US telecommunications giant AT&T is about to increase the pain for consumers who pick up or renew an iPhone contract and wish to terminate it early.
In an open letter posted on its website, the company announced that any customer who picks up a smartphone (including the Apple iPhone) in a contract after June 1 and wishes to terminate that contract early will incure a $325 termination fee, an increase of $150 on the current fee.
The early termination fee (ETF) will drop by $10 per month for each month customers remain with AT&T. Once a customer stays for the completion of the two-year service contract, the ETF will no longer apply.
In contrast, consumers who terminate a contract early on basic or quick-messaging phones will see their early termination free drop from $175 to $150. The ETF will drop by $4 per month for each month a customer remains with AT&T until the two-year service agreement is completed. After that, the ETF will be zero.
The news comes as speculation grows that AT&T is about to lose its exclusivity deal with its Apple iPhone money-maker, which will likely see at least some of its iPhone customers start looking elsewhere for better deals.
Phone carriers subsidise phones in order to attract customers and the iPhone is no different. It would appear that the $325 figure is designed to recoup at least a substantial portion of that subsidy. However, terminating an AT&T smartphone contract after 23 months will still incur a $95 termination fee, which is surprisingly steep, particularly when waiting one more month will actually save you that $95.
High termination fees however are nothing new. On November 14 last year, rival Verizon increased its early termination fee to $350 with a $10 per month reduction for each month customers remain with their service contract when purchasing an “advanced device”.