Saturday, December 19, 2009

Verizon Has More Greed Than Common Sense

Consumers like to walk away from bad prices and bad service

When you’re hell bent on angering your customers, always try to do it with a smile, not a sneer:

Verizon Wirelessdefended today its recent decision to double penalties for smart-phone customers who leave their contracts early, telling federal regulators that it needed to do so to keep up with the rising costs of mobile devices that it is subsidizes for its users. Starting Nov. 15, Verizion Wireless smart phone customers were charged $350 for cancelling their contracts early, compared to previous charges of $150.

The letter drew immediate criticism from consumer groups that said Verizon is unfairly charging consumers for costs unassociated with the phones. Such policies, they say, deter users from switching carriers even when they move to areas without service and can add up to hundreds of dollars of penalties for households that want to terminate service, even close to the end of their contracts.

In a 77-page letter to the Federal Communications Commission, the nation’s largest mobile phone service operator said it makes up the costs of subsidizing phones like the BlackBerry Storm and Droid through service fees in one- or two-year contracts. When customers leave for competitors like T-Mobile, Sprint Nextel or AT&T,Verizon argued, it suffers losses from the discounts given for smart devices.

And the ETF goes to recover other costs beyond the phone, Verizon said:

Contrary to the implication of the question, the ETF is not limited to the recovery of the wholesale cost of the device over the life of the contract. As explained in response to Question 4, the ETF partially compensates Verizon Wireless for all the costs and risks of providing service, which include advertising, commission, store costs, and network costs.

Those costs shouldn’t fall on the shoulders of its users, who aren’t buying their phones to pay for Verizon Wireless’ ad campaigns, consumer advocates said.

The thing is, these phones are wonderful and all, but they’re really money traps. You’re not paying for a super cool device. You’re paying through the nose to be connected to a spotty network with severe limitations and expensive data rates. There’s a reason why a kid in California can run up a ridiculously expensive bill just by downloading a gig and a half of data over the wrong phone—the networks cannot handle it, and the fees are just one way to soak people. On my Verizon FiOS connection, I can download a gig of data, any time and any day of the week, in mere minutes. What’s a gig of data? To me, it’s a momentary thing that happens in the background. To someone with the wrong kind of phone, it’s like signing over six months of salary. Something is seriously flat busted broken out there. It’s been going on for years—anything for a buck.

And what’s to blame? Well, the marketing aspect is partially to blame. The elitism that goes with having an iPhone has clearly put companies like Verizon on the defensive. They are now rushing to give consumers something that can compete with the iPhone, and the costs of marketing such a thing are hitting their profit margins. Instead of playing against the weakness of the iPhone, which prevents customers from having real choice, Verizon is now saying, ‘the cost of abandoning us is designed to spread a word of mouth that will ensure that no one will sign with us, because our draconian rules will scare customers into sticking with their iPhones.’

Networks are expensive. Why bother even going into the communications business, then? Well, if every major telecom company joined with their brethren, and built out one comprehensive network that everyone could use, coverage would expand to most Americans. Where these companies would have to compete is on customer service, quality, and price. That’s why they won’t do it. They want their enclosed networks, their outrageous cancellation fees, and their exclusivity. In reality, there’s one simple way they could provide the consumer with great service and fair prices, and that’s by shared infrastructure investment and cooperation. You’re more likely to see them hiring better customer service personnel. I once had a conversation with a man at Comcast cable who, in his smugness and disdain for me, let slip that I was a drop in the bucket. Comcast’s bucket has sprung a leak in my area—their customers have abandoned them for Verizon. Is that because Verizon is such great shakes? Of course not. It’s because Comcast became too nasty to continue to do business with. This is why Direct TV, Dish Network, and everyone else are seeing a backlash from consumers.

The draconian rules of having an iPhone have now been confronted with the draconian rules of signing up for whatever Verizon has to offer, and, dammit, you had better pay their price and sign over your choice to them. Common sense has always said, “give the people what they want.” If you can’t figure out how to make money from doing that, go out of business.

Leaving things open, and giving the consumers the best product that a company can field, has gone the way of the analog pager.

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