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Verizon to ease termination fees

Wireless cancellation charges a longtime consumer gripe
By Bruce Myerson

The Associated Press

Updated: 3:25 p.m. MT June 28, 2006

NEW YORK - 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."
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URL: http://www.msnbc.msn.com/id/13600607/

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