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Summary:

The day after the FCC released its wireless competition report AT&T said as of June 1 it will raise the early termination fee on the iPhone to $325. Is it a sign of the carrier’s imminent loss of iPhone exclusivity, or a lack of wireless competition?

AT&T, a day after the Federal Communication Commission released its wireless competition report (it was the first year since 2003 that the agency didn’t declare the industry competitive), said it would raise the early termination fee on smartphones — including the iPhone — to $325 from $175 as of June 1. This may be an indication of the carrier’s imminent loss of iPhone exclusivity, but it’s also bad timing from a major carrier.

Carriers justify early termination fees because they subsidize the price of hardware for cellphone buyers in exchange for those buyers agreeing to a one- or two-year contract. Verizon last year raised eyebrows when it increased its termination fee on smartphones to $350 and had to justify its moves to the FCC. No one was impressed with its defense, but Verizon is still charging the higher ETF (although it is now dropping the amount owed each month by $10). AT&t will also lower the fees by $10 a month, and is lowering the early termination fees on non-smartphones to $150 from $175.

It’s not unusual that AT&T is following suit behind the nation’s largest carrier, although it is ironic timing given that high ETFs generally reduce the freedom of consumers to change providers, making the industry overall less competitive. Of course, having the nation’s top two providers set similarly high termination fees doesn’t look that great for competition either.

Related GigaOM Pro Content (sub req’d): How AT&T Will Deal With iPad Data Traffic

  1. [...] By James Kendrick May. 21, 2010, 3:16pm CDT No Comments        0 GigaOM reports that AT&T has raised its Early Termination Fee to $350 from the $175 it is now charging. The [...]

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  2. Does this change temporarily give us the right to terminate our contracts without any ETF?

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  3. michellackeret Friday, May 21, 2010

    “…Carriers justify early termination fees because they subsidize the price of hardware for cellphone buyers in exchange for those buyers agreeing to a one- or two-year contract.”

    Does it mean that mean that a person (like myself) who had bought the iPhone through the Apple Store and paid full-price, will not get tacked with these ridiculous ETFs?

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  4. “It’s not unusual that AT&T is following suit behind the nation’s largest carrier, although it is ironic timing given that high ETFs generally reduce the freedom of consumers to change providers, making the industry overall less competitive. Of course, having the nation’s top two providers set similarly high termination fees doesn’t look that great for competition either.”

    Well said!

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  5. [...] GigaOM] Click To Share This! Hide Sites $$('div.d1731').each( function(e) { [...]

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  6. So does this mean telcos are preparing us(US) for India type model where you buy your device and then pay as you go. No subsidy….

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