Keep a variety of tools in your ETF offset toolbag

It's earnings season on Wall Street, and the financial media flash revenues and earnings-per-share numbers on each reporting company. But most of the alerts I get from Wall Street telecom analysts instead highlight the internal figures for each major carrier, especially on the wireless side -- ARPU (average revenue per user per month), and churn (percentage of customers cancelling or leaving during the period).

Now that wireless is considered the main profit generator, the carriers have pretty much gotten the analysts used to rising ARPU and falling churn. The problem is that the drive toward constantly falling churn, while certainly admirable, has potentially negative side-effects.

That's one of the sources of the scare toward the end of last year over Verizon Wireless' hike in consumer early termination fees (ETFs) to as high as $350. In theory, there's nothing wrong with a certain base level of churn if it's caused by something other than dropped calls or bad customer service. Rollouts of new devices and next-generation networks obviously cause customers to look around for new options at a faster rate than before. So naturally, that occasionally leads them to change carriers. But that activity threatens Verizon's industry-leading 1.06% churn and, perhaps goaded by Wall Street, they want to stop it.

In business wireless contracts, Verizon's outsize ETFs don't apply to corporate-liable devices. But many companies rely on an overwhelming number of personal-liable devices to make their negotiated discount tiers with a carrier, in effect leaving their pricing at the mercy of independent users' reactions to carrier marketing.

Other business users are frustrated by lower but still onerous ETFs on a big pool of corporate-liable devices, and find negotiated offsets to be insufficient. One classic headache: "Pro-rated" ETFs that aren't truly pro rata -- say, a $5-per-month reduction in a $175 ETF on a 24-month contract (it would take 35 months to make such a concession a straight-line proration).

Effective ETF management reminds me of the problem of rate reviews in wireline contracts. While some carriers are trying to cut out rate reviews, some customers are trying out better alternatives such as term rather than annual commitments. Similarly, while a complete waiver of all ETFs was sometimes available to very large customers and is now more difficult to achieve, many companies are turning to waiver pools to get the right to end a set percentage of their corporate-liable lines every year without charge.

Still other companies with high turnover in certain business units implement policies that require re-use of individual lines, often combined with "suspend" or "seasonal" plans for the period between two employees' use of the line.

There's a real continuum of techniques here. That's why I like an 18-minute podcast that's available free in the "Telecom Junkies" series run by the folks at The Voice Report, because it describes a whole gamut of these tools.

The podcast, recorded in November and called "Savings Tips in Wake of VZW Termination Fee Hike," features among others LB3 partner Kevin DiLallo. Kevin is an occasional contributor on this blog, including recent notes about the IRS rules on personal cell phone usage and the text-message donation dilemma for corporate-billed devices. Kevin's advice is always practical and tuned to the needs of business users in particular situations. I encourage you to check out the podcast.