AT&T to pro-rate early termination fees for cell-phone contracts

In another sign of the growing consumer power in the cell phone marketplace that we reported last January, AT&T has joined Verizon in pro-rating its $175 early termination fee, a major thorn in the side of respondents to our latest survey of cellular service providers (available to subscribers).

But three other big wireless service providers, Alltel, T-Mobile, and Sprint, have yet to deliver on their promises to do likewise this year. Those providers still ding you for up to $200 if you cancel your cell phone contract before its full term is up. Consumer advocates including Consumers Union, Consumer Reports' parent organization, consider such flat fees to be unjustified, since consumers continually repay the cost of a low-priced or "free" cell phone with a portion of their bill each month.

AT&T's plan is similar to Verizon's. For both, there is no cancellation fee for the 30-day trial period at the beginning of a new cell phone contract, during which new customers can quit the service if they're dissatisfied. Thereafter, the $175 fee on one- and two-year contracts is reduced by $5 for each month you stay with the service.

Verizon began pro-rating its cancellation fees in November 2006. AT&T will commence pro-rating for new and renewal customers on May 25. That means, if you're thinking about switching to AT&T or renewing your contract to get an updated, discounted phone, you should try to wait to do so until May 25. Contracts signed before then—and, of course, existing older contracts that have not yet run their full term—will still be subject to the flat $175 cancellation fee.

Spokespeople from the three major cellcos that are yet to implement pro-rating were vague when we called them to inquire about timing. "All I can say is it's in the process," said Scott Morris, an Alltel spokesman. Sprint blamed a new customer-billing platform, which is expected to be in place at the end of June. "Once we do that, we'll implement pro-rating," said Roni Singleton. T-Mobile's response was to repeat its less-than-specific November 2007 press release, which promised only that early termination fees "will decline during the course of a customer's contract term with T-Mobile."

Sen. Amy Klobuchar, D-Minn., calls the AT&T announcement "a welcome but long overdue step." Last year, she introduced federal legislation that would have required pro-rated fees, among other fairness protections for consumers. Now Klobuchar wants the sluggish cell companies to follow through or explain why they're not going to do it. "It is time for the wireless companies to adhere to the assurances they made to the American consumer," she said.

—Jeff Blyskal

Comments

[Jolene]

I absolutely have had nothing but trouble with AT&T! And every other wireless provider has 24hour customer service! They have messed up my bills, charged me for things I haven't used, and just made things all around difficult! I have been a customer for over 3 years... and I am sooo dissapointed that things aren't getting any better! They ridiculously expensive, and I am not even will to ride out my contract! I am also not too happy to pay $400 to shut off my service when the problem is not me, but them! I DO NOT RECOMEND AT&T/CINGULAR to ANYONE! Sprint is good for business because of the two way, I don't know much about verizon, but tmobile is the most reasonable priced one, great customer service, and have good coverage area.

[John Simmons]

The question I have is if the cost of the phone is included in the monthly fee that I pay over the term of my 2-yr contract, why doesn't my monthly charge decrease after the two years have expired and I no longer have a contract? Seems to me I should be getting some sort of discount after my contract is up. After all my phone is now paid for.

[Justin W Banner]

AT&t has contacted a collection agency for over $200 dollers in cancelation fees that I refused to pay for canceling 2 days before my contract was up. will this affect my credit card interest rates? I was missled when I got the phone I asked for a 1 year contract and they sliped me a 2 year and sent me out the door. I have a copy of the contract and I never even signed it

[Laura Yanez]

Just got off with AT&T Customer Service Rep. told me that the full $175 was going to have to be paid although my contract was almost half over. A contract I never signed but was electronically applied since I kept the phone.

I tried my best to stay with AT&T but their rates for adding another phone and getting a Bluetooth compatible made it impossible! I went with Verizon and got new equipment etc. for about half. Phones ended up almost free.

Customer service didn't even offer to prorate. Told me to write to the Office of the President then told me a P.O. Box in Atwater, CA Ha! no way the President is in Atwater, CA.

Would love to leave all of AT&T online services and home phone service just because they've proven that they have deep disdain for their customers.

[Craig Hattersley]

After two years on a Verizon family plan (700 minutes a month for $100), we moved to T-Mobile, as we were using fewer than 100 minutes and wanted the most economical pay-as-you-go plan. As it turns out, we switched over FOUR days early (we wanted to ensure retaining our same phone numbers), and as a result, Verizon is now after us for $612.60 in early termination fees -- despite the fact that we have paid off the entire two years of the original contract. Their corporate actions belie the claim that these ETFs are justified to recoup the cost of the handsets, violating the spirit, if not the last letter, of their rationale.

[Tyler]

Someone not liking AT&T's terms is free to go with Sprint, Verizon or any other wireless carriers.

[Ivonne Garcia]

So to say that Me and my husband been with you for to long and my girls too as hope that you can give us a better deal and bill wise, as a customer and other we such have a better deal as other and hope that you can be better poeple and with your customer who been with you long time i don't like the feeling of takeing adanveage of thank you very much, so help those who pay, you have a great day too.. I HAVE BOUGHT 2 OTHER PHONES ON TOP OF THAT AND STILL PAYING MORE THEN I WANTED TOO AND HOPE THAT YOU CAN HELP ME WITH YOU WITH ONE THAT DON'T WORK AND SEND IT BACK 2 TIME ALREADY SO WHAT CAN YOU CO FOR ME NOW. I HOPE THAT YOU CAN HELP ME AS A SINGLE PATRENT NOW THAT I FELT ME HUSDAND SO CAN YOU HELP ME NOW THAT IM IN A SINGLE PAREN. PLZ LET ME NOW IF YOU CAN I REALLY HOPE SO AS A CUSTOMER.. I WAS REALLY DISSPONETED OF MY BILL ON HOW MUCH I HAVE TO PAY EVERY MONTH I HOPE THAT YOU CAN HELP ME WITH THIS AND GETTING A PHONE.

[Mike]

I am also surprised there is no prorating for people who had prior contracts? There is no loyalty anymore to long term customers. 8 year custumer to US Cellular, moved to an area that our phones did not work well, but Razr's did. Went to US Celullar (was in the middle of a 2 year contract) and told them my story, asked for a discount on new phones, some help only. They said I could pay full retail or sign up for an additional 2 years, making it 3 years till I was out of the contract.

It was cheaper for me to buy out the contract and start a new one with T-mobile! When I told US Cellular this they said basically oh well we can't help you! 8 years we had phones through them and they would not budge a bit!

[vinnie mirchandani]

wow, I am surprised you did not give them a hard time for not releasing 60+ million consumers from that unfair provision...only new customers? No loyalty to customers who have been with them for years...