New Verizon Upgrade Fee Marks Telecom’s Latest Attempt to Score Easy Money

Posted by · April 11, 2012 12:00 pm

When it comes to imposing new fees on its subscribers, Verizon Wireless seems to abide by this general philosophy: If at first you don’t succeed, just wait a few months and try again. After watching its attempt to impose a $2 “convenience fee” last December crumble under considerable public and regulatory pressure, Verizon is back in the spotlight, this time with a new $30 upgrade fee.

Speaking in a press release Wednesday morning, the popular telecom made the following announcement:

On April 22, Verizon Wireless is implementing a $30 upgrade fee for existing customers purchasing new mobile equipment at a discounted price with a two-year contract. This fee will help us continue to provide customers with the level of service and support they have come to expect which includes Wireless Workshops, online educational tools, and consultations with experts who provide advice and guidance on devices that are more sophisticated than ever.

Verizon Upgrade FeeTo be fair, when compared to similar fees levied by AT&T and Sprint—each charging a $36 upgrade fee—Verizon’s new fee doesn’t seem all that unreasonable. If anything, one might say they were late to the party. With its 92.2 million wireless customers, Verizon could have been collecting up to $2.8 billion in additional revenue every two years without having to offer anything more in terms of service to its subscribers. Not a bad deal for a company already enjoying the momentum of “particularly strong growth” at the close of 2011 yet simultaneously preparing to slash thousands of jobs from its payrolls.

Which ultimately begs the question, if Verizon was already experiencing “great momentum for 2012,” as Verizon Chairman Lowell McAdam said at the close of 4Q 2011, why follow in the footsteps of those telecom’s who long for a day when they have Verizon’s market share? That is, by not having an upgrade fee, Verizon could have set itself apart in a manner not unlike the “Bags Fly Free” strategy employed by Southwest Airlines.

New Upgrade Fee: All Fee, No Upgrade

But instead of adhering to the age-old wisdom of “If it ain’t broke, don’t fix it,” Verizon appears to be more interested in short-term gains while running the risk of losing two-year renewals and sending subscribers to search for alternatives, such as prepaid plans or perhaps even T-Mobile, who only charges $18 for upgrades.

Furthermore, much like its attempt to collect an additional $2 each month from non-AutoPay subscribers, Verizon still doesn’t seem all that concerned with not offering anything more in terms of service in exchange for this new fee.

While the so-called convenience fee was supposedly “to allow [Verizon] to continue to support these single bill payment options,” the upgrade fee is similarly justified as a means to “help [Verizon] continue to provide customers with the level of service and support they have come to expect.”

As one can see, neither fee was proposed as a means of paying for any additional “convenience” or “upgrade” to what Verizon already offered. Nor were they proposed during a period of financial uncertainty making the installation of such a fee into a matter of maintaining profitability for the company. Rather, this new upgrade fee appears to be Verizon’s latest attempt to boost its revenues without having to offer any real benefit to its subscribers.

What do you think? Is Verizon making the right move by following the lead of AT&T, Sprint and T-Mobile? Or is the company poised to start losing customers as two-year contracts expire?