In what is termed as an “open letter to our valued customers”, AT&T announced that consumers willing to terminate their connection before the set date in the contract will be liable to pay a hefty sum of $325 as an early termination fees (ETF). Adding further onto its point, AT&T has decided to divide the ETFs it charges on the cheaper or subsidized phones. For consumers dealing with basic, quick messaging phones, the ETF would be $150, even as $4 gets reduced for every month of the contract. For those consumers requiring Smartphone, netbooks or other high-end devices, the cost of ETF would be $325, with a reduction of $10 every month.

AT&T defends its exorbitant ETFs by providing a simple argument: they are offering the consumers with wireless handsets for subsidized rates which are much lower than the market price! The subsidized handsets come with a two-year service contract with AT&T. However, the ETFs being charged are supposedly to help AT&T recover what they invest in providing handsets at subsidized rates. Nevertheless, what has caught the eye of the Federal Communications Commission (FCC) is that while the ETFs are high, it is still quite expensive to forgo the contract, even towards its end. If a consumer bound by 24 month contract forgoes it in the 23rd month, a basic phone user still owes the company $58. For those using Smartphone and other more sophisticated devices, the price goes as high as $95.

Industry examiners are now coming to the conclusion that AT&T has followed the same ETF pattern as brought up by another big player, Verizon. Verizon too recently increased the ETF against a Smartphone up to $350, ensuring that the consumer ends up owing a lot to the company at the time of canceling the contract. However, the examiners are now raising questions addressed to companies like AT&T and Verizon. According to them, if the entire point of charging ETFs is to cover up for the huge discounts offered by the companies on the handsets, shouldn’t it be prorated properly? After all, if the ETF is prorated equally for 24 months, the cost towards the end of the contract should be zero.

Another question coming into the light is that if the entire point of ETF is to recover the discounts offered on handsets, ETFs should not be applicable to consumers who opt to pay the full amount for their handsets. On this the company is clear and ascertains the fact that for consumers not entering into any agreement or term contract, ETFs stand nil and void. However, this remains the only difference. Subsidized handsets or not, all consumers are asked to pay the same fees for the services they avail. There is absolutely no difference in tariff plans for those opting for “no commitment” or “month-to-month plan” and those who opt for a “24 month commitment plan.”

While FCC examines the issue, no measures have yet been taken by the industry or concerned committees to curb this policy.