Friday, December 25, 2009

Verizon Responds to Consumer Complaints

A few weeks ago, I wrote about two particularly nasty Verizon Wireless practices. First, Verizon doubled the early-cancellation fee for smartphones, the price you pay for canceling before your two-year contract is up (it's now $350).

Second, I passed along a note from a Verizon whistleblower who identified a really outrageous Verizon profit center: if you accidentally hit one of the arrow keys on your Verizon cellphone (which come premapped to various Verizon Internet functions), you're charged $2 instantaneously, even if you cancel instantly. (Verizon confirms that on many models, you can't remap those buttons to other functions even if you're tech-savvy enough to try.)

To my delight, the F.C.C. got on the case, even citing my original post. It formally asked Verizon for some answers about both issues.

Verizon hemmed, hawed, asked for an extension on the deadline, and finally responded on Friday. You can read the entire outrageous document here here.

Why is it outrageous? Because basically it denies everything. It says, in essence, "We've doubled the cancellation fee because we felt like it," and "We don't charge those $2 accidental-Internet fees. You must be mistaken."

O.K. Let's take these one by one.

First of all, Verizon explains the doubled cancellation fees like this: "Verizon Wireless incurs additional costs to sign up customers, such as advertising costs, commissions for sales personnel, and store costs. These costs are higher for Advanced Devices."

Huh? It costs more to advertise a BlackBerry than a regular flip phone?

Verizon also says that the higher fees help to recoup its expenses for building up its data network. Yet no other other carrier has felt the need to double the fee.

Here's what really gets me, though. Verizon justifies early-cancellation fees by noting the huge gap between a customer's purchase price and a phone's real cost. For example, you might pay $200 for a BlackBerry that, on the open market, would cost $500. Over your two-year contract, you're paying Verizon back the rest of the full price. That's how the American cellphone industry works.

O.K., great. We're with you so far.

But if I were the F.C.C., I'd have two big questions about this:

1. How come our monthly bills don't drop at the end of two years, once we've fully paid for the phone?

2. Verizon says that we, the customers, can avoid the early-cancellation penalty if we're willing to pay the full retail price of the phone up front ($500 or whatever). Fine. But then why do we have to pay the same monthly fee as somebody who got the discounted price?

What are we missing here?

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