Wireless Telecom Expense Management: Understand Verizon Wireless’ New Termination Penalty
Verizon Wireless recently announced that it will double its early termination penalties from $175 to $350. You need to understand the implications for your comprehensive telecom expense management program.
First, let’s understand the details of the offer… Verizon’s new policy is that your cancellation fee starts at $350 and decreases by $10 per month for each month of service. The typical contract term is 24 months, so in month 23, you would have reduced your Verizon Wireless Early Termination Penalty (ETP) by $230, to $120. The old Verizon ETP started at $175 and dropped by $5 each month.
On the surface, you might say that while Verizon Wireless ETP is worse at first, as long as you keep your account for a while, they’re about the same. Let’s take a look at how this affects users who want to leave…
In the old early termination plan, a VZW subscriber typically had to pay around 2 months of service to cancel immediately (we’re assuming a $90 monthly voice and data service plan). After one year, the ETP is approximately one month of service.
Under the new ETP, a Verizon Wireless subscriber will have to pay 4 months of service to cancel from the start of their plan. At the one year mark, the ETP drops to $230, or 2 1/2 months of our $90 service plan. Therefore, Verizon Wireless increased the early termination penalty by nearly 150% for a one-year subscriber.
Will Verizon end up keeping customers longer with this new program? Maybe. But they are also likely to drive away a lot of customers. Verizon Wireless probably believes that consumers don’t really focus on the cancellation component of the plans they are considering. That’s probably true when carriers have similar policies, but this is a big difference from other wireless carriers. Unless AT&T, Sprint and T-Mobile do the same, Verizon Wireless may find that they have fooled themselves.
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