Astounding: Canceling iPhone service will cost $175

I seriously don’t understand this. According to this article in the Boston Globe, Cingular (now AT&T, again) is going to charge an early termination fee of $175 if you cancel your service agreement before the 2 years are up. Um WHAT?!

See in the United States, we pay nearly nothing for most cell phones. This is because they are ‘subsidized’ by the telcos such as Verizon, AT&T, T-Mobile, and the like. The early termination fee is charged if you leave before your contract is up to cushion the telco from losing money on the subsidy to you. But since AT&T is NOT subsidizing the cost of the iPhone (hence the $499 and $599 price tags) – they HAVE NO RIGHT to charge an early termination fee.

So I guess the moral of the story is – if you chose to buy an iPhone, you better know you’re going to like it!!!

PS As I’ve said before, I wish we had the European model of cell phone usage. They purchase their phones at full price (even if it means paying $200-400 per device) and get pre-paid SIM cards for GSM phones. When I get released from my service contract with verizon, I’m going this route. I’ll find some cool phone I like and just go pre-paid. Service Agreements suck

  • fareal

    How is that different than a normal early termination fee when you cancel most other cell phone service after the trial period is up?

  • jason

    fareal,
    as I said in the blog post, normally a carrier charges an early termination fee to recoup the expense of the phone subsidy. They difference here is that AT&T doesn’t subsidize the cost of the iPhone, meaning they have no justification to charge an early termination fee.

  • Michael

    I thought that the iphone prices were subsidized…?

  • jason

    no Michael, from what I know, you’re paying full price.

    here’s a related article:
    http://www.engadgetmobile.com/2007/04/25/iphone-qanda-for-atandt-employees/

  • fareal

    re: jason said, on June 22, 2007 @ 10:56 am

    Is this the first time a U.S. phone has not been subsidized?

    I wouldn’t expect that a U.S. mobile phone provider would alter from their regular Terms of Service regarding Early Termination Fees only for specific (unsubsidized) phones.

    They should instead lower the price of the phone. But since its the allmightly Apple iPhone, who knows when we’ll see a lower price.

  • You can return the phone and cancel service without paying a fee if you do it in the first 15 days of purchse.

    If you do it in the first 30 days of purchase, they waive the fee, but you can’t return the phone.

    After that first 30 days, THAT’S when you’d have to pay the $175 cancellation fee, which is pretty standard. t-Mobile charges $200 and only gives you 15 days.