AT&T (s 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 (s aapl) 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 (s vz) 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.
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