Verizon to double fee for early termination of FiOS service
Saturday, January 16, 2010
Verizon Communications said it will double the cancellation fees its charges customers of its FiOS Internet and television service, a move that critics say unfairly heaps hundreds of dollars of dubious penalties on subscribers even when they move or are unhappy with the service.
Beginning Sunday, Verizon will increase the early termination fee to $360 from $179 for customers who signed two-year contracts for new packages offering faster Internet speeds and more high-definition television channels. The company is offering discounts for those who sign up for long-term contracts and said it needed to raise cancellation fees to recover potential losses from those discounts.
The move comes amid increasing criticism of the industry by lawmakers and consumer groups, who say consumers are paying higher prices and getting hit with unexpected fees for cellphone, cable and Internet services.
"I am very concerned that these companies are heaping fees on people that don't have a relationship with costs to their business," said Sen. Amy Klobuchar (D-Minn.), who has introduced a bill that would cap contract cancellation fees for telecom service providers.
Verizon's move follows similar steps taken by major cellphone companies. Some customers who cancel service for their Google Nexus One smartphone, for example, could be charged as much as $550 in penalties by Google and partner T-Mobile.
In November, Verizon Wireless said it would more than double early cancellation fees on smartphone contracts to $350 to recover the costs of subsidizing the more expensive devices, a move that has sparked a Federal Communications Commission review.
In response to the FCC inquiry, Verizon Wireless said the increased fee also covered marketing costs and the cost of operating stores to sell those phones. That "raised more questions than answered them," said FCC Chairman Julius Genachowski.
Critics say customers shouldn't have to contribute to paying these costs.
Bobbi Henson, a spokeswoman for Verizon, said the penalties are explained upfront to new subscribers. She said the fee for Internet and television services "is calculated on expected profit from a customer's two-year commitment -- in other words, based on a predictable stream of revenue that helps us justify investment in customers."
The fee will be prorated at $15 a month and users can choose to get the bundled service without a long-term contract.