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FCC Wants to Know Why Verizon Increased Termination Fees

Updated with Verizon's response: The Federal Communications Commission wants to know why Verizon decided to double its early termination fee (ETF) for new customers who sign on to the wireless service using advanced devices...longhand for smartphones.

GigaOM Om Malik

Context & Ripple Effects

The inquiry lands mid-Droid-launch: Verizon has spent November promoting the [[a:none|Google-powered Droid]] against the iPhone in TV ads while stating it will not offer free tethering on the device, so smartphones are squarely the growth engine it is defending.

The move also fits a newly assertive FCC under Julius Genachowski — days earlier the agency confirmed work on white-space databases for broadband between TV signals, and an unconfirmed account circulating at the time held that the commission vowed a new approach after its CableCARD mandate fell short.

First-order effects

  • New Verizon customers signing up with smartphones face a doubled early termination fee — roughly $350 — raising the cost of leaving the carrier precisely when the Droid push is trying to win switchers.
  • The FCC's letter forces Verizon to justify the increase publicly rather than let it pass as routine pricing.

Second-order effects

  • Raising exit costs shifts more of each subsidized smartphone's payback onto locked-in subscribers, sharpening the trade-off for buyers weighing the Droid against the iPhone on total contract cost rather than sticker price.
  • Other carriers now price their own termination fees knowing a regulator has flagged steep hikes as fair game for inquiry — any rival matching Verizon's number invites the same scrutiny.

Third-order effects

  • If inquiries like this become routine, wireless termination fees evolve from a quiet revenue line into a regulated battleground, with the FCC positioned as an active check on carrier pricing power in the smartphone era.

The trend: Smartphone economics are pulling carriers toward deeper contract lock-in just as the FCC begins policing consumer-facing wireless fees.

Related: FCC · Verizon