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Raises Early Termination Fee on Smartphones By AT&T

Berita Gadget - AT&T Inc. announced today that its early termination fees for new and renewing smartphone and netbook customers will jump from $175 to $325 on June 1, following similar actions by other carriers.In an open letter to customers, AT&T also said that it will drop the early termination fees for new and renewing customers who use basic and fast messaging rings by $25 to $150 on that date.

Spokesman refused to comment beyond the contents of the letter, which said the early termination fees make it feasible for AT&T to offer industry-leading rings below their full retail prices in exchange for a two-year service dedication. For example, a $199 Apple iPhone would cost $599 without a contract. AT&T has said that iPhone customers pay on average over $90 in service fees each month.

Some bloggers have theorized that AT&T's increase in its smartphone early termination fees is timed to go in to effect prior to Apple's announcement of a next-generation iPhone, and some are speculating that the fees are going up because AT&T could be losing its exclusive right to sell the iPhone in the U.S. within the next year, after years of complaints from users about the AT&T network.

Presumably, higher fees would discourage AT&T iPhone customers from switching to another wireless service if other carriers are allowed to start offering the iPhone. AT&T would not comment on that theory.

AT&T said the new early termination fees, which won't apply to current customers unless they renew after June 1, will decline by $10 a month over the life of a two-year contract for smartphone users & by $4 a month for users of basic & fast messaging rings.

Jeff Kagan, an independent telecommunications analyst, said carriers are fundamentally offering consumers subsidies or loans when they sell rings at reduced prices to customers who sign long-term service contracts. They noted that early termination fees & subsidies are mostly U.S. traditions.

"Phones are expensive," Kagan said. "In lots of countries without early termination fees, the customers are necessary to pay the full $500 or more for a phone. In the United States, [carriers] started subsidizing & continue doing it today. When a carrier helps a customer buy a phone by giving them a loan of sorts, the customer agrees to repay that loan" -- fundamentally through the early termination fee.

Kagan pointed out that when a customer of any type defaults on any kind of loan, there is a penalty involved. "The reason for the ETF is to protect the carriers from losing funds when they give the customer a loan of sorts," they said.

Early termination fees have been controversial. They have been the subject of lawsuits by customers, & in January the Federal Communications Commission launched an inquiry in to excessively high termination fees.

Verizon Wireless doubled its early termination fee on "advanced devices," chiefly smartphones, to $350 last November. & in January, Google Inc. & T-Mobile USA jointly imposed an early termination fee of $550 on the Nexus One smartphone. In response to criticism, Google lowered its part of the Nexus One fee from $350 to $150 in February. Verizon responded to concerns from the FCC by reducing the number of advanced devices affected by its higher early termination fee.