Verizon Wireless said it increased its early termination fee (ETF) last month to reflect the substantially higher costs and risks the company faces when subscribers buying heavily subsidized smartphones and other advanced mobile devices exit two-year contracts early. The wireless carrier plus told the Federal Communications Commission on Friday that ETFs help promote the commission’s goal of fostering greater adoption and use of mobile broadband services.

“By reducing up-front costs to consumers, that pricing lowers the barriers to consumers to obtaining mobile broadband devices,” Verizon Senior Vice President Kathleen Grillo wrote in a letter to the FCC. “It thus enables many more consumers, including those of more limited means, access to a range of exciting, state-of-the art broadband services and capabilities.”

Offsetting Costs And Risks

The commission’s inquiry was prompted in major part by Sen. Amy Klobuchar (D-MN), who urged FCC Chairman Julius Genachowski to review Verizon’s ETF boost.

“Verizon Wireless’ decision shows

us once again that the wireless industry cannot police itself and will not, on its own, form its practices more competitive and consumer-friendly,” Klobuchar noted. Though Verizon has agreed to prorate the new ETF by $10 a month, “under the company’s new plan the penalty for leaving the contact halfway through a two-year contract would be $230 — still higher than the $175 ETF Verizon Wireless previously charged for these phones,” she added.

Grillo countered by saying the carrier’s new ETF reflects the real-world costs associated with offering advanced devices to consumers “at appealing prices,” together with the costs and risks of investing in the broadband network to support these devices as well as other costs and risks.

“The difference amoung the amount Verizon pays manufacturers for the device and the price it charges to customers on term contracts is more than twice as large for advanced devices,” Grillo wrote….

Original post by dhiram