XX amount to be released from contract.
The ETF should be 350 on phones where the device would have been at least $330 more with the manufacturer price paid; if it was less reduce the amount by that much.
For those free LG, Motorola, and Samsung phones on a contract usually cost about $220 something manufacturer price the etf should be no more than $130 since part of it is being paid by the monthly charges
ETF's are con trick.
The equipment is not avaliable other than though Verizon (generally crippled) and they charge either full MSRP or whatever they feel like.
NO ETF's.
This is a nice start for Verizon regaining good will with their customers, but their mandatory data plans on high end feature phones is by no means acceptable. Period.
Doesn't really matter to me though cause I'm switching to T-Mobile pre-paid when my contract is up. I'm just saying, it'd look better for them as a company to drop the mandatory data plans. A lot of people are gonna be really, really unhappy with that when they go to upgrade and they have to pay an extra $10-$30 a month or they have to get a piece of shit phone.
@kenny goo
Might wanna check with the other carriers. VZW isn't the only one requiring data on none 3g multimedia devices. Good luck with Tmo!
@jeeperman
The problem with Verizon is that they just raised their prices to ridiculous levels with this. It used to be that the mandatory unlimited messaging and data on a smart phone was $30 a month extra. Now the data itself is $30, and optional messaging is an extra $20.
If you want a decent feature phone, messaging is still $20, but you need to buy at least a 25MB a month data plan for $10, so it's the price you'd be getting for unlimited messaging and data before, but now the data isn't unlimited and you don't even have the option, it's mandatory.
On the smart phone prices they're identical to AT&T now, which charges $30 for data and $20 for messaging. T-Mobile data is $30 but their messaging is only $10, while Sprint is the best where their data is only $20 and their messaging is $10.
As for carriers putting mandatory data plans on non smart phones, I've seen all four carriers doing that with borderline feature phones, but Verizon has just made themselves easily the worst with it.
Gee...
Maybe Verizon having a problem getting FCC approval on new phones as of late.
That could make Verizon have a change of heart on the ETF"s