AT&T raising the early upgrade fee and why it isn't a smart move

Taylor Martin
 from  Concord, NC
| October 12, 2010

One of the largest problems that consumers have with wireless service providers in todays market is the ever-increasing pricing and the nickel-and-diming that goes on behind the front of set-price rate plans. Recently we have watched AT&T raise their early termination fees, eliminate unlimited data and introduce tiered data structure, and now increase the early upgrade fee a pretty penny.

I understand their reasoning behind the tiered data and bumping up the ETF, but I can't quite wrap my head around their hiking the early upgrade fee so high. Before, to upgrade early to a Samsung Captivate, it would cost $200 plus a $75 early upgrade fee. Now, purchasing the same phone as an early upgrade it would cost one $400. That's an increase from $75 to $200 for the fee. To buy the Samsung Captivate off of contract, it would cost a user $500, only $100 more than as an early upgrade. This should and probably will motivate a customer to purchase off of contract rather than signing another two-year contract.

I assume that AT&T has hiked the price of the early upgrade fee to deter people from purchasing phones on an early upgrade, and this change in price will more than likely do just that. When you purchase a phone on contract, the price of the phone is cut severely and the carrier makes it back over the length of your contract. If everyone upgrades early, their profits will be cut in the long run, so I can understand them raising the price of the fee. But over doubling the fee is a little outrageous, especially if the fee puts the price of many phones on early upgrade a mere $100 less than buying the phone contract-free. The smart move for the customer here would be to purchase the phone outright for $500 or so and remain on AT&T without a contract (after their current one expires, of course). The major problem comes when this happens with multiple AT&T users. If customers are averted from upgrading early and purchasing phones outright, in the long run more customers will be left contract-free. Meaning, if the customer wants to up and leave for another carrier, they will be able to do so at any time. I think raising the fee to $100 or $125 would be a reasonable change, but $200 is just too much.

AT&T could lose their leverage on price plans and eventually push some customers over the edge. I'm not saying that enough customers take advantage of the early upgrade option or that this is a fatally wrong move for AT&T, but with all of the other changes they have made recently, it doesn't look like they're too worried about what their customers think or whether they're on contract or not. With the recent statistic that up to 40% of AT&T customers would jump ship if Verizon gets the iPhone, if the rumors pan out, AT&T will be in no place to be making such superficial decisions.