Friday, May 21, 2010, 12:55 pm PT (03:55 pm ET)
AT&T to increase iPhone contract early termination fee to $325Starting June 1, new AT&T iPhone customers who wish to cancel their contract with the wireless carrier will need to pay a $325 early termination fee, up from the existing $175 cost.
The new fee will apply to all smartphones, including Apple's iPhone, as well as connected netbooks. For feature and messaging phones, the fees will drop to $150, according to Dow Jones Newswires.
Though there has been speculation that AT&T could lose exclusivity of Apple's iPhone over the next year, an AT&T spokesperson reportedly said that the increase in the ETF to $325 was not related to one specific device.
"The changes come amid increased regulatory scrutiny and class-action lawsuits over the issue," the report said. "The Federal Communications Commission has expressed concern that onerous fees make it difficult for consumers to switch their service. Wireless carriers argue the fees are necessary to recoup the costs incurred by the subsidies they provide to lower the initial cost of the handset."
The change follows a previous move by competitor Verizon, which began charging a $350 ETF for smartphone users. Google and T-Mobile also charged a combined $550 fee for those who canceled their contract on the Nexus One. Both of those recent developments have brought ETFs under scrutiny from the U.S. Federal Communications Commission.
AT&T and Apple offer the iPhone at a subsidized rate, starting at $99 for the iPhone 3G, with a two-year contract for the device. Starting in March, Apple began selling contract-free iPhones at a much higher price, as it has done in previous years, to help clear out inventory before the launch of new hardware.
In addition to recouping lost money from a canceled contract, ETFs are also designed to deter customers from jumping to another network. The timing of the ETF increase will undoubtedly result in speculation about the potential of the iPhone becoming available on a carrier other than AT&T.
Apple is expected to introduce its next-generation iPhone when it kicks off the annual Worldwide Developers Conference in San Francisco on June 7.
Rumors of a Verizon iPhone have been persistent since March, when The Wall Street Journal reported that Apple is working on two new iPhones, including a CDMA-capable model that would be compatible with Verizon's network. That report alleged that CDMA iPhones would not go into mass production until September.
When he was asked this week about the prospect of the iPhone on other carriers, Ralph de la Vega, president and CEO of AT&T's Mobility and Consumer Markets division, said he isn't concerned. He said his company's family talk and business discount plans do a good job of retaining customers.
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