Cellphone Contracts: Hard to Get off the Hook
Fed up with dropped calls and a string of defective cellphones, Corey Taylor said he became irate when he learned he'd have to pay $175 to get out of his long-term contract with Verizon Wireless. So he resorted to a rather extreme measure.
Context & Ripple Effects
By mid-2007 the American wireless market runs on a simple trade: subsidized phones in exchange for two-year commitments policed by early-termination fees — Verizon Wireless charges customers like Corey Taylor $175 to leave. The same carrier spent June 2007 staging all-day store events so shoppers could test drive what it markets as the nation's most reliable network, while locking up exclusive handsets such as LG's Chocolate.
That lock-in model sits inside a larger fight over control: in June 2007, AT&T and Verizon Wireless urged U.S. regulators to reject Google's proposal for mandatory resale of auctioned airwaves, framing openness mandates as the opposite of the carrier-controlled model. Taylor's $175 bill — arriving after dropped calls and defective phones, per the confirmed reporting — is the consumer-facing edge of that structure, and his unspecified "extreme measure" shows how far some customers feel pushed.
First-order effects
- Taylor and other dissatisfied Verizon Wireless subscribers face a $175 penalty that makes service complaints — dropped calls, defective phones — financially irrational to act on, keeping revenue with the carrier even when the product fails.
Second-order effects
- Rivals and entrants gain an opening to compete on exit terms rather than network slogans, and the carrier pushback against Google's airwaves-resale proposal becomes part of the same battle: whoever controls switching costs controls the market.
Third-order effects
- If defection friction keeps generating cases like Taylor's, the two-year-contract-plus-fee model invites regulatory attention alongside the open-access fight, and pressure builds toward shorter commitments — though whether carriers reform voluntarily or under mandate is unresolved.
The trend: Wireless competition is migrating from network-quality marketing toward the terms of the contract itself, with early-termination fees and open-access rules emerging as the next battleground between carriers and their customers.