Verizon Announces Monthly Plans With No Early Termination Fees

Facing increased pressure from consumers and lawmakers alike, Verizon has announced that they will begin offering monthly cellphone plans with no early termination fees. Consumers wishing to take advantage of the plans will be required to pay full price for a phone, or provide their own phone, as Verizon will not be subsidizing the cost of handsets.

A spokesperson did confirm, however, the monthly members will pay the same rate as contract customers. If you’re already a Verizon customer, you can switch to the monthly plan after your current contract is up.

From Bloomberg:

Verizon, which made about half of its $24.1 billion in revenue last quarter from wireless service, agreed in July to resolve a consumer lawsuit over early cancellation fees by paying a $21 million settlement. The agreement covered contracts that had a flat-rate cancellation fee and were issued before Verizon Wireless introduced a declining-fee structure in 2006.

Verizon’s termination fees start at $175 and decline $5 for every month a user stays with the contract after 30 days. Customers can cancel for free in the first 30 days, Raney said.


Verizon Offers Monthly Plan With No Termination Fees (Update2)
[Bloomberg]

Comments

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  1. bikeoid says:

    So much for the argument that ridiculous Early Termination Fees are required to pay back the subsidized cost of the cell phone. Otherwise one would expect the Month-to-Month Monthly fees to be lower than under a contract.

    But I can see that some ETF would be required to cover the cost of a cell phone subsidy in a short period.

    • mugsywwiii says:

      @bikeoid:
      Prices are not based on the cost of providing the service, so your reasoning is fallacious.

      Promotional prices on phones are a marketing tool intended to secure you as a customer for an extended period of time. Early termination fees are intended to make you pay back the subsidy if you don’t hold up your end of the bargain.

    • @bikeoid: The argument still holds true. Now they’re not subsidizing phones, so there’s no need for an ETF.

      If they were subsidizing phones, there would be an ETF. It’s that simple.

  2. chemmy says:

    Wasn’t this kinda already in place? I mean… when your contract expired, you went month-month anyway and didn’t have any ETF’s…. And they subsidized your handset….

    It’s the same… only different.

    • socalrob of the 24 and a half century says:

      @chemmy:
      Yeah but when you left the contract you had a phone that was 1 or 2 years old and probably going out. To get a new subsidized phone you had to get a new contract.

      I haven’t had a contract with AT&T for almost a year now, and now that I need a new phone I had the choice of a 2 year contract or just buy a phone off of ebay. I chose the ebay route.

  3. carlogesualdo says:

    Why was this so hard to figure out? Buy a phone at full price and have phone service without a contract. Duh.

  4. Skankingmike says:

    i don’t know if it’s just me or what, but I don’t understand, you signed up for a contract yet you don’t want early termination fees? well why did you sign up for a contract that stipulates all these?

    This is just stupid and a waste which I’m sure I’ll end up paying for with new fees.

    • johnnya2 says:

      @Skankingmike: Because you were REQUIRED to have a contract with the company as opposed to be willing to pay each month for what you need and want. TMOBILE has had this in place for a while. With TMOBILE you can buy an unlocked phone on EBAY and then pay $20 for a SIM card and change providers or use yoru phone overseas.

  5. I love getting phones for free, but the contracts are kind of annoying. This is a great sign though. I jsut wonder if Verizon thought abotu what they’re doing, once people find out they don’t need a contract, then it will become standard for people not to want one.

    • mugsywwiii says:

      @AbstractConcept:
      When people realize how much unsubsidized phones cost, they’ll want a contract. Honestly, the contract makes the most sense for most people. How often do you need to change your cell phone provider?

      • rugman11 says:

        @mugsywwiii: Seriously. Having sold cell phones for several years (though, no longer) the only thing the vast majority of people care about when they’re signing up for cell service is “how much will this cost me today?” We’ve created a culture where people think an expensive phone (not of the smart phone variety) costs about $100. Once they figure out that the only reason the phone costs that little is because the carrier is giving them a $200 subsidy for signing up on the contract, they’ll still end up on the contract. People would rather get locked in to the same service provider for two years rather than have to spend an extra $200 for their phone.

  6. sashazur says:

    Even before this change, Verizon (and I think any other wireless provider as well), would put you on a monthly plan without a contract automatically, after your contract expired. The only new thing is that now you can do it without having to even get a contract to begin with.

    The only caveat I can see in all of this is that you better be careful if buying a new phone that you don’t end up sucked into a new contract.

  7. Ihaveasmartpuppy says:

    I cannot understand why cell phones were ever sold with contracts anyway. My land line isn’t sold that way (yes, DH insists on keeping it), buy the phone and get service from the phone company. How about a furnace? Buy it, have the gas company provide the service. Duh. You want a phone that works on the T-Mobile network? Buy one that does, then get service from them. Duh. Maybe that’s why I use pay as you go cell phones…

    • rugman11 says:

      @Ihaveasmartpuppy: Cell phone providers used contracts as a way of subsidizing the cost of their expensive equipment. It’s the same thing that a lot of cable companies do where they’ll offer you a discounted rate for x number of months in exchange for you signing a contract for x number of months. In this case, the companies give you $200 (or $150) off the initial cost of the phone. Obviously, should you cancel the contract, they want their subsidy back. It also works this way because the service providers are also the primary providers of the equipment. Landline providers don’t need to subsidize the cost of a phone because you can get one at WalMart for $10. For the longest time, cell phones didn’t have that luxury. Now that you can pick up CDMA or GSM phones for cheap, I expect to see this sort of thing becoming a trend.

  8. snoop-blog says:

    I wonder what this will do to their customer retention? I foresee a large amount of impatient upset customers threatening CSR’s to “switch” if their demands aren’t met…

    and I also foresee a lot of those people switching to another service provider only to repeat the process over and over again. That is providing other carriers do away with etf’s.

  9. snoop-blog says:

    Why is my name on the left side? Doesn’t tha Consumerist kno I only rock it on the ‘west side’?

  10. snoop-blog says:

    okay, sorry for three consecutive post’s, but I’m all confused now. Have they changed things again since yesterday?

  11. wallspray says:

    Am I the only one who doesn’t mind signing the contract as long as I get a free phone, or a large chunk of the price slashed? I mean it’s not like I am not going to want a cell phone at any point in the next two years. Why not sign the contract, get a free phone, and not worry about it? Have you seen the retail price of those phones? Its like $450 for any phone with features. Why would I want to pay that much for a phone that most likely can not work on another carrier just so I can go month to month?

    • kairi2 says:

      @wallspray: I used to feel the same way, until I moved to an area with 1-bar coverage with over a year left in my contract. So far, my carrier has ensured me that this is my problem (*ahem* T-Mobile).

  12. dieselman8 says:

    Wow. What I want to know is where the hell you’re going to buy phone to use on Verizon’s network without buying one from Verizon.

    You can’t use just any old “unlocked” phone on Verizon’s network because they don’t support SIM cards or GSM phones that are readily available anywhere these days.

    • mugsywwiii says:

      @dieselman8:
      Of course you can’t use any old “unlocked” GSM phone on Verizon’s CDMA network. You need a CDMA phone. It’s not as if Verizon is the only company that uses or sells CDMA phones.

  13. pecan 3.14159265 says:

    @wallspray: No, I’m with you there. I don’t mind the contract. It’s something I’ve researched, and invested myself in – getting the discount on the phone is just one of the benefits. If you’re keeping a cell phone as your main line of communication, I don’t see why a contract is a problem, unless you really want to abandon your cell phone as soon as another service has a better deal.

  14. nobodyman says:

    This is a good start but still seems like a bad deal. The reason why they had contracts in the first place was to make up the subsidized cost of the phone by paying inflated monthly charges. Under this new deal you have to pay full price for the phone, yet you still pay the same inflated monthly amount.

    If I’m fronting the full cost of the phone, shouldn’t I be getting a discount on the monthly charges?

  15. dragonfire81 says:

    Bear in mind folks, while there is no 2-year term on these plans, you still have to AGREE to a service contract with Verizon, which includes the clauses with binding arbitration if you want to use their services.

    Don’t think you can go on one of these plans and later sue them when something goes wrong because you are “not under contract”. When you use the services, you agree to the terms. The difference is now there is not minimum timeframe.

  16. ValerieLeda says:

    The problem with the contracts isn’t at the beginning, when you get your phone. It happens years down the line, when they imply your consent to sign a new contract at any point when you change anything on your plan. I was stuck with ETF when I left them after 6 years of service, because 9 months earlier I had added features to my plan. I was told later that in my initial contract there was a clause stating that they could sign a new contract for me at any time without informing me. THAT’s the problem.

  17. Interesting. Our family contract is up on 11/10/09, and we’ve been getting mailings from Verizon almost every other day for a week, offering $50 a new phone or 2400 free anytime minutes if we sign a new 2-yr. contract. I think we may just switch to a pay-as-you-go plan. The lowest cost family plan costs $69.95/month for 2 lines sharing 700 minutes. We don’t even hit 200 minutes. Add the additional fees, and it is almost $100/month cell phone bill.
    They just keep adding more and more crap (Rhapsody, VZW, etc.). I don’t want more stuff, I just want to make and receive phone calls.

    • theblackdog says:

      @Sir Winston Thriller: Don’t bother with the extra minutes, all they will do is give you 100 extra minutes per month, and they don’t carry over into the next month.

      I ultimately went with the $50 off, which with a few other discounts made my new Motorola Adventure free :-D

    • pecan 3.14159265 says:

      @Sir Winston Thriller: I see your point, and I considered this myself (being on the 700-minute plan) but the costs just don’t justify the pre-pay plan. The very lowest plan is .99 cents a day per line, which is already $30 a month. Then they charge 10 cents a call to anyone not on the Verizon network. I talk to my parents every couple of days and they’re not on Verizon. Even if I spoke to them every three or four days and only for 20 minutes each time (we’ll say a total of 200 minutes a month), that would be $20. So already, I’ve got $50 and this doesn’t count talking to friends, being on the phone with customer service, etc. Your situation is entirely different, I understand, but my husband and I don’t even crack 300 minutes between the two of us – it’s just that it’s cheaper per minute to pay for 700 and not use all of them, than to pay for however many at a more expensive rate.

      And you don’t need to buy a phone with Rhapsody or VZW, those are all optional. I have an LG chocolate and all I use it for is making phone calls and sending text messages.

  18. BeastMD says:

    You could buy a new or used phone on ebay. I have used ebay several times and it works great.

  19. They may have figured out that after spending good money on a Verizon-locked phone you wouldn’t break the contract anyway.

  20. ATTSlave says:

    One catch is being on the month to month plan you are not eligible for any employee or government discounts. For example if I worked for Home Depot I would be eligible for the 25% discount on the primary line of my plan. So if I was on a family plan with 700 minutes which is $60 a month on the primary line I would lose out on $360 worth of savings over the course of 24 months which would have been my contract term. And also Verizon does not compensate their employees or indirects for the sale. I think an indirect makes about $200 on a new line. So all in all this is very smart on Verizon’s part as a way to save money.