Wednesday, August 31, 2011, 04:14 pm PT (07:14 pm ET)
Sprint raises smartphone termination fee to $350 weeks before iPhone 5 launchSprint has announced plans to follow AT&T and Verizon Wireless in charging a hefty $350 early termination fee for all "advanced" devices starting September 9, ensuring that customers won't be able to obtain new subsidized hardware and then ditch their service plan.
The policy change, noted by blog SprintFeed, goes into effect just weeks before Apple is expected to launch iPhone 5. Sprint is rumored to be among the US carriers that will carry the new phone.
Sprint previously charged its subscribers $200 to escape their subsidized service contract early, an amount prorated over the term of the contract. By boosting the fee to $350, Sprint will now be in the same ballpark as AT&T and Verizon, both of which hiked their fees to accommodate the shift from subsidizing cheap feature phones to subsidizing much more expensive smartphones.
AT&T's early termination fee was originally $175 for Apple's iPhone, the first widely popular phone costing around $650. The fee was intended to prevent customers from buying an iPhone as part of a contract and then abandoning the contract. Previously, expensive smartphones in the price range of iPhone were carried only by a minority of US customers.
At the end of 2009, Verizon raised its own smartphone early termination fee to $350 as it began to market Droid-branded phones running Android to replace flagging sales of Blackberry devices. The next spring, Google and T-Mobile launched the Nexus One with a $550 early termination fee, sparking scrutiny from the U.S. Federal Communications Commission.
Last summer, AT&T also raised its early termination fee on advanced devices like the iPhone to $325. AT&T's smartphone mix is now predominantly made up of iPhones, and Verizon's iPhone subscribers are growing fast enough to substantially knock down the carrier's share of Android phones within the US.
Sprint's own early termination fee hike suggests that it too will be focusing on moving its subscribers from feature phones to advanced smartphones, setting a date the coincides with the iPhone 5 release. Sprint already sells high end Android phones and operates an expensive 4G network, but those devices make up a relatively small share of its subscriber base.
Picking up Apple's iPhone would likely dramatically change Sprint's subscriber mix. This summer, Verizon revealed that it sold more than twice as many iPhones as it did 4G phones, despite an advertising blitz promoting its new 4G service.
Sprint appears similarly inclined to leverage the popularity of the iPhone to upgrade its subscribers to more sophisticated smartphones. The company has also announced an event on October 7 to provide a "Strategy Update," and Apple has posted jobs throughout 2011 apparently related to supporting a Sprint iPhone.
The company itself has told employees simply not to offer any comment on its plans to support iPhone 5. but the Wall Street Journal was confident enough about its sources to report that the next iPhone would in fact be carried by the company in tandem with Verizon and AT&T at its launch.
Analyst Gene Munster of Piper Jaffray has stated that Sprint could sell 6 million additional iPhones for Apple in 2012, based on a comparison with the shift to iPhone that Verizon experienced.
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