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Verizon's new ETF policy: full penalty for the first 7 months

New contracts for "advanced devices" will be subject to a modified ETF structure that sees, among other things, a $0 deduction for the first 7 months.
By
November 15, 2014
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Contracts are a binding agreement between you and your service provider. Contracts often have mutual benefits for both parties. Contracts can be broken… for a price. In the world of cellular service, there are two basic options for consumers: (1) spend a large sum of money and procure a new product either SIM-free/carrier unlocked, or (2) opt for a multi-year agreement with a mobile carrier and receive the desired device for a heavily subsidized cost. Recently companies have been offering a third option wherein a handset is $0 down with a monthly installment plan, though in this context the customer is actually paying full price for their smartphone or tablet. Any way you slice it, things are expensive.

Things are about to get even more expensive however, if Verizon Wireless has anything to do with it. Prior to November 14th, contracts worked like this: sign a two-year agreement, and each month the Early Termination Fee (ETF) would decrease by $10. From today onward, however, the ETF won’t begin to decrease for a full 7 months when purchasing so-called advanced devices. To be specific, months 1-7 will see zero reduction of the penalty, months 8-18 will warrant a $10/month decrease, months 19-23 will each garner a reduction of $20. Hit the final 24th and the final $60 will be eliminated.

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The full legal spiel is as follows:

If you cancel a line of Service, or if we cancel it for good cause, during its contract term, you’ll have to pay an early termination fee. If your contract term results from your purchase of an advanced device on or after November 14, 2014, your early termination fee will be $350, which will decline by: $10 per month in months 8–18, $20 per month in months 19–23, and $60 in the final month of your contract term. For other contract terms entered into on or after November 14, 2014, your early termination fee will be $175, which will decline by: $5 per month in months 8–18, $10 per month in months 19–23, and $30 in the final month of your contract term. If your contract results from your purchase of an advanced device prior to November 14, 2014, your early termination fee will be $350 minus $10 for each full month of your contract term that you complete. For other contract terms entered into prior to November 14, 2014, your early termination fee will be $175 minus $5 for each full month of your contract term that you complete.

Suffice to say this is a rather severe new system, to put it nicely. Clearly Verizon has figured out a way to better monetize its ETF penalty system as customers either switch networks or else seek to upgrade their devices at a faster pace. The disturbing thing is that for a company that actually lost customers earlier this year, this is either a brazen move to try and keep more from leaving in the future, or else just plain bad judgement. Or both.

While T-Mobile, AT&T, or Sprint have yet to react to this new policy publicly, now that one has instated something of this nature, it’s only a matter of time before the other three try something as well. All-in-all this scenario showcases the benefits of purchasing off-contract, if you can afford it, that is.