John Paczkowski

Recent Posts by John Paczkowski

AT&T’s New Early-Termination Fee for the iPhone: $325

att_iphoneA word of warning to AT&T subscribers who would switch carriers when the company’s iPhone exclusivity deal with Apple finally ends: The cost of doing so will soon rise–substantially. Come June 1, AT&T is raising its early-termination fee on smartphones to $325 from $175.

The increase comes amid speculation that AT&T’s (T) iPhone-exclusivity deal with Apple (AAPL) is nearing its end. But a company representative tells me it has “nothing to do with the iPhone or any other device.”

$325. That’s a pretty steep increase from $175. Though to be fair, it’s not quite as bad as the one already implemented by rival Verizon (VZ). Last November, that carrier doubled its smartphone ETF from $175 to $350, a move AT&T was quick to cite as partial justification for its own decision.

And, indeed, the company is following in Verizon’s footsteps here. Like its rival’s ETF, AT&T’s drops $10 per month for each month of a two-year contract. Which means that at the 23rd month of a two year contract, AT&T subscribers must pay $95 to leave the carrier. The contract is nearly over, yet subscribers are obligated to pay nearly a third of the full ETF if they break it at that time.

Now it’s true that ETF’s were created as a means of recovering legitimate costs associated with subsidizing mobile phones. If AT&T is paying a $325 subsidy for the iPhone, the company should be able to recoup that money when customers break their contracts. But does it really stand to lose $95 if they do so in the 23rd month? Doesn’t seem likely if those customers can walk away just a month later without consequence, taking their handsets with them.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik