FREE TO GO?
On the surface, it looks like small miracles do occur. I'm referring to Verizon Wireless's decision yesterday to offer lower termination fees to subscribers who wish to cancel their service before their contract is out. According to this AP story:
"Targeting a top gripe by cell phone users and breaking ranks again with its industry, Verizon Wireless plans to prorate the fee it charges subscribers who break a contract so they only pay an amount proportional to the time left on their agreements."
The company plans to implement this policy
"...this fall for all new customers and any Verizon Wireless subscribers who sign a new contract..."
In other words, for existing, loyal customers like yours truly, "NO EARLY TERMINATION FOR YOU!"
On the surface, this looks like putting almost $8.75billion of revenue at risk. That's the total amount of potential termination fees due the company, extrapolating from this tidbit in the AP article:
"About 50 million of Verizon Wireless' 53 million subscribers are under contract, and nearly all would face an early termination fee of $175 if they decided to change carriers or just close their accounts."
But given the pro-ration, and the high ranking of it's wireless services relative to competitors, the amount is likely to be much smaller.
Overall, it's a smart business strategy for Verizon Wireless, what with increasing push-back from customers across the country against this industry practice, as the AP piece outlines.
And as the AP piece points out, the company's move is designed to put more of the hurt on it's competitors than itself. This is due to the company's current record of having the best customer retention rate in the industry.
Finally, a nuanced benefit might be to encourage customers to try the latest phones and PDAs from Verizon, by rolling early from one contract to another.
The question now is how competitors react to this move, if at all.
DISCLOSURE: I hold shares in Verizon Wireless.
Comments