AT&T Nearly Doubles Early Termination Fee For Smartphones And Netbooks

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News Posted: Sat, May 22 2010 10:48 AM
Some things in the wireless industry are great for consumers. Like,carriers spending billions in order to improve network quality andinfrastructure. And offering more and more smartphones nowadays. Andmaking voice minutes cheaper and cheaper to buy. But some things, asyou all know, aren't so great. Like Sprint's $10/month surcharge forWiMAX on the EVO 4G, even if you don't live in a 4G area. Or AT&T'slock-down on the iPhone family. Or the fact that no carrier wants toprice-cut another when it comes to mobile WWAN data pricing. And now wecan add another negative to this growing list: ETF increases.

Last November, Verizon Wireless made headlines by becoming the first U.S.wireless operator to willfully and purposefully raise their early termination fee on "advanced devices," making it where it would cost acustomer $350 in order to cut out of the two year agreement at anypoint before it was up. This was basically done in order to preventconsumers from buying a subsidized phone, immediately breaking out ofthe contract, paying a small fee, and still selling the phone for alittle bit of profit. With that massive $350 ETF looming over them,consumers could now not make any profit on phone reselling.

We don't really have a problem with the logic behind stopping thatbehavior, but it's not great for consumers who have "life events" thatput them in positions where they can't really avoid the fee. Theargument here, though, is that you can always buy a phone at full priceand use a carrier "month to month," so if you take a risk and buy thesubsidized handset to begin with, you're doing so knowing full well youmay one day have to pay that discount back if you have to cut-and-run.

Usually, when one U.S. carrier makes a monumental move like this, it'snot long before the others follow suit. Amazingly, many months havegone by, and Verizon Wireless is still the only one charging such ahuge ETF on smartphones. All that changes on June 1. AT&T hasannounced this weekend that they'll become the second in the UnitedStates to significantly bump their early termination fee on advanceddevices, from $175 previously to $325 on June 1. The prorated contractstill applies; even after June first, you'll see your ETF decrease by$10 for each month you stay connected. On the flip side, customersopting for non-smartphones will see a slight decrease in their ETF;it's going from $175 over 2 years to $150, and that decreases by $4each month that they stay connected.

The full open letter to customers is below, but there's no way aroundthis. It's happening, and if you want to renew your AT&T contractwhen the next-generation iPhone comes out this summer, you have amassive $325 ETF hanging over you. Or you just pay full price for itand avoid this mess, but you know you won't.

An Open Letter to our Valued Customers
May 21, 2010

At AT&T, we work hard every day to provide you with a great wireless experience at competitive prices.

One of the ways we do this is to offer you the industry’s leading wireless handsets below their full retail price when you sign a two-year service agreement. In the event you wish to cancel service before your two-year agreement expires, you agree to pay a prorated early termination fee (ETF) as an alternative way to complete your agreement. Of course, if you prefer not to enter into a term commitment, we offer the same great selection of devices at their full retail price with no term commitment or ETF, as well as prepaid GoPhone options.

We are now making changes that will lower the ETF for many customers who agree to new term commitments, and will increase it for others. Current AT&T wireless customers who are within their two-year consumer service agreement or have an existing enterprise service agreement will see no change to their current terms.

Beginning June 1, 2010, we will reduce the ETF in new and upgrade two-year service agreements for all customers who are buying basic and quick messaging phones. Whether you are new to us or upgrading handsets, the ETF will decrease to $150 from $175, and be reduced by $4 for each month that you remain with us as a customer during the balance of your two-year service agreement. After the term commitment is completed, the ETF will no longer apply.

For customers who enter into new two-year service agreements in connection with the purchase of our more advanced, higher end devices, including netbooks and smartphones, the ETF will increase to $325, and be reduced by $10 for each month that you remain with us as a customer during the balance of your two-year service agreement. After that, the ETF will no longer apply.

Thank you for being an AT&T customer. We hope you enjoy your AT&T wireless device and service. We appreciate your business and we will continue to work hard to earn it.
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rapid1 replied on Sat, May 22 2010 11:47 AM

That's because they know they are about to hit a big bump in the road. With there system already taxed even after upgrades by iPhone's alone, now they have iPad's as well. It really brings to the question why Apple chose them over all. Of course I guess any provider would be taxed to run the traffic.

I am wondering how Sprint is going to handle it when they get the EVO. No I am not yet a subscriber, but I really want an EVO bad. I am also in a 4G covered area so I am considering it. My Contract with Verizon is not fully up until August which will give me a couple months to watch what happens after the EVO drops on June 4th I guess.

I do have a setup June 3rd call with a preferred account rep. We will see. Either way At&t it looks like is bracing for some bad news, and therefore trapping there customers in a more constricting method.

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3vi1 replied on Sat, May 22 2010 4:26 PM

>> they know they are about to hit a big bump in the road.

I think you're spot-on, rapid1. I think Verizon and Droid are about to accelerate sales big-time.

What part of "Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn" don't you understand?


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mhenriday replied on Sun, May 23 2010 11:00 AM

Yet another illustration of why it was so unfortunate that's Google's attempt to break the carrier's stranglehold on the mobile phone market in the United States with the Nexus One failed. Those who think carrier plans allow them to get advanced mobile phones more cheaply should read the fine prints in the agreements they have signed more closely and next time - if there is a next time - support attempts to change the situation....


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