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May 25, 2010

AT&T Mobility says it is increasing the ETFs (early termination fees) on its more advanced, higher end devices, including netbooks and smartphones from the current $175 to $325 beginning with device purchases after June 1st.

Many wireless industry analysts weren't expecting such an increase, and now some think that other wireless carriers might follow in AT&T's tracks with similar ETFs increases.

While the increasingly-popular iPhones will see ETFs increase, customers purchasing a basic wireless handset or quick-messaging device will actually see the fees drop to $150, AT&T said.

AT&T's prorating of the ETF will drop the charge $4 a month for the life of the contract, or by the 23rd month the ETF will be $58.

Last November Verizon Wireless increased its ETFs for smartphones and advanced devices from $175 to $350, a move that garnered a lot of scrutiny from the Federal Communications Commission.

AT&T Mobility said that its new 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 the service with one month left on their contract.

This will have the net effect of leaving $95 in ETF for a wireless customer with one month of service left on their contract.

Ross Rubin, executive manager of industry analysis at The NPD Group noted that while the increased ETFs along with recent moves by wireless carriers that require consumers to purchase specific data plans with certain mobile devices could appear to be anti-consumer, the wireless industry has nevertheless rolled out an increasing number of various options that provide consumers with more options and a broader range of service options.

Rubin added "overall, there's been a real growth in no-contract offerings that allow mobile users to pay full price for a device or to buy a bundle of unlimited services for a flat fee. Wireless carriers like MetroPCS and Leap Wireless have made a lot in this segment of the market."

He also said that the current timing of AT&T's decision is definitely of interest and that it could reveal that AT&T 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 anytime soon.

AT&T's move also seems to align itself with some rumors of Apple's expected unveiling of its latest iPhone model sometime next week.

Mobile service operators 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 wireless users as one of their least favorite activities of the wireless industry.

AT&T 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.

Overall, device subsidies for the iPhones have never been noted as AT&T doesn't offer the smartphone 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 initial 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.

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Source: AT&T Mobility.