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AT&T nearly doubles iPhone early termination rates

by David Winograd May 22nd 2010 at 3:30PM

AT&T announced yesterday a new "carrot and stick" pricing plan for early termination fees (ETF) of cellphone contracts, beginning with new contracts starting June 1st. The carrot is that for new two-year agreements or upgrades on what they refer to as "basic and quick messaging phones," the ETF will be reduced from $175 to $150 and be further reduced by $4 for each month of the contract. Well, that's very nice of them, but it probably doesn't affect anyone reading this post.

The stick is that for anyone using higher-end devices such as smartphones, including the iPhone, the ETF will nearly double from $175 to $325 and reduce by $10 for each month the contract ages. Now don't get scared, since this is only for new or upgrade contracts starting June 1st and doesn't apply to anyone with a current contract. That is, unless you're up for renewal and make the mistake of buying a new two-year contract.

This is not unheard of. Verizon doubled their ETF to $350 for smartphones last November. But in the AT&T case, the timing seems a little too convenient. With everyone and their brother believing that the next iPhone will be out this summer, this can hurt early adopters right in the wallet. Since AT&T doesn't seem to be the most popular of cellphone providers around here, what if the new iPhone comes out in July and Verizon gets it a few months later? In fact, it seems to me, that this might be a veiled indication that Verizon is getting closer to being in the iPhone market.

AT&T maintains that they need a high ETF since the iPhone is extremely subsidized and they will only be repaid through monthly fees that apparently $175 won't cover. Of course the opposite position is that $325 is a hard nut to swallow and upping the ETF will make people think long and hard about jumping over to Verizon, or anyone else, since we all don't have iPhones.

My suggestion for those who dislike AT&T and whose iPhone contract is coming to an end, is to not upgrade even when the new iPhone gets released. Instead, go month-to-month to buy yourself some time to see what happens. Now I know this is blasphemy for early adopters, but $325 is a lot of money. I want the shiny new toy as much as anyone, but my feeling is that Verizon will be an option sooner rather than later. If you find you can't wait anymore, you always can always cave and be instantly gratified, but forget jumping to Verizon for a good long time unless you're willing to pay the inflated price.

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AT&T announced yesterday a new "carrot and stick" pricing plan for early termination fees (ETF) of cellphone contracts, beginning with...
 

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Michaelzrork

So, let me get this straight, assuming the iPhone prices stay the same, buying an iPhone at $300 is subsidized from $600, which means that to cancel, you pay an EXTRA $75 than if you bought the phone outright?

I agree with ETF to cover lost money, but not when they MAKE the company money!

May 26 2010 at 1:11 PM Report abuse rate up rate down Reply
1 reply to Michaelzrork's comment
Michaelzrork

Sorry, an extra $25.

May 26 2010 at 2:14 PM Report abuse rate up rate down Reply
Johny Barbosa

ETF is going because the iPhone will be moving to the Sprint network!

May 24 2010 at 11:05 AM Report abuse rate up rate down Reply
jwfnla

I'm seriously considering 'going without' until the Verizon phone appears. I really can't stand AT&T, and this little tidbit does nothing but solidify my disdain.

May 24 2010 at 2:07 AM Report abuse rate up rate down Reply
docdemilly

By what crystal ball do you make the determination that there will be a better Verizon option sooner than later? As an Apple blogger, you should know not to but any weight in any rumors. None. Zero.

Way to show yourvfellowcApple users how not to anticipate Apple.

May 23 2010 at 4:20 PM Report abuse rate up rate down Reply
jbrown510

Once again I'll just say that I think a verizon iPhone will never come. I find it fat more likely that the next gen iPhone will support T-mo's frequncies in addition to AT&T's.

I for one would never buy a CDMA phone (I travel internationally way too often).

I also would jump at an officially unlocked iPhone sold at full retail in the US for which I could get service at $10/m less than a subsidized phone on contract.

May 23 2010 at 2:19 PM Report abuse rate up rate down Reply
josh

unlock att http://www.gsmunlocklabs.com/unlock-cingular-c-41.html

May 23 2010 at 10:27 AM Report abuse rate up rate down Reply
TIm

So far the ETF was 175 no matter how long into your contract you are right? Now it is 325-10$ for every month gone by.
So lets say you are going to renew your contract every year for the latest iPhone .. you basically end up paying 325$-12*10$ = 205$ instead 175$ before? doesn't seem to bad for me (if you really need to jump the latest phone instantly every time).

I may be horribly off here .. European with no idea of US contracts.

T.

May 23 2010 at 10:26 AM Report abuse rate up rate down Reply
Rob

Honestly, I was expecting this. I would bet money that at WWDC we find out that Apple will be immediately (or very soon) releasing the iPhone 4G. Then, a few months from now, perhaps somewhere around September, the iPhone will debut on Verizon's network.

For those people who cannot wait, and Apple has MANY of them, they will just go to AT&T and buy the new iPhone - and have the much higher cancellation fees.

AT&T is pretty much hedging their bets that if people leave for VZ, they take a good chunk out of their wallets on the way out. They could, of course, try to show that their network is superior -- but that would be a losing battle.

May 23 2010 at 9:51 AM Report abuse rate up rate down Reply
VeryVito

So how much Google stock does AT&T own, anyway? They seem hell-bent on making Android more desirable than the iPhone. Apple needs to chew its arm off and get out of this bed.

May 23 2010 at 12:34 AM Report abuse rate up rate down Reply
wmcraveronline

"we're not scared people will leave... But just in case, we can still cash in."

[2 cents]

May 23 2010 at 12:24 AM Report abuse rate up rate down Reply
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