From June onwards, AT&T has hiked up its early termination fees (ETFs) to $325 in what might well be a move to ensure that iPhone users are kept locked in.
The ETF is the fee that a user is to pay when he/she terminates the service contract. The early termination fees are being raised by the company from $175 to $325, which commenced from the starting of June. Incidentally, this roughly coincided with the expected release date of Apple's unlocked iPhone 4G/HD. This increased amount will be applicable to fresh contracts only and on the other hand ETF on feature handsets will drop down to $150. Renewal of a contract for a new iPhone will however get you into the province of this new ETF.
Naturally this new policy change is rather a hassle but the underlying logic behind AT&T's decision is not that difficult to fathom. Apple's unlocked iPhone 4G/HD will in all probability be having an entry level price of $199 although AT&T has to shell out around $500 to $600 for a single set. Counting that in the reckoning, along with the number of people who are going to purchase the item, it totals up to quite a tidy sum in subsidies. They should certainly be able to get that money back over time due to the mobile data services of the users. Still, this does give enough of a prod for a rethink of strategies. It's an even greater problem for AT&T as many owners of iPhones 3GS unlocked handset compulsively upgrade to the latest version on an annual basis, expecting the introductory pricing.
This move is close on the heels of Verizon's hiking up of its ETF to $350 on "advanced devices" citing similar causes. The increased ETF may be another impediment for current AT&T customers to change, especially after rumours that Apple might go with Big Red, thus endangering AT&T's exclusivity with the iPhone.