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early termination fee
pistolro1
Member

If you get an iphone 5 with a contract that is monthly, and want to cancel the phone, do you still have to pay an early termination fee, or no. If not, what is the different between getting it monthly and 2 year contracts, except for the prices. What is the point in getting it monthly then 2 year if you have to pay the early termination fee, anyways for either contracts.

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Re: early termination fee
silver6056
Sr. Member

pistolro1 wrote:

If you get an iphone 5 with a contract that is monthly, and want to cancel the phone, do you still have to pay an early termination fee, or no. If not, what is the different between getting it monthly and 2 year contracts, except for the prices. What is the point in getting it monthly then 2 year if you have to pay the early termination fee, anyways for either contracts.

"Month to Month" isn't really a contract.  You just pay each month and can stop at any time, so no early termination fee.

With the two year contract, you get the phone at a subsidized price, and you pay an ETF if you cancel the contract early.

(The "standard" explanation for this is that the carriers need to recoup the subsidy, which they do over the life of the contract.  If you quit early, they haven't got the subsidy back, and so need an ETF.   The explanation breaks down because monthly charges are not reduced for customers who bring their own devices, or once the contract ends)

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Re: early termination fee
LuvMyLabs
Novice

I don't believe there is an early termination fee with a month by month with verizon. But...imo, a month by month would leave a person vulnerable to having the plan changed anytime verizon feels like it as you would not be in contract. Which is one of the reasons I would not pay full price for a verizon phone.

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Re: early termination fee
rcschnoor
Sr. Leader
Sr. Leader

silver6056 wrote:

The explanation breaks down because monthly charges are not reduced for customers who bring their own devices, or once the contract ends)

I don't see that it breaks down. Bottom line is you receive a benefit for being under contract, that benefit being a several hundred dollar subsidy, in exchange for "promising" to stick with Verizon for a specified time period.

Why should Verizon give additional benefits to customers who can leave at any time without consequence?

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Re: early termination fee
silver6056
Sr. Member

rcschnoor wrote:

silver6056 wrote:

The explanation breaks down because monthly charges are not reduced for customers who bring their own devices, or once the contract ends)

I don't see that it breaks down. Bottom line is you receive a benefit for being under contract, that benefit being a several hundred dollar subsidy, in exchange for "promising" to stick with Verizon for a specified time period.

Why should Verizon give additional benefits to customers who can leave at any time without consequence?

Well, what happens after the contract ends, and I stay month to month.  The subsidy has been repaid, so, if $X of my previous 24 month charge was to repay the subsidy (which is at least part of the claim of the need for ETF) maybe my monthly bill should go down by $X.  Or if I bring my own device in the first place, I still pay the same monthly charge.

It MIGHT make more sense if the contracts were like some other types, where the point of the contract is to guarantee stable pricing for the length of the contract, and after that there is no month to month, you need to sign a new contract at new rates.   But this doesn't happen either.

Of the big carriers, only T-mobile reduces the monthly charge for those using non-subsidized devices, and there you DO still need a contract so that the carrier gets a guaranteed period in return for a reduced rate.

So my comment about "breaking down" was just the often stated reasons don't really correspond to reality, not that it isn't a good business decision by Verizon.

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Re: early termination fee
rcschnoor
Sr. Leader
Sr. Leader

silver6056 wrote:

Well, what happens after the contract ends, and I stay month to month.  The subsidy has been repaid, so, if $X of my previous 24 month charge was to repay the subsidy (which is at least part of the claim of the need for ETF) maybe my monthly bill should go down by $X.  Or if I bring my own device in the first place, I still pay the same monthly charge.

It isn't necessarily that $X of your previous 24 month charge was to repay the subsidy. You received the subsidy because you signed on for a 2yr period. That is guaranteed revenue for Verizon for a 2yr period, unless you pay a penalty. That is why you are being rewarded. Yes, a month to month customer is paying the same amount, but they can leave at any time without consequence. THEIR revenue is not guaranteed and can stop at any time without penalty.

EDIT:

silver6056 wrote:

Of the big carriers, only T-mobile reduces the monthly charge for those using non-subsidized devices, and there you DO still need a contract so that the carrier gets a guaranteed period in return for a reduced rate.

In essence, Verizon is just giving you a reduced rate in exchange for signing a contract, it just so happens that your entire savings is realized on the front end instead of over the period of the contract.

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Re: early termination fee
silver6056
Sr. Member

rcschnoor wrote:

silver6056 wrote:

Well, what happens after the contract ends, and I stay month to month.  The subsidy has been repaid, so, if $X of my previous 24 month charge was to repay the subsidy (which is at least part of the claim of the need for ETF) maybe my monthly bill should go down by $X.  Or if I bring my own device in the first place, I still pay the same monthly charge.

It isn't necessarily that $X of your previous 24 month charge was to repay the subsidy. You received the subsidy because you signed on for a 2yr period. That is guaranteed revenue for Verizon for a 2yr period, unless you pay a penalty. That is why you are being rewarded. Yes, a month to month customer is paying the same amount, but they can leave at any time without consequence. THEIR revenue is not guaranteed and can stop at any time without penalty.

Yes, that is one view, the other, more commonly stated in my experience, is that is repaying a subsidy.   Checking now, it appears that Verizon gives no explanation, just that an ETF fee will apply, perhaps to avoid fueling these types of discussions!

The distinction becomes more acute now that (some) people are paying full retail to keep unlimited data.  I suspect that some of us would be willing to sign 2-year contracts to get a lower monthly charge when we have not got a subsidy on the equipment (i.e. the T-mobile approach)

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Re: early termination fee
rcschnoor
Sr. Leader
Sr. Leader

silver6056 wrote:

The distinction becomes more acute now that (some) people are paying full retail to keep unlimited data.  I suspect that some of us would be willing to sign 2-year contracts to get a lower monthly charge when we have not got a subsidy on the equipment (i.e. the T-mobile approach)

Then you would be negating the reason for purchasing a phone at full retail, because you will lose unlimited when you sign a 2yr contract.

Additionally, you may be willing, but Verizon does not offer lower monthly charges in this manner.

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Re: early termination fee
silver6056
Sr. Member

rcschnoor wrote:

silver6056 wrote:

The distinction becomes more acute now that (some) people are paying full retail to keep unlimited data.  I suspect that some of us would be willing to sign 2-year contracts to get a lower monthly charge when we have not got a subsidy on the equipment (i.e. the T-mobile approach)

Then you would be negating the reason for purchasing a phone at full retail, because you will lose unlimited when you sign a 2yr contract.

Additionally, you may be willing, but Verizon does not offer lower monthly charges in this manner.

Mmm, yes.  I thought it was (very) clear that I knew it didn't exist on Verizon, and that I was suggesting that IF such an arrangement existed, it would find some takers. 

And of course it is predicated that that sort of contract would not lose unlimited (perhaps because the total savings is less than the current subsidy for example).

More to the point, Verizon is unlikely to do anything to promote continued use of unlimited, so I am not holding my breath

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Re: early termination fee
Not applicable

LuvMyLabs wrote:

I don't believe there is an early termination fee with a month by month with verizon. But...imo, a month by month would leave a person vulnerable to having the plan changed anytime verizon feels like it as you would not be in contract. Which is one of the reasons I would not pay full price for a verizon phone.

When you're on month to month you're not under contract so of curse there isn't a ETF. And yes if your're not under contract you are subject to any changes Verizon wants to make. On the flip side you're also free to leave Verizon for another carrier any time you want if you don't like the changes.