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Terminating Early-Termination Penalties

For all the grief I give the wireless-phone industry, it has at least shown the occasional willingness to drop some of its least-admired business practices.

Not all these moves--for example, the "wireless number portability" that lets you take your cell-phone number with you when you change carriers--have been strictly voluntary. But the net effect has still been more constructive change than we've seen in, say, the subscription-TV business.

The latest cellular annoyance that may go the way of the rotary-dial telephone is the early termination fee. These charges--$175 at AT&T and Verizon, $200 at Sprint and T-Mobile--usually exceed the cost of several months of service, and so a lot of disgruntled customers have suffered in silence.

Last summer, though, Verizon Wireless announced that it would lower this charge for people farther along in their contracts.

Last month, AT&T Wireless announced that it, too, would prorate early-termination fees for contracts opened or renewed next year, and now Sprint and T-Mobile have made the same commitment.

Neither AT&T, Sprint nor T-Mobile, however, offered details on how much of a break they'd give customers. If they follow Verizon's precedent, it may not add up to much. That carrier knocks $5 off the initial $175 fee for each month you're in your contract. So by the time this discount could yield a substantial break on that penalty, you'd be almost through with the contract anyway--and especially if you'd only signed a one-year deal.

It's not that I don't welcome more lenient contract-cancellation policies--anything that lowers barriers to customer choice can only improve the wireless-phone market. But you'll still be better off if you can avoid getting stuck in an unwelcome contract in the first place: Research each carrier's coverage before you pick out a phone; see what other customers in your area think; compare plans, phones and service features carefully (don't overlook pre-paid options if you won't use the phone much); and use the free-trial period every carrier offers to make sure that you've made the right call.

By Rob Pegoraro  |  November 12, 2007; 10:13 AM ET
Categories:  Telecom  
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My problem is with Verizon which is the only service that is reliable in the mountains where I live. They simply won't offer rollover minutes and other nice features of the other companies because, as a salesman told me, "we don't have to." Their price is higher with fewer minutes and I am stuck unless I want a company that drops calls or isn't as reliable in the mountains. Customer fall off won't work with such companies. What would I wonder?

Posted by: WNC | November 12, 2007 11:58 AM | Report abuse

As I understand it the early termination fees were originally instituted to recover the cost of subsidizing the reduced prices on cell phones that the carriers offered. It seems to me that if the carriers did away with both subsidizing the cost of cell phones and early termination fees consumers would be better off and the carriers would make just as much money with a lot fewer disgruntled customers.

Posted by: RZ | November 12, 2007 12:00 PM | Report abuse

The only times I have wanted to jump to a new carrier were when (1) my current carrier screwed up billing in a major way (like that month when long distance calls were billed at cost), or (2) when for my situation another carrier offered an incredibly superior deal (marrying into a family who used Carrier XYZ that offered free in-calling).

I think that most people, given the opportunity to switch carriers with a minimal penalty would do so - for a $5 or $10 savings a month. We would probably see real price competition though, if the barrier to switch were lower.

Personally, I think the early termination fees are grossly out of line with the paperwork and processing it takes to cancel an account - $20 or $50, sure, but nearly $200? Come on, that's stealing.

Posted by: Gman | November 12, 2007 12:50 PM | Report abuse

Try - problem solved.

Posted by: Adrian | November 12, 2007 2:35 PM | Report abuse

I'm sure this experience isn't unique, but about 2 months ago, my wife's cell phone broke. I called at&t for service. At the time I had no intention of breaking my contract which had about 7 months to run. Customer service said they couldn't repair it (although they had fixed mine 6 months before when it was still under warranty.) All they would do was insist we renew our contract and harassed us with repeated phone calls to get us to do so. (I hadn't heard of an unlocked phone at the time.) Finally, I couldn't take it and canceled the contract. Bottom line is that the case is now before the NY State Attorney General's Office Dept. of Consumer Fraud. I'm no kid, and I remember when Ma Bell was one of the most respected companies in the country. How the mighty have fallen!

Posted by: hugha | November 12, 2007 9:44 PM | Report abuse

I understand the ETF when you get a subsidized phone. However, If I cancel my contract (or let it run out), and then a year later bring that same phone back to the same phone, I would still be charged a penalty if I wanted to terminate that contract.

Posted by: George | November 13, 2007 4:32 PM | Report abuse

I just spent 40 minutes on the phone trying to relay the information in this article to a Verizon Customer Support agent in hopes of getting my fee waived or reduced. I was told that I am not entitled to a reduction in the $175 fee and referred to the Customer Agreement on Verizon Wireless website. I entered into contract in November 2005 and was told that if I had upgraded my contract a year ago then I would qualify for this benefit. An upgrade to my account was defined as "extending my contract." But because I left my account as is, then I'm out of luck. I don't see how the Post's take on this subject aligns with the reality and policy under which Verizon governs.

Posted by: Curt | November 20, 2007 5:09 PM | Report abuse

Early termination fees are just one of the costs that consumers incur to change carriers. See the link to "Breaking Up is Hard to Do:"

Posted by: Locked in a Cell | November 20, 2007 5:57 PM | Report abuse

Verizon won't allow prorated fees for customers that signed a contract before November 16, 2006. They claim that they are doing prorated fees to make customers happy, yet they stiff their current customers by not giving them the opportunities as new customers.

Posted by: Kyle | December 20, 2007 11:36 AM | Report abuse

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