Report: Verizon to hike Fios termination fee

Verizon Communications is reportedly jacking up its early termination fee for its Fios TV service.

The company plans to double the fee to $360 from the $179 it currently charges customers for canceling their service early, according to reports. The new fee would apply to new customers who sign up for service on or after January 17. And it would only apply when customers cancel service before their two-year service contract ends.

News of the fee hike was first reported by the blog DSL Reports.The Philadelphia Inquirer confirmed the change with documents it obtained from the company. A Verizon spokesman declined to comment for CNET's story.

"We don't have anything to announce on this front right now," a spokeswoman said in an e-mail.

The Inquirer reported that the new $360 Verizon fee will be prorated, decreasing over the life of the 24-month contract. This means that subscribers canceling their service in the middle of their contract would pay less than those canceling at the beginning of their contract.

For example, a Fios subscriber who signs a two-year contract and cancels within three months of his contract, would pay $330, according to Verizon documents. If the customer cancels after 16 months, the fee would be $135, the Inquirer reports.

The new early termination fee would take effect for new customers starting January 17. And there will be no grace period. Previously, Verizon has offered customers the option of trying out the service for 15 days. And if they cancel the service before the 15 day period is over, they are not charged the early termination fee.

News of Verizon's increased early termination fee comes at a time when the Federal Communications Commission is looking into a similar early termination fee hike instituted late last year by Verizon Wireless. In November, the company, which is jointly owned by Verizon Communications and Vodafone, announced it was increasing its $175 early termination fee to a whopping $350 for "advanced devices," such as smartphones. Verizon is also prorating this fee, which decreases by $10 for every month of service over the life of the two-year contract.

In early December, the FCC sent a letter to Verizon asking the company to explain why the new fee is necessary and how it will be implemented. Verizon has provided some preliminary answers. The FCC hasn't made any official comments on Verizon's answers, but early indications suggest the FCC isn't satisfied with Verizon's initial answers.

"Verizon's response to the FCC [on early termination fees] has raised more questions than it has answered," FCC chairman Julius Genachowski said last week during a press briefing at the 2010 CES trade show in Las Vegas. "What strikes me is that there is a very real level of consumer confusion around these fees."

While the FCC and Congress have each questioned the wireless and paid TV industries about their early termination fees, the practice persists. Not only does it make it more difficult for consumers to switch service, but it also makes it more difficult for competitors who are offering to pay those early termination fees to get consumers to switch.

The Inquirer reports that Comcast, Verizon's chief competitor in many parts of the country, has been stealing back Fios TV and Internet customers by offering big discounts and rebates on the Fios early termination fees for customers who switch to Comcast's services before their contracts with Verizon end.

With a higher fee, Comcast would undoubtedly have a more difficult time offering to pay a rebate to customers willing to break their contracts and switch to Comcast.

Whether the early termination fee is being paid by a competitor or the consumer, one thing is clear, it is meant to keep customers locked into a service. The FCC has not asked Verizon specifically about its cable and TV early termination fees. It will be interesting to see whether, if and when this fee is increased, the FCC will expand its inquiry to include it as well as the fees on smartphones.