Cell Phone Contract Termination

I don’t like cell phone contracts.  But maybe I should.  I recently bought a Blackberry Bold on AT&T and signed a two year contract.  Turns out that AT&T’s 3G network (as most AT&T subscribers can tell you) is beyond atrocious.  I should have returned the phone within 30 days, but I didn’t.  Now I’m in a quandary with no recourse, or so I thought.

The early termination fees (ETF) are there to inhibit switching, and they work well.  However, the contracts can actually work in your favor.  Most phones are subsidized around $100-$200 if you sign the contract.  Check out the below table, and you’ll find that over time, the ETFs become lower than the subsidized amount – i.e. it behooves you to buy a phone on contract as long as you don’t cancel within a couple months (depending on the carrier).   There are caveats (activation fees are meant to even it out, though these are sometimes negotiable), but at least we have the flexibility.

Ultimately, I still believe that cell phone service would be vastly improved if 1) we got rid of contracts altogether and 2) they shared a similar technology platform.  The carrier technology would then be a commodity (much to their chagrin) and service + cost would win customers (instead of devices, which is where the iPhone has done an extreme disservice to service quality-conscious customers,  as we have shown our buying choice can be based entirely on phones).

Problem is CDMA and GSM are both prevalent, however the evolution to LTE will help even the field (whenever that happens).  Contracts create (illusory or not) a feeling of stickiness.  If a carrier truly felt that they were good enough, they would allow customers to change whenever without ETFs.   Thing is, if contracts were eliminated, phones would be more expensive (though one could argue the market would be more efficient since platform barriers would be eliminated).  However, monthly plans would decrease, assuming that carriers currently make up subsidies over the life of the contract.  It’s an interesting conundrum.

Anyways, since I’m very seriously considering changing networks, I decided to look up all the return policies and ETFs, as I feel this is extremely relevant to what network I do end up on next.

Return Policy

Early Termination Fee (ETF)

AT&T

30 day

$175 minus $5 for each month on contract

Verizon

30 day

$175 minus $5 for each month on contract

T Mobile

14 day *

180 days + remaining on contract: $200 **
91-180 days remaining: $100
31-91 days remaining: $50
Less than 31 days: Lesser of monthly or $50

Sprint

30 day

$200 minus $10 each month beginning month 5 ***

* Another page on their website says 20 days. Phones activated in CA have 30 days.

** Only for contracts on or after June 28, 2008. No idea what is before that date.

*** Only for contracts after Nov 2, 2008. All contracts signed before subject to full amount.

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10 Responses to Cell Phone Contract Termination

  1. KR says:

    interesting…

  2. Nimzter says:

    How does this compare with the model in europe?

  3. Krish P says:

    Check out this article on BW…platform independence won't necessarily be a sure thing with LTE.http://www.businessweek.com/the_thread/techbeat

  4. Sanjay Makhijani says:

    Thanks for doing the leg work. I'm looking into signing up for a Sprint/Palm Pre family plan, which would tie up at least myself and two other family members. Just the thought of it makes me sweat.

  5. Sammy says:

    No….really…refuse getting any contracts in your future! I did and it's made me so much happier by switching to Net10. Check it out how easy it is to break contracts by using Net10 on this website:http://www.celldefense.com

  6. Sammy says:

    No….really…refuse getting any contracts in your future! I did and it's made me so much happier by switching to Net10. Check it out how easy it is to break contracts by using Net10 on this website:http://www.celldefense.com

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