Cellular service users have been upset for years that the companies that give them their wireless connections often charge large fees if they break their contracts. Verizon Wireless (NYSE:VZ)(NYSE:VOD) has decided to charge a huge $350 penalty to some of its customers who walk away from their agreements.
The FCC is in the midst of an investigation about cellular break-up fees. The wave of consumer advocacy sweeping Washington makes the Verizon Wireless move particularly risky.
Verizon Wireless defended the charge to the FCC on December 19. “The higher early termination fee associated with Advanced Devices reflects the higher costs associated with offering those devices to consumers at attractive prices, the costs and risks of investing in the broadband network to support these devices, and other costs and risks,” Verizon wrote in a letter to the FCC. These handsets include the Blackberry from RIM (NASDAQ:RIMM) and the Motorola (NYSE:MOT) Droid.
Verizon’s action may bring down the wrath of both the FCC and members of Congress who looks at termination fees as another way that large phone companies unfairly take money from the pockets of subscribers. Analysts only need to look at the remarkably high profits that Verizon Wireless and AT&T (NYSE:T) make on their cellular divisions to support the argument that subscribers are already paying enough money for their services to help the largest phone companies hefty returns.
The FCC will almost certainly come after Verizon over the fees. The agency’s move will be popular with the public and Congress. A $350 fee is a very easy target.
Douglas A. McIntyre
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