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U.S. wireless users hold onto phones longer, higher fees cited: study

Americans are holding onto their old cellphones much longer because of the bleak economy, and penalties and other fees attached to new purchases are turning off buyers, according to a survey by J.D. Power and Associates.

The report comes as federal regulators are being presssured to impose guidelines to better protect consumers who have seen a rise in contract cancellation penalties by major wireless providers over the last year.

In a report released Thursday, the marketing information firm found that in 2010, basic cellphone and smart phone users said they had kept their wireless cellphones for about 20.5 months. That’s 17 percent longer than from the previous year and the longest duration since J.D. Power began its survey in 1999.

“Typically, when upgrading to a new cellphone, there’s the added expense of either subscribing to a more expensive service plan and/or incurring termination fees when switching service providers,” said Kirk Parsons, senior director of wireless services at J.D. Power and Associates. “Today, consumers are really watching their wallets, and any added discretionary expenses are being considered more thoughtfully than in the past.”

Of the nearly 19,000 basic cellphone and smart phone users surveyed by J.D. Powers, consumers said their average monthly bills had increased to $78 in 2010, including taxes and fees, compared with $69 three years ago.

The increase is mainly attributed to data-related service fees and a rise in text messaging and added fees and taxes.

The Federal Communications Commission has looked into increases by Verizon and AT&T of some smart phone early termination fees. Those firms have agreed to pro-rate those fees based on the amount of time a consumer fulfills the contract.

Consumer advocates have said that early termination fees are a business tactic to keep users strapped to their carriers while punishing users with higher fees. Carriers say they need to increase fees to reflect the cost of smart phones and the subsidies they give to users when offering those phones at a discount. Sen. Amy Klobuchar (D-Minn.) has introduced a bill to limit early termination fees.

The FCC said it is reviewing how wireless carriers use early termination fees and wrote letters to major carriers and Google (which has since stopped selling its Nexus One phone). But it hasn't moved forward on that issue.

The agency is also looking into complaints by users that they were automatically being charged data for the use of phones with Internet browsers, even when they only wanted basic voice and text services.

By Cecilia Kang  | September 23, 2010; 11:18 AM ET
Categories:  AT&T, Early Termination Fees, FCC, Mobile, Sprint Nextel, T-Mobile, Verizon  
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Comments

Why should we be outraged? So people actually are honoring their contracts under which they get as significant discount on a phone. Once the contract is up there's no cost to changing carriers and you can get a new phone and subsidy if you want.

Posted by: ah___ | September 23, 2010 11:31 AM | Report abuse

There are other ways. I've been using Virgin Mobile prepaid for the last four years. Right now I've got a (fairly dumb) touchscreen/slider smartphone for which I paid $125 and a 300-minute unlimited-text-and-data plan for $26.20/month with no contract.

If one doesn't need the very latest iphone or android phone, it's really an incredible bargain.

Posted by: random-adam | September 23, 2010 12:17 PM | Report abuse

I think the better question is if you buy your phone at a subsidized price that is offset by a two year contract, why are we still required to pay the SAME monthly rates AFTER the contract is over the subsidy paid off?

Alternatively, if the two year contract has the phone cost subsidy built-in, why doesn't someone who pays the full, unsubsidized price for a phone get a lower monthly rate that those whose plans are subsidizing the discounted phone price?

Posted by: WoodleyParker | September 23, 2010 12:39 PM | Report abuse

@Woodley, T-Mobile seems to be the only major carrier to recognize what you say. They charge customers who do not buy subsidized phones less per month than customers who buy subsidized phones. Unfortunately, its unlikely that the rest of the big companies will be this customer friendly. We could all take our business to T-Mobile to send a loud message!

Posted by: midanae | September 23, 2010 1:17 PM | Report abuse

Wireless companies should be compelled to sell unclocked phones so that Verizon and Sprint users can easily switch. The same with AT& T and T-Mobile. Since we will be buying the phone, there will be no contract and we can take the number and move if we do not like the service.

Posted by: philly3 | September 23, 2010 3:07 PM | Report abuse

Power, not "Powers."

Posted by: mattintx | September 23, 2010 3:16 PM | Report abuse

Just honor the two-year contract to the end. Is a phone really obsolete in less than two years?

Posted by: GenXer1 | September 27, 2010 9:59 AM | Report abuse

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