FCC examines Verizon's doubling of early termination fees

PC World - The Federal Communications Commission is asking Verizon Wireless to explain why it recently doubled early termination fees for its customers.

The company has until Dec. 17 to explain the rationale behind the higher fees.

The inquiry comes after U.S. Sen. Amy Klobuchar, D-Minn., introduced a bill that would curb the penalties customers are required to pay for early cancellation of a wireless contract.

On Nov. 15, Verizon raised the early termination fee for "advanced devices" to $350, from $175 earlier.

In previous statements, Verizon has said the increased cost of subsidizing handset prices made it more expensive for the company when customers depart before their contracts are up, justifying the fee increase.

The FCC made its request Friday in a sharply worded letter to the wireless carrier, specifically questioning how the new ETF is prorated over the life of the customer agreement.

"It appears that if a customer cancels a two-year contract after 23 months, the customer would still owe an ETF of $120. 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?" the commission asked.

The letter asks a number of questions as to how customers would know about the ETF and other business practices without reading the actual Verizon agreement, seeming to say that pricing issues are too important to be left to the fine print.

The commission has already begun an inquiry into ETFs as well as into how carriers disclose contract terms to customers. Verizon's response will become part of both proceedings.

Here is another sample of the questions posted in the four-page letter:

"What information about the higher ETF does Verizon Wireless provide to prospective customers, and when? How do consumers know whether the increased ETF applies to the device and service plan they would like to purchase?

"Please provide a description of whether or how a customer seeking to sign up for Verizon Wireless service by first selecting a device or service plan on the Verizon Wireless website would be able to find out about the levels and terms and conditions of the ETF, other than by calling up the formal Customer Agreement accessible in small type at the bottom of the web page.

"Please also provide a detailed description of how consumers receive relevant information across other retail sales channels, including retail outlets and sales made over the phone (if applicable). Please describe the format in which this information is presented, and provide sample materials."

The commission also asks about $1.99 Internet access fees that consumers might accidentally incur.