Verizon and AT&T Charging $300-plus to Quit Smart Phone Service?
Starting June 1, new AT&T customers were notified they will be charged a $325 early termination fee for smart phones and netbooks if they ask out of their contract early. This almost doubles the previous ETF charge of $175. (This fee will be lowered by $10 every month for the remainder of the contract, disappearing after the two-year term is satisfied.)
Harvard Business School marketing professor Frances Frei, an AT&T customer, considers the new fee "scandalous."
"The real message it's sending is that it's simply done trying to win over customers," Frei writes on her blog. "Rather than keeping us the old fashioned way, by creating and sustaining real value, AT&T is now just charging us a ransom to leave. Imagine an AT&T that was truly confident in its ability to serve? How would it behave in the marketplace? It would invite customers to stay only as long as we're satisfied -- and not a cell-phone minute longer."To be fair, AT&T has legitimate costs to recover when users opt out early because it offers a discount phone price in exchange for a two-year agreement. And it's not alone in the practice: Competitor Verizon started charging $350 for disconnecting "advanced devices" last November.
But the AT&T announcement didn't have the feeling of an action based upon some careful business modeling on the early termination problem. There was no real justification for such a giant increase. Rather, it smells like AT&T saying that if Verizon can get away with it, we can to. Just like how the airlines all fell into place when a few started to charge for checked luggage.
Ironically, AT&T ends its announcement, "We appreciate your business and we will continue to work hard to earn it." Um, my guess is they didn't have to work real hard to dream up this unique way of earning loyalty.
How does this sit with you?