AT&T Mobility to adjust ETFs

In an “open letter to our valued customers” AT&T Mobility last Friday announced it was increasing the early termination fees on its “more advanced, higher end devices, including netbooks and smartphones” from the current $175 to $325 beginning with devices purchases after June 1.
AT&T Mobility said that its prorating policy for ETFs will see $10 lopped off the charge for each month that a customer is into their contract, or up to $230 off the charge if the customer for some reason decides to cancel service with one month left on their contract. That will leave $95 in ETF for a customer with one month of service left on their contract.
While the increasingly-popular smartphones will see ETFs increase, customers purchasing a “basic” handset or quick-messaging device will see the fees drop to $150. The prorating of the ETF will drop the charge $4 per month for the life of the contract, or by the 23rd month the ETF will be $58.
Late last year Verizon Wireless increased its ETFs for smartphones and advanced devices from $175 to $350, a move that garnered scrutiny from the Federal Communications Commission.
Ross Rubin, executive director of industry analysis at The NPD Group, noted that while the increased ETFs along with recent moves by carriers that require consumers to purchase data plans with certain devices could appear to be anti-consumer, the industry has in general rolled out an increasing number of options that provide consumers with more choices.
“There has been a real growth in no-contract offerings that allow consumers to pay full price for a device or to buy a bundle of unlimited services for a flat fee,” Rubin noted. “Carriers like MetroPCS and Leap have done a lot in this segment.”
AT&T Mobility’s move seems to align with talk of Apple Inc.’s expected unveiling of its latest iPhone model sometime during the first week of June.
Rubin added that the timing is definitely of interest and that it could show that AT&T Mobility is looking to cover its financial investment in subsidies should customers look to switch carriers in the future if Apple does indeed roll out an iPhone compatible with Verizon Wireless’ network.
Carriers typically charge ETFs as a way to ensure they receive the device subsidy they provide for a new device if a customer decides to cancel service before their contract is up. These charges are often cited by consumers as one of their least favorite activities of the wireless industry.
AT&T Mobility provides between $100 and $200 in device subsidies for its basic or quick-messaging devices, while smartphones and netbooks typically see subsidies in excess of $200 with some at more than $300. Device subsidies for the iPhones have never been noted as the carrier does not offer the phone without a 2-year contract, though when first launched in 2007 AT&T Mobility sold the device for $400, which analysts thought was pretty close to an unsubsidized price. With the launch of the 3G model in 2008, AT&T Mobility began offering the device for a greatly reduced price of $200 that was thought to include a substantial subsidy.
(The price carriers actually pay for devices is held under strictest confidentiality agreements and could vary depending on the number of devices ordered.)
Sprint Nextel Corp. and T-Mobile USA Inc. continue to charge prorated $200 ETFs regardless of device.