Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Verizon's Bad Timing Could Crush the Droid


Doubled early-termination fees are preventing consumers from making the switch.

Tomorrow is the biggest day of the year for Verizon Wireless (VZ). It marks the full-scale release of the Motorola (MOT) Droid, the first Verizon Wireless smartphone that can truly compete with Apple's (AAPL) iPhone. See also Motorola Wins Hype Battle in Smartphone War.

While the Droid isn't perfect, it does a lot of things right. It has a fantastic screen, the best smartphone GPS system, and perhaps most importantly, it runs on the best US 3G network. And soon, users will be able to tether it to a laptop for on-the-go wireless Internet, something the iPhone likely won't ever offer. As the first phone running Google's (GOOG) Android 2.0 operating system, it's simply an outstanding effort.

The only problem is that Verizon decided that now would be a good time to double early-termination fees for "advanced phone" users to $350. Starting November 15, it becomes just a little bit less attractive to become a Verizon Wireless smartphone customer, especially if you're interested in a hot phone like the Droid or the BlackBerry Storm 2.

Mobile-phone carriers charge early-termination fees for a very good reason. The prices we pay for phones at retail are much lower than their actual cost, and for smartphones, the difference is hundreds of dollars. The carriers make up the difference through our monthly bills. The early-termination fee is insurance against customers leaving before they make Verizon or AT&T (T) some money.

Nonetheless, Verizon finally has the goods to put up a decent fight against the iPhone, and that makes now the worst possible time to institute an anti-consumer policy like a jacked-up early-termination fee.

In fact, Verizon should be so eager to get the Droid into the hands of new customers that it should be cutting or even dropping the early-termination fee. Why not give people a risk-free 30 or 60 days to try out a Droid, on the condition that it be returned in perfect shape? If there's a better way to show confidence in your hot new phone and the quality of your network, I'd like to hear it. It could even tempt some iPhone users unsatisfied with the performance of AT&T's network. And after the trial period, the new termination fee goes into effect -- a more-than-fair arrangement.

At the very least, Verizon should delay the termination-fee increase by at least a few months. Why raise the prospect bad press at the same time that it wants to maximize positive attention on the Droid?

Thus far, the Droid's marketing has been by far the best of any smartphone, save the iPhone, and Verizon should be getting the word out that the Droid is a safe bet -- it's just too bad that the beancounters are getting in the way of new customers. For more, read Betting on Motorola's Droid Is Premature.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos