In a particularly painful twist of the knife, both AT&T Wireless and Verizon Wireless have recently increased the early-termination fees for smartphone owners breaking two-year cellphone contacts.
Y’see, your shiny new iPhone may only cost you $199, but AT&T is paying Apple several hundred dollars more so that you can get it cheaply. Their motivation is in the monthly service fees they’ll collect over two years, so if you break the contract early, they’ve shelled out a bunch of money on you and aren’t getting their money’s worth from you. Hence, early termination fees.
Last November, Verizon Wireless doubled its early termination fee from $175 to $350 for smartphone customers. Sprint Nextel and T-Mobile both have $200 fees.
Starting this month, AT&T is following suit by charging $325 for smartphone customers (including the iPhone) who break their contracts. And like their counterparts, their early termination fees actually decrease the longer you’ve stayed in your contract. AT&T subscribers will find their early termination fee dropping by $10 for each month they stay, meaning they will pay far less money to cancel if they stick around closer to their contract end date.
Note: This new fee structure only applies to new contracts, and new renewals. Customers currently in a contract will not have the same initial cost or gradual reduction.
Of course, if you’re one of the many iPhone customers who will be upgrading to the new model this summer (like me) you’re fair game. Consider yourself warned!