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

Some things in the wireless industry are great for consumers. Like, carriers spending billions in order to improve network quality and infrastructure. And offering more and more smartphones nowadays. And making voice minutes cheaper and cheaper to buy. But some things, as you all know, aren't so great. Like Sprint's $10/month surcharge for WiMAX on the EVO 4G, even if you don't live in a 4G area. Or AT&T's lock-down on the iPhone family. Or the fact that no carrier wants to price-cut another when it comes to mobile WWAN data pricing. And now we can 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 a customer $350 in order to cut out of the two year agreement at any point before it was up. This was basically done in order to prevent consumers from buying a subsidized phone, immediately breaking out of the contract, paying a small fee, and still selling the phone for a little 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 that behavior, but it's not great for consumers who have "life events" that put them in positions where they can't really avoid the fee. The argument here, though, is that you can always buy a phone at full price and use a carrier "month to month," so if you take a risk and buy the subsidized handset to begin with, you're doing so knowing full well you may 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's not long before the others follow suit. Amazingly, many months have gone by, and Verizon Wireless is still the only one charging such a huge ETF on smartphones. All that changes on June 1. AT&T has announced this weekend that they'll become the second in the United States to significantly bump their early termination fee on advanced devices, from $175 previously to $325 on June 1. The prorated contract still applies; even after June first, you'll see your ETF decrease by $10 for each month you stay connected. On the flip side, customers opting 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 $4 each month that they stay connected.

The full open letter to customers is below, but there's no way around this. It's happening, and if you want to renew your AT&T contract when the next-generation iPhone comes out this summer, you have a massive $325 ETF hanging over you. Or you just pay full price for it and 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.