The Changing Face of Contracts & Early Termination Fees

Many have had to switch wireless service providers for one reason or another, but if the timing is not right customers can get hit with fees for early termination, up to $200. While there are some loopholes to these contracts (e.g. moving, joining the military, customer impacting carrier imposed rate changes, and death), these contracts and termination fees have been pretty difficult to avoid.

This was tough enough with one year contracts, but it has become even more painful with the proliferation of two-year contracts that started to emerge when Local Number Portability legislation went into effect in November 2003 - they are now pretty much the standard.

Yes, you can get one-year contracts or non-contract plans with most carriers, but you do not get the great device offers that are available to those willing to commit. Further compounding the problem over the years, carriers routinely require a contract extension when changing to a new, more attactive, “promotional” plan.

There is good news to report - times are changing, and you should understand the changes, because contracts and Early Termination Fees are no longer as onerous as they were, or may appear on the surface. Driven by the goodness of their hearts, lawsuits and also by proposed legistion including but not limited to the Cell Phone Empowerment Act of 2007 and Wireless Consumer Protection and Community Broadband Empowerment Act of 2008, carriers have implemented, and are implementing, subtle but significant changes to lessen the sting of long term contracts and Early Termination Fees.

For example, most cellular providers now give you a trial of up to 30 days (depending on your provider), during which time you can break the contract if the service does not meet expectations - for any reason. In these cases you can cancel service and only pay for prorated services used. Of course, after that initial trial period, if you terminate service before the end of your contract period you are responsible for an Early Termination Fee.

Another new development coming into play last year: carriers are no longer requiring you to extend your contract when changing to their new plans. Contract extensions are now typically only tied to rewards provided by the carriers and their partners (e.g., Wirefly) in the form of great pricing on phone/device upgrades historically reserved only for new customers. Wirefly now offers great offers on upgrades for all carriers.

Finally, some carriers no longer charge the full Early Termination Fee if you cancel service before the end of your contract term. Verizon Wireless began this practice in November of 2006 for new and renewing customers agreeing to contracts on or after November 16, 2006. For these customers the $175 Early Termination Fee is reduced by $5 per month for each full month completed.

AT&T, Sprint and T-Mobile all announced their plans to move to prorated Early Termination Fees last fall, but, among these carriers only AT&T has definitively defined the plan and committed to an effective date, May 25, 2008. Like Verizon Wireless, AT&T charges an Early Termination Fee of $175 and will reduce the fee by $5 per month for all new and renewing customers agreeing to the new terms when they go into effect. Sprint and T-Mobile are both expected to launch their new terms before Q3 2008.

As we’ve always done, Wirefly provides full details of all terms and conditions for all features and and all plans, for all carriers, so you can be certain to have all the information needed to make your purchase decision and buy online. Also note that while carriers will continue to offer contracts and impose termination fees, the benefit to the customers continue to be the significant upfront discounts on device packages like those offered on Wirefly. Finally, carrier coverage and service quality has and continues to improve dramatically, with the benefit of the trial and satisfaction periods offered by carriers and Wirefly, customers can be assured of ample opportunity to select or continue with (upgrade) the best service and device options through Wirefly.