FCC responds to Verizon’s letter

Verizon Wireless continues to face government pressure regarding its smartphone early termination fee, which was recently raised from $175 to $350. The FCC Commissioner Mignon Clyburnhas written the company a harsh open letter.

Consumers already pay high monthly fees for voice and data designed to cover the costs of doing business,” Clyburn wrote in the letter. “So when they are assessed excessive penalties, especially when they are near the end of their contract term, it is hard for me to believe that the public interest is being well served.

Late last week, VZW responded to the FCC’s criticism, with the company issuing the following statement: “This pricing structure enables Verizon Wireless to offer wireless devices at a substantial discount from their full retail price,” Verizon wrote in its letter to the FCC. “By reducing up-front costs to consumers, this pricing lowers the barriers to consumers to obtaining mobile broadband devices. It thus enables more consumers, including those of more limited means, access to a range of exciting, state-of-the-art broadband services and capabilities.”

Verizon previously said consumers always have the option of purchasing a smartphone without the subscriber subsidizing the cost of the phone — but very few consumers elect to pay the entire phone cost. Furthermore, Clyburn is dissatisfied that ETFs paid by subscribers also can be distributed for retail store operation costs and advertising.

The math, according to the FCC, never truly added up: “It appears that if a customer cancels a two-year contract after 23 months, the customer would still owe an ETF of $120,” a letter to Verizon from the FCC notes. “Is this correct? If the ETF is meant to recoup the wholesale cost of the phone over the life of the contract, why does a $120 ETF apply?”

Consumers have become fed up with hidden fees, rising prices, and additional shenanigans the wireless companies have been able to get away with the past few years. Even though it will likely be quite some time before anything significant happens, it’s nice to see the FCC finally launch a formal investigation into VZW, AT&T, Sprint-Nextel, and T-Mobile.