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AT & T smartphone ETF to hit $325

Mon, 05/24/2010 - 8:20am
Maisie Ramsay, Wireless Week

AT&T's iPhone users and other smartphone subscribers will have to pay $325 to get out of their contracts under new early termination fees (ETFs) that go into effect next week.

The charges go into effect June 1 and will nearly double AT&T's current $175 early termination fee.

AT&T is not raising fees across the board. The carrier said it will lower the early termination fee for its feature phone users to $150 in an effort to "reflect the way customers buy our products and services."

An AT&T spokesman said the new contracts were designed to be "fair to all our customers. … Those who buy less-expensive devices and lower-priced service plans will pay a lower ETF in the event they terminate their contracts early, and consumers of more expensive devices and service plans will pay a higher ETF for terminating their higher-priced plans early."

The penalty for exiting a standard two-year contract will decrease by $10 per month for smartphone users and $4 per month for feature phone users under the new plans. The changes only affect new contracts, including renewed subscriptions. Current subscribers will see no change to their current plans.

Early termination fees help operators recoup some of the cost of subsidized handsets, which are sold to users at below cost with the profits made up over the term of the contract.

The fees came under FCC scrutiny late last year when Verizon Wireless doubled the cost to get out of a smartphone contract to $350. The FCC questioned Verizon's practice of prorating the charges over the term of a subscriber's contract and later expanded the inquiry to AT&T, Google, Sprint Nextel and T-Mobile USA. No action was taken as a result of the investigation.

Sprint and T-Mobile USA both charge $200 to break a contract whether or not the customer has a smartphone. All of the country's top-four carriers decrease the early termination fees as a customer's contract matures.

More Broadband Direct 5/24/10:

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•  Dish reaches deal to keep The Weather Channel
•  FCC clears Verizon plan to sell phone lines
•  AT&T smartphone ETF to hit $325
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