Apparently, it's the contract.

Verizon Wireless is defending the implementation of a $350 “early termination” fee for customers who purchase smartphones and switch service providers before the end of the agreement, explaining that the fee covers the costs and the risks of providing high speed internet.

I understand their perspective. All wireless providers have dramatically reduced the cost of phones and other devices to attract customers and get entice them to sign long-term service agreements. The service philosophy in play is that the cost to serve an existing customer is dramatically less than the cost to acquire a new one, and with a contract, they can count on users as a reliable stream. They get frustrated when this strategy is short-circuited by customers who aren’t as loyal as they would hope, leaving the provider without penalty for a better deal, better service or both.

Instead of customer behavior that needs adjusting through penalty, perhaps it is their retention model that needs correction. Rather than using contractual verbiage and fiscal penalty to retain customers, why not use outstanding service supported by compelling products to make people want to stay?

The strategy of holding a consumer to a contract is tough to enforce at the best of times, and it’s difficult to start charging for something that previously came free.

More suspect is the logic that justifies signing a client to a contract for service and holding them to their obligation not to defect, while not performing their own end of the agreement to provide a quality service. Effective service agreements (and client relationships) tend to work in both directions. If the company isn’t providing service levels customers expected when they entered into the service agreement, customer defection should be facilitated, rather than restricted.

If their ad claims are accurate, Verizon would have little to worry about.

Arguing over “Adequate”

I don’t know which seems sillier – Verizon launching their national holiday ad campaign differentiating on the strength of a table-stakes service attribute, or AT&T going to the trouble to sue them over their representation of it.

Verizon is actively promoting their nationwide 3G coverage and pointing out a perceived weakness in the 3G coverage of AT&T, who has sued them in response, claiming “their use of white space in their advertisements misleads people into thinking that AT&T offers no coverage in most of the country."

Does any of this really matter?

Plotted against population density, the two networks are within percentage points of each other in terms of coverage.

Further, “coverage” isn’t a service delighter, or even representative of customers’ desired service. It’s an indicator of available service alternatives, or an identifier of adequate levels of service. If you have the coverage, you’re in the consideration set. If you don’t, you’re not. The more alternatives customers have, the higher the level of expected service.

For most consumers, this conversation is about nothing.

It’s easy for network-based services (airlines, cable, shipping, telecom) to focus on coverage, mostly because it is operational and tangible.

But of all the complaints people have about their wireless service providers, 3G coverage represents a minority. Follow either Verizon or AT&T on Twitter for half a day, and you’ll get an idea of how important 3G coverage is to consumers, compared to the themes of my phone doesn’t work / I can’t get the plan I want / my bill is never correct / I can never get through to a customer service agent that can fix my problems. I have yet to see, “I’m in the Tetons, and can’t get 3G coverage!”

By focusing on network coverage, Verizon & AT&T neglect the service their customers desire, and focus on who is doing a better job delivering on what is adequate. When adequate is the goal, I don’t wonder why churn rates in telecom are among the highest in any industry.