Ditching Your Cellphone Provider on the Cheap

FOR WIRELESS CUSTOMERS, the price of freedom has long come in the form of exorbitant early termination charges. A customer who abandoned a contract before it was set to expire could expect to pay as much as $200. And for a family of four looking to ditch their wireless plan, fees could climb to an astronomical $800.

But now, customers are fighting back — and claiming some sizable wins. Last month, a California court ruled that Sprint's (S) early termination fees were illegal because they were, as the court decision said, "implemented primarily as a means to discourage customers from leaving" their contracts. Sprint was ordered to pay $73 million in damages. And Verizon Wireless (VZ) recently agreed to pay $21 million to settle a lawsuit filed by subscribers in California that alleged its early termination fees were excessive and violated state law.

The activism seems to be working. "I think carriers are finally waking up. They don't want to tick off the customer," says Jeff Kagan, a telecom industry analyst. Now, instead of charging a flat fee no matter what, carriers are prorating penalties, which decrease as customers get further along in their contract. Moving to a prorated fee structure is "something they're all going do," Kagan says, "and I think you'll see them do it fairly quickly."

The new cost of breaking up

With the exception of Sprint, all the major carriers have made their early termination fees more subscriber-friendly. (According to a company spokeswoman, Sprint plans to institute a new prorated fee schedule by the end of the year.) Here are their new prorated plans:

Wireless Carrier	Previous early termination fee	Current early termination fee	Who's eligible for prorated fees?
Verizon Wireless	Flat $175	Starts at $175 at the beginning of the contract. For each month that a customer sticks to their contract, the fee is reduced by $5. In effect since November 2006.	New subscribers and those renewing contracts after November 2006.
Sprint	N/A	$200 flat fee (The company plans to introduce a prorated structure by end of 2008.)	N/A
T-Mobile	Flat $200	$200 with more than 180 days remaining on contract; $100 with 91-180 days left; $50 with 31-91 days remaining; either $50 or the standard monthly charge, whichever is less, for those with fewer than 30 days remaining. In effect since June 2008.	New subscribers and those renewing contracts after June 30, 2008.
AT&T	Flat $175	Starts at $175 at the beginning of the contract. For each month that a customer sticks to their contract, the fee is reduced by $5. In effect since May 2008.	New subscribers and those renewing contracts after May 25, 2008.

Ensuring an Amicable Split

To help reduce your chances of going through a contentious divorce with your carrier, follow these steps:

Take a test drive

Take advantage of the free trials most carriers offer, suggests Jeff Blyskal, senior editor at Consumer Reports. "Check out the service, use it where you'd be traveling to or in your home," he says. If you're unhappy for whatever reason, return the phone, get a refund for the handset and activation fee, and try another service.

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User Comments

Posted: 9:19 AM EST October 10, 2008

Posted by: yrush007

When I started out with my particular plan, I believe the cost was $39.99 with unlimited nights and weekend. After adding a game or two, I figured the bill should be $50-$60 per month. You can imagine my surprise when the first of many bills totalled almost $200 bucks! After numerous calls and emails, it was lowered somewhat, I removed quite a few extras, and now it's although not in my ideal price range of $50-$60, it's manageable. You must check, check, and DOUBLE-CHECK all of your bills each month. Had I not done so I would still be paying close to $200 each month. Oh, and I forgot to add - a lot of it was due to the provider's error. On another note, if a phone was purchased through a particular provider (regardless of when), why are they not obligated to take it back and decrease the cost of a new purchase? I receive an upgrade every 2 years and have a small collection of cellphones.

Posted: 8:05 AM EST October 10, 2008

Posted by: griderrr1

This information does not include what a third party like Supercomm,LLC who sells AT&T phones can charge you. Third parties do not even adhere to the co's basic rules of returns and cancellation fees. I sent my complaint to the att General of Fl. but nothing was done. This is another are of abuse to the consumer , I wonder if we stop the fees they will holler they are broke and ask for 1B bailout!. Co's have been in the business of ripping off consumers more and more. may they all sink until they learn fairness.

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