An allegedly authentic internal Verizon memo leaked to various websites just prior to Christmas supposedly contained a number of proposed changes to Verizon’s FiOS pricing structure as well as to some of details regarding their FiOS offerings. The biggest point of contention seems to revolve around allegedly steep increase in early termination fees (ETF) for existing Verizon FiOS customers, but some posters have also vented about increases to monthly plans. While none of these potential rate hikes have been officially confirmed by Verizon, and thus is not easy to analyze honestly, the eruption of angry posts across the Internet seems to be worth analyzing since it certainly is real.
Analyzing the Analysis
News outlets of all kinds have a tendency to see things through a polarized lens; nearly everything they discuss or report on tends to be exaggerated in some way to prove their point, often in a fashion that would be consistent with the beliefs and feelings of their viewership. Since few consumers would jump for joy at the prospect of higher ETFs, the logical position to take would be that of one against the ETFs.
Is the anti-Verizon point of view the only position to take? Certainly not, but it is almost impossible to take as extreme a stance on the other side without seeming like a corporate mouthpiece. Looking at the situation in a less polarized manner might produce rational discussion and intelligent decision making. This process should start with dispelling the rumors and myths that polarized reporting has fostered.
Misleading Notion #1: Verizon is Scared to Lose Customers
One of the most common misleading notions is the theory that Verizon is simply trying to keep customers versus compete on equal footing. This is a shortsighted view, as companies need to think in terms of years and decades. With contracts lasting up to a year, and consumers being off the hook without paying an ETF, this particular notion seems lacking in the logic department. Additionally, it would be hard to say that Verizon’s FiOS services are not extremely competitive. Verizon’s FiOS network makes use of system-wide fiber optics, which has resulted in a high performance network that provides ultra-broadband performance that is extremely competitive. In fact, Verizon recently took steps to take its network to the next level in terms of performance. So, the implication that Verizon is scared that FiOS is not competitive does not appear to have any factual basis.
Misleading Notion #2: Verizon’s Alleged Upcoming FiOS Price Increases Will Drive Customers Away
Unfortunately, there are too many markets to completely analyze the financial aspects of such a claim in an intelligent manner, but the fact is that all of the fields that FiOS competes in are highly competitive: digital cable, broadband, and digital telephone services. Prices fluctuate on a per-market basis as well as on a national scale, but it is fair to suggest that Verizon knows that it cannot price their offerings without consideration for market value. Using high-ETFs as a way to trap consumers is a recipe for a major law suit, and that is certainly something that Verizon would not want to be embroiled in. The publicity would be bad, and a settlement or judgment would likely cause them to lose money in the long run. In short, the argument of ETFs trapping customers is almost assuredly bunk.
Misleading Notion #3: Verizon Customers Moving to Non-Verizon Serviced Areas Will be Forced to Pay the New ETF
Most contracts and service agreements let consumers cancel their agreement and end their obligation without paying ETFs if they can satisfactorily prove that they have moved out of a service region. This is an industry standard, and is probably based on a complex series of laws that once again reinforce just how important it is from a financial and brand-image standpoint for companies such as Verizon to behave in a forthwith manner.
Misleading Notion #4: New ETFs Will Affect Older Agreements
Section 3 of Verizon’s own Terms of Service (ToS) agreement requires the company to provide 30-days notice before any policy changes take effect. A month is plenty of time for customers to cancel their service, and Section 9.2 of the ToS can be read to suggest that customers are locked into the ETF that was listed in their most recent contract. Whether or not this is a valid legal reading of the ToS is questionable, but it would certainly be worth calling Verizon and inquiring about further. Either way, it seems that there is probably a case for an argument to be made in regards to new ETFs not applying to previous agreements, at least not without warning.
A good question raised by this would be: if Verizon does reserve the right to change ETFs with a month’s notice, can customers use the new ETF as a justification for canceling their service and not paying their ETFs? This scenario seems unlikely, but at the minimum, it would at least ensure that customers had a month or so to find new service.
Speculating Logically
While it is very easy to look at the problem from the consumer side, what about looking at the prospect of raising rates from the perspective of a company such as Verizon. Verizon is a publicly traded company (NYSE:VZ) with literally hundreds of thousands of employees in its various departments and units. Unfortunately, a breakdown on how many employees work directly or indirectly for Verizon’s FiOS-related departments is not readily available, but it is likely to be a very high number. These two facts are very important for different reasons.
The fact that Verizon is publicly traded means that it has to answer to the needs and wants of shareholders, and is not necessarily free to embark on ill-conceived courses without running the risk of having its corporate head lopped in a shareholder revolt. Senior executives would be replaced, and the actions that caused such a revolt would likely be corrected. Even with this fear factor in place, Verizon could probably stand to gain more from having a higher stock value more than it would from raising their early termination fees. Lower stock value and higher ETFs is certainly not a desirable position for Verizon, especially in the midst of a recession Executives have plenty of incentive to try to make money for the company and its shareholders, but they also know the value of restraint, especially in these politically charged times when corporate schemes and machinations are exposed and often blown out of all proportion by the media. In short, Verizon does need to make money, but it must go about this quest in an honest fashion or risk serious repercussions.
Additionally, Verizon is responsible for and to their massive employee base as well as hundreds of thousands of other individuals and businesses that rely on Verizon and its employees indirectly for a portion of their income. Verizon cannot pay its bills if Verizon customers leave by the hundreds or thousands, even if the current economic crisis makes justifying entertainment expenses somewhat difficult for many consumers. Therefore, it is safe to say that Verizon has a reasonable right to expect that customers fulfill their end of their agreements in order for Verizon to fulfill their own obligations, and for Verizon’s employees to stay employees and capable of spending money that drives the economy. Instead of trying to go about this in a decidedly deceptive manner, chances are that Verizon will instead consider using higher ETFs only on new accounts in an attempt to secure customers that will help them meet their own financial obligations. In turn, this would allow Verizon to better plan their purchasing and spending patterns for the future. Many jobs rely on those estimates, as does the interest of Wall Street.
Wrapping Things Up
The alleged leak of internal memos is always questionable, particularly when it is followed by scathing indictments. The alleged memo could be a fabrication from a Photoshop-savvy jaded former-Verizon consumer, or it could be a corporate ploy to test the waters of public opinion. There are a million other possible explanations for the alleged memo, but the one thing that the Verizon memo is not is ‘official’ at this time. In a week or so the truth should come out, but even in the worst case scenario, all that is being seen is a company trying to do what it can to survive and remain profitable in times of economic turbulence and uncertainty. While it is true that companies should not be allowed to abuse their consumer-base, this certainly does not seem like such a case. On the other hand, companies do have responsibilities to their employees, suppliers, and second-hand businesses that rely on them. At worst, it seems that Verizon is simply trying to behave in a way consistent with these obligations, and indicting them for such an actions may actually be bad for hundreds of thousands of individuals and businesses.
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