Verizon Communications has doubled its early termination fee for FiOS broadband and TV services to $360, taking to the extreme a concept made famous in the mobile industry and increasingly being applied to other kinds of services. Customers who cancel before their two-year agreements are up will be on the hook for that hefty amount, which makes you wonder if the telco will see a rash of FiOS cancellations come January 2012. Or maybe everyone will just have forgotten by then because some other provider will be enforcing a $500 ETF.
ETFs, a way of ensuring some measure of customer loyalty without actualy having to earn it, are getting out of hand. Service providers say it's insurance against the cost of installation and gear that goes into powering up new customers, but in the TV service world in particular, that cost continues to decline for most types of deployments.
Perhaps the Federal Communications Commission will take a closer look and create an ETF ceiling or some method for computing ETFs that are truly cost-based. But, until then, service providers can charge what they want for early termination. For telco TV providers in particular, ETFs seem like a bad idea. They are the new players, the upstarts, and they should be bending over backward to make their new and growing customer bases happier than those customers were when they fled the cable TV providers. Maybe early success has made Verizon overly confident in services that still are not remarkably different than what customers can get from cable TV firms.
One of the top selling points of any telco TV service is customer service. Telcos have made much of a window of opportunity left open by a legacy of poor customer service in the cable TV sector. In recent years, cable TV companies have become more focused on customer service and have begun to close that window, though telcos still finish at the top of customer service and consumer studies in the TV services market.
Creating giant ETFs for services with declining installation costs will show that such accolades don't mean much, and that claims of better customer service are just a charade to win over new customers--at least and if only for two years, during which those customers will have plenty fo time to plan their next move.