$175 Fee If You Cancel iPhone, Even Though You Paid Full Price

You better frickin’ like your full-price iPhone because if you don’t, AT&T plans on charging you the full $175 early termination fee, even though the phone’s cost isn’t at all subsidized under a long-term-agreement.

Cellphone companies usually justify early termination fees on the basis that it’s meant to recoup the cost of discounting a new phone to a new subscriber.

But if the iPhone is selling for the full price, why would AT&T impose the same high fee? Oh wait, because it’s the iPhone, and they can. (See: Veblen goods). — BEN POPKEN

Boston.com via AppleInsider
(Photo: presta)

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  1. danieldavis says:

    Though I dont agree with it, it certainly makes sense. I mean, with all the new equipment AT&T is adding….

    But still not right.

  2. oldbluebox says:

    It makes me sad that people don’t realize that there are $250 phones out there that can do more than what the iPhone can do.

    Such stupidity.

    And yes they’re touchscreen as well. Have faster internet, can do picture messaging (iPhone can’t do picture messaging OR instant messaging), and have more applications.

  3. beyond says:

    It makes me sad that people don’t realize there are $20 phones out there that do exactly what you need: call people and send an occasional text message, and they get killer talk/standby battery life.

    Unless I’m a business person needing Internet access 24/7, a phone that does anything except make phone calls seems like a waste of money.

  4. enm4r says:

    While I have no care at all for the iPhone (as I type this from my MacBook Pro no less!) I am glad that it will be able to push open wifi in a mobile device. I’m tired of phones restricting me to expensive data plans that I don’t plan on ever buying.

    There’s a pretty big novelty aspect right now, because free wifi isn’t available everywhere. But I’d be willing to pay the money for open wifi that includes browsing, email, instant messaging, etc.

    Phones are getting closer, but still not there yet, and if iPhone does anything in the US, I hope it pushes the open wifi standard that is on what, only 2-3 phones now?

  5. lhutz34 says:

    Basically, yes. The ETF is easier to swallow on most plans because the phone is subsidized, but there are a lot of other good business reasons for the fee, for example, being able to accurately predict revenue over a longer period of time. You don’t have to worry about a 40/month customer canceling his service if there’s an ETF penalty, because the ETF will both deter the customer from canceling and recoup the unexpected lost revenue if he does cancel.

    AT&T are upfront about their 2-year contract requirement, so how can they enforce it if there’s no ETF? I’d rather have a month to month service too, but if they don’t offer it, there’s not much I can do except agree to the contract or not buy the iPhone. And lets not kid ourselves, this apple fanboy is buying the iphone. Of course, if they then make a materially adverse change to my contract…helloooooo, T-Mo!

  6. nweaver says:

    The iphone looks like a really interesting device, but its closed platform nature (I need to do my blog post on WHY this won’t change) makes it an instant turnoff. Although it has the capabilities to do what I want, the lockdown keeps me from exploiting such capabilities.

  7. Krycek says:

    you should still be able to purchase the phone without a contract to avoid the fee, I personally feel that the iphone is rather pointless because you could get a 30GB ipod for half the price and a treo or blackberry and you would end up being able to do more between the 2 and spend less money.

  8. nequam says:

    @oldbluebox: There are also clothes at the Goodwill store that do the same job as the stuff you’re wearing. I know it sounds like a ridiculous analogy, but Apple users have always been willing to pay a premium for elegance and the brand. What you’re saying is like telling a Harley rider that a Honda is a better deal.

    The logic you assert (and I agree that it is logical, but misses the point) would also counsel against buying an iPod where less expansive and more versatile options are available. That’s not the way things have gone.

    It’s not stupidity. It’s merely a value judgment you don’t agree with. Most Apple fans (and I am one) apparently have decided that there is more to electronics than mere utility.

  9. Hawk07 says:

    I see the product advertised so heavily that I think we may be looking at the iPhlop.

    Businesses – Already numerous phones geared towards them (i.e. RIM, Treo, Palm)

    Adults – Being trendy isn’t always that important

    Teens/Young Adults – $250 and $500 plus a year or two year contracts isn’t going to come cheap and I doubt ma and pa will jump at the opportunity to buy them another phone.

  10. visualbowler says:

    @oldbluebox:
    I believe iPhone has iChat for IMing. This is also bs, If I pay full price for a phone, i dont want an early termination agreement ON TOP of that. It’s just stupid to pay $175 for cancelling service. I’m hoping since they took out the 2-year cancellation clause we can assume we don’t have to sign up for iPhone service, have a company unlock the phone and bring it over to another GSM provider. Except for the fact that the new ATT infrastructure is the reason that the iPhone is cool. DAMN

  11. TPIRman says:

    @oldbluebox: It makes me sad that people don’t realize that there are $250 phones out there that can do more than what the iPhone can do. Such stupidity.

    “Do more” is subjective. From the beginning, there have been similarly priced MP3 players with longer feature lists than the iPod. (FM radio was the big one for a long time, but that dropped off the rader — even though iPods still don’t have an FM tuner.) Perhaps, like the iPod, many people are interested in the iPhone because of its aesthetics and (purported) ease of use. Kind of makes sense for something that you’ll be looking at and using every day.

    Is it necessarily “stupidity” when people have different reasons for buying electronics? Or is it stupid to assume that everybody has the same priorities that you do?

  12. visualbowler says:

    @Hawk07:
    I own apple stock and follow the rumor sites and analysts religiously. They are all claiming that this will be a huge success for apple and ATT, whether thats the case or not is another deal, but I also have people who I go to school with, high school, who carry around blackberry pearls for absolutely no reason and those are expensive too. They don’t have the email feature enabled nor do they have the internet feature enabled, they just use it for phone calls and texting… There are plenty of girls out there who will do the same for the iPhone.

  13. FLConsumer says:

    @enm4r:

    While I have no care at all for the iPhone (as I type this from my MacBook Pro no less!) I am glad that it will be able to push open wifi in a mobile device. I’m tired of phones restricting me to expensive data plans that I don’t plan on ever buying.

    Gee… My little UTStarcom 6700 phone/PDA has WiFi and has been available for over 2 years now and I primarily use it on WiFi. It’s not a great phone, but just about every PDA-type phone sucks as a phone, with the exception being the Treos.

    On the actual article, the ETF — Looks like the “New AT&T” still sucks as bad as “the old Cingular” and The Old AT&T. Anyone who switches to Cingular, er, ahem, AT&T to get this phone definitely is buying the phone to be trendy. Guess it’s trendy to have a slick looking phone on a service provider with some of the worst network coverage in America.

    I wonder if the iPhone will have misreading over-optimistic signal meters like most of AT&T’s other phones do. Always loved that one. 5 bars showing on the screen, go to make a call and watch the bars drop down to 2-3, sometimes none.

  14. @oldbluebox: “And yes they’re touchscreen as well. Have faster internet, can do picture messaging (iPhone can’t do picture messaging OR instant messaging), and have more applications.”

    The iPhone has WiFi. Which other phones have “faster” Internet?

    The iPhone also does picture messaging and instant messaging – you’re either very ill-informed or trolling.

    The iPhone is also a full-features widescreen iPod and has a full-featured web browser, instead of the mini-browser of most other phones. I think there’s plenty to recommend it to people interested in carrying one less device around – especially people who bought iPods 2-3 years ago and are ready to trade up.

    There are plenty of MP3 players that do “more” than the iPod, yet Apple brought their design and interface acumen to that market and owned it after two years and three generations of product. I believe they’ll do the same thing with the consumer smartphone segment of the market.

  15. nequam says:

    @FLConsumer: Good points. But the UTStarcom 6700 looks like a diabetes monitoring device.

  16. LatherRinseRepeat says:

    Huh? $175 is nothing. After you sell the iPhone on ebay, you’ll make your money back, plus profit. I’m going to guess that the initial batch of people that buy the iPhone are only out to make a profit on a much hyped product.

  17. enm4r says:

    @FLConsumer: Which is why at the end of my post I made reference to the fact that a few other phones on the market have wifi. But still, is this a standard? No. That’s my point. Apple has the ability to force other manufacturers, and more importantly, other providers into allowing wifi on their phones.

    Also, as you mention, it sucks as a phone. I had it for about 2 days and was completely unimpressed with it. (This was on Verizon.)

  18. sled_dog says:

    Sounds like the iScrew to me.

  19. consumer_999 says:

    Why exactly, I wonder, is everyone so obsessed with Apple products? I just don’t see it. Somehow I manage to survive with neither a macbook, nor an ipod, nor an iphone. Wow, you say, but I say it’s true!

  20. Buran says:

    @visualbowler: It’s fake iChat and it’s just for SMS. It won’t work with IM services.

    That and the lack of 3G mean I’ll be buying a Blackjack, unlocked, via eBay and using that for a while. I’ll look at the iPhone again when and if it adds 3G and IM.

  21. roamer1 says:

    @lhutz34:

    Basically, yes. The ETF is easier to swallow on most plans because the phone is subsidized, but there are a lot of other good business reasons for the fee, for example, being able to accurately predict revenue over a longer period of time. You don’t have to worry about a 40/month customer canceling his service if there’s an ETF penalty, because the ETF will both deter the customer from canceling and recoup the unexpected lost revenue if he does cancel.

    Carriers usually require contracts subject to ETF even if you bring your own phone. In the past, Cingular and Sprint would allow month-to-month when customers BYOP (and I believe Sprint still does), but customers who did that wouldn’t get free M2M, N&W, etc.; that situation isn’t much different than business telecom providers or other companies who provide discounts and/or freebies for a term contract. What I have a problem with are carriers like Verizon Wireless and T-Mobile (and now AT&T, unfortunately) who require a contract for ANY new postpaid activation, even if you BYOP and sign up for a “non-promotional” plan (pretty much, they treat ALL plans as promo plans.) As for the “if you want no contract, get prepaid” line: prepaid just isn’t an option sometimes, especially if you need data service or roaming coverage, thanks to US carriers treating prepaid like a red-haired stepchild (Alltel and T-Mobile are better than most, but VZW’s prepaid is a joke and Sprint is too ashamed to do prepaid under its own name.)

  22. Buran says:

    @consumer_999: Because they look good and because they are easy and comfortable to use. People do pay a little extra, if they have to, for something they like to use.

    Plus, the OS is secure and has a lot of software available for it now, and the ipods have all sorts of add-ons out there, last but not least OEM car adapters that mean you don’t have to fiddle with mix CDs anymore.

    Don’t sneer at people who use Apple stuff just because they use Apple stuff. Why don’t I see the sneering aimed at, say, BMW drivers or Rolex users or Prada wearers? They, too, pay extra for those things. And if they want to, that’s their choice.

    I’m an Apple user, I have a few iPods, but I’m not in the “they can do no wrong” camp. I also use the right OS for the right job — but I also don’t regret the choice.

  23. Buran says:

    @LatherRinseRepeat: That wouldn’t surprise me, and I’d certainly look at doing that, except for the fact that the voicemail requires server-side support. I don’t know if it would work with regular voicemail or not. I doubt we’ll know til someone tries it.

  24. Buran says:

    @CaliforniaCajun: It doesn’t have 3G, so yes, other phones can do Internet faster — over the cellular network. AT&T documents posted on sites like macintouch.com have already stated that it won’t work with IM services (the “iChat” in screenshots is just an SMS client that looks like iChat) and it won’t work with MMS.

    So the message you responded to is correct, assuming the leaked documents are correct as well — it just doesn’t explain that the “faster internet” comment means “it doesn’t have 3G while other phones do”.

    The Nokia n95 is another smartphone that does wifi, etc. — but it doesn’t work on US 3G, nor does it have a qwerty keyboard. Too bad — I would have bought one if it had qwerty at least.

  25. consumer_999 says:

    You have a few ipods? I’d say that indicates a problem right there. :) Anyway, I only mentioned Apple because this is an Apple thread. Actually I don’t have a cellphone at all. I don’t see reason to be in constant contact with someone at all times, especially in 4 out of 5 cars driving down the highway; though I concede it is good for emergencies, and I’d probably have one if I was a parent at this time. But people today wonder why they have so much debt, when it’s really quite simple; in the majority of cases it’s all of this unnecessary spending on adult toys. You can live without them. Of course people are free to choose though. But they shouldn’t buy themselves into debt over it.

    I think Apple gets special attention because it caught on so quick, it can’t possibly other than some kind of mind control or sheep herding phenomena. I go to meetings where of the 9 people around the table, 7 of them have brand new macbooks. Somehow, that strikes me as a problem. Almost like it’s the new drug.

  26. JustAGuy2 says:

    This is shocking – a company has a highly in-demand product, and they’re charging a high price for it. Completely outrageous.

  27. Buran says:

    @CaliforniaCajun: It’s not a troll. It’s true.

    iPhone has faster Internet — as long as it’s using Wifi. Over the cell network it only has 2G, not 3G — so over the cell network it’s quite a bit slower. The IM client that looks like iChat is just an SMS application, and it cannot do MMS.

    This is from leaked AT&T documents posted to sites like macosrumors.com.

    Nice how people scream “troll” when someone posts something that they think is wrong, and don’t bother to do research.

    What’s with the rush to scream “troll” or “photoshopped” these days?

  28. Buran says:

    @Buran: … and NOW my original comment shows up. Arrrgh.

  29. Buran says:

    @consumer_999: Or maybe they just like the looks, security, ease of use, and think they got a fair deal.

    Buying something that a lot of other people have doesn’t automatically make you a sheep.

  30. Don Roberto says:

    Att: “Look um, we know there’ll be a glut of iphones and iphone-like devices within a year of our exclusive release, so um, sign here for a two year contract. It’s so you’re not tempted to stray from us.”

  31. Hawk07 says:

    Another thing, if I’m not mistaken, AT&T has like a 5 year lock on this phone. I wouldn’t be surprised if it’s hacked though so it can be unlocked and used on any GSM network.

  32. ZonzoMaster says:

    While it’s true that not everyone buys electronics because of it’s functions, and that apple is suposed to bring easy to use products, it’s still a shame that many people will buy such an expensive product merely because it’s “the new thing” and it’s “cool”, it is their money, but wasting it just be part of a trend seems kinda pointless to me.

    I’ll have to see it myself first to judge the “easy to use” design…

    Still, i’m sure many people actually think of what they buy, and well, the iPhone isn’t a bad product at all.

  33. Techguy1138 says:

    Will you be able to get a new iphone attached to your old plan without a fee?
    I know a big part of Apple’s business comes from people who buy new iProducts each year.

    That could be bad for Apple, but good for AT&T.

  34. missdona says:

    @beyond:

    If you’re a business person, you’re not going to be able to use the iPhone for corporate email. It doesn’t support Push email or Exchange systems as of now.

    I’m sticking to my tried-and-true-Treo.

  35. MrEvil says:

    $175 contract termination fee and you paid FULL PRICE for the phone anyway? What a load, that’s the reason I don’t like ATT. Perhaps they should have changed their name to Cingularity because they love sucking up money like a Black Hole.

    Sprint and Alltel will let you pay full price for the phone and avoid the contract.

  36. oldbluebox says:

    @CaliforniaCajun:

    The iPhone is not capable of MMS. Which is picture messaging, you’re the one misinformed. It also does not come standard with any sort of “instant messaging”.

    Also regarding your “omg it has wifi”.

    Dash, Touch, among a lot of other phones have Wifi as well.

    Thanks.

  37. SirKeats says:

    i don’t know that i understand. generally you’re forced to commit to a two year agreement in order to get the cheap phone. if you buy a phone outright, you’re not obligated to contract for any length of time. is that not the case with the iphone? do they make you sign on for two years even if you buy the phone outright? an eft would only apply if you’re forced to agree to contract so i’m confused as to how this is working with ppl getting the iphone (thank god i don’t want one. LOL)

  38. John Stracke says:

    @enm4r:

    I am glad that it will be able to push open wifi in a mobile device. I’m tired of phones restricting me to expensive data plans that I don’t plan on ever buying.

    I’m pretty sure AT&T has said they won’t sell the iPhone without a data plan—and it has to be the special iPhone data plan.

    There’s a pretty big novelty aspect right now, because free wifi isn’t available everywhere. But I’d be willing to pay the money for open wifi that includes browsing, email, instant messaging, etc.

    (a) The iPhone doesn’t have an IM client.

    (b) If you want handheld WiFi, get a Nokia N800, or something similar. $200-300 less, lots of software to install, and you actually own it without any ETF.

  39. BillyShears says:

    If Apple and AT&T are actually going to limit it to a special plan, they’re really spiting themselves. Not many current, under-contract customers are going to extend their contract by signing up for a new calling plan.

    If they are, then they’re spiting THEMselves.

  40. skechada says:

    Thanks John for posting at least another similar phone. I was getting annoyed about people mentioning mythical “other similar phones” with not so much as a mention of brand, much less model.

    Links to any other phones with cool iPhoneish capabilities would be appreciated too!

  41. krunk4ever says:

    How do you know that’s “full price” when they don’t sell it w/o a contract?

  42. Trick says:

    They said the iPod would not be a success too…

    Never underestimate of those who want to spend far more money than needed to have a little apple on their product.

  43. Topcat says:

    This $175 fee is just a tax on stupid people, I’m all for it. If you buy into the iPhone and don’t realize and plan ahead for the potentially exorbitant cost of mobile data transfer, you deserve to get stuck with an extra fee.

  44. Why is this news worthy? Every AT&T contract has a $175 break fee no matter how much you paid for the phone. If you don’t like the terms of the contract, get a different phone – that’s simple.

  45. DudeAsInCool says:

    What ever happened to anti-trust measures? Isn’t it about time that ATT was broken up again…and forever?

  46. Promethean says:

    @missdona: you’re sticking with the Treo? That’s fine, but from my treo usage, it also doesn’t have “push” email the way blackberry does. It has Versa mail, which allows the same pop/imap & a few major free services (yahoo, etc.) that the iphone will.

    POP/IMAP get’s you into pretty much any email server, exchange included, at least for basic send/receive functions. Send can sometimes depend on the client supporting certain security protocols, for which the Treo then requires an additional software purchase.

    My concern with the iPhone will be the security support for sending email through my work server. If it’s basically the same client as the regular Apple mail program, this shouldn’t be a problem. We’ll see…

  47. centernetworks says:

    Don’t forget that the $599 is not the full price, but the subsidized price – same as when you get a razr for “free” – that’s not the full price.

    And if you think that’s bad, what about my post earlier this year about the cost to own an iPhone for a year?
    [www.centernetworks.com]

  48. gblakeman says:

    this has nothing to do with the iPhone – just last week I went around to each of the major wireless providers trying to figure out how to get any type of service without a contract (and the subsequent ETF) – IT IS NOT POSSIBLE – even if you bring your own technologically compatible phone to the table that you purchase yourself they still all require contracts for a service plan (even if you ask them to not sign you up for any “promotions”

    the rep I talked to at at&t was actually very sympathetic and he showed me the computer system he uses to sign up customers – doesn’t even give him the option to sign someone up without a contract

  49. anti-corp says:

    I agree that this is outrageous. Imagine going to your local TV store and buying the brand new plasma you have been dreaming about “at full price”. Now imagine that you are told that if you cancel your service with the local cable company and switch to another provider that you will have to pay an ETF. What would you say? Exactly! When was the last time you let the local phone company (land-line service) tell you which phone to buy? Never?

    When will consumers realize that any restriction of your choice as a “full-paying member” of this consumer society goes against our best interests.

    Yes, I have a cell phone and no I don’t have a contract. Three years ago I signed up for a two-year contract with, then, Cingular and it has expired. I have purchased a new cell phone, “at full price”, to get the features that I want. I get 1000 anytime minutes with rollover plus unlimited nights and weekends for $39.99. My rate is grandfathered in and will never change as long as I don’t sign up for a new contract. I have the freedom as a consumer.

    As soon as all of us stop letting corporate America dictate the terms of use by restricting the amount of cash we let fly out of our wallet, we will all be better off and have more choice.

  50. Another reason I hate AT&T (Cingular)

  51. bhopali says:

    boohoo.

    No one is holding a gun to your head to buy the iPhone. You are buying it of u’r own free will and the terms and conditions are known to u before hand. So get over it.

    If you are cribbing about how expensive or restrictive it is then the iPhone is not for u.

    -not-an-apple-fan-boy

  52. asplodzor says:

    @anti-corp: When was the last time you let the local phone company (land-line service) tell you which phone to buy?

    Not quite as long ago as you might think actually. AT&T (technically called Bell System at that point, prior to multiple company break-ups) used to only allow company-owned phones on subscriber’s landlines that the subscribers leased from them.

    To many people, Bell Systems (or Ma Bell as it was better known) is still the original man to be hated when thinking about big business DRM and monopolies.