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Updated: Want to leave your AT&T iPhone contract? That just became more expensive.

AT&T has raised the penalty it charges users for leaving iPhone and other smart phone contracts early, amid greater concern by regulators and lawmakers that such fees burden users and hinder competition. One lawmaker immediately responded with a letter criticizing the move.

The company said on its Web site that it is raising the early-termination fees on two-year wireless service contracts for smart phones to $325 from $175. That fee is prorated $10 a month for time completed on the contract. Such devices include the iPhone, BlackBerry Bold and netbooks. The higher fees apply to customers who subscribe after June 1.

AT&T said it is meanwhile lowering the early-termination fees for its most basic phones -- feature and quick-messaging cellphones -- to $150 from $175. That fee is also prorated by $4 a month.

Customers can buy a phone for full price ($599 for iPhone) instead of a subsidized phone with a long-term contract.

The decisions reflect the cost of the phones that the company subsidizes, AT&T said.

"We felt that this was a fairer approach for someone who pays less for a phone," said Mark Siegel, a spokesman for AT&T.

The move, however, drew criticism from Sen. Amy Klobuchar (D-Minn.), who has scrutinized the practice of termination fees in hearings and a bill to allow users to cancel their contracts without penalties when they move or lose their jobs.

“Too often consumers find out after committing to a multi-year contract that their wireless service doesn’t meet their needs, and changing your wireless provider shouldn’t break the bank," Klobuchar said in a letter to AT&T. "Once again wireless providers have shown that they would rather use arbitrary fees than network and service quality to keep customers."

Siegel said AT&T had not reviewed Klobuchar's letter.

Verizon Wireless faced scrutiny from the Federal Communications Commission late last year when it decided to increase its termination fees on certain smart phones to $350 from $150.

The FCC has said it is investigating how contract fees for cellphones, cable and Internet effect consumers. It has asked all major wireless carriers to show how they inform customers about such fees and whether those fees are reasonable to their costs of subsidizing devices.

Verizon and other carriers have said they use termination fees to pay for marketing and store operation costs. Consumer groups have criticized that practice, saying carriers should pay for those fees out of general operating budgets and not directly from consumers.

Asked if AT&T's move was prompted by rumors that competitor Verizon would soon begin to offer the popular iPhone, possibly enticing AT&T customers, Siegel said the decision wasn't based "on any one device."

By Cecilia Kang  |  May 21, 2010; 4:30 PM ET
Categories:  Early Termination Fees  
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Comments

I really dislike contract cancellation charges thats why I switched to Net10 prepaid they have a wide selection of phones to choose from and when you buy a phone from them you get 2 months service and 300 minutes free. With Net10 prepaid you can also send texts for 5 cents each.

Posted by: river42rafter | May 25, 2010 11:36 AM | Report abuse

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