AT&T's ETF hike: Lock in those iPhone customers for as long as possible

AT&T is preparing to raise the early termination fees on smartphones from $175 to $350 just days before Apple is expected to release its new iPhone

AT&T is imposing a substantial hike in its smartphone early termination fee, nearly doubling it, just days before Apple is expected to announce its latest iPhone. Given the demand that occurs every time Apple launches a new iPhone, it's safe to assume that AT&T, the exclusive carrier for the device, will see a fresh wave of customers committing - or re-committing - to a new 2-year contract when the new iPhone is released.

According to a Dow Jones report, the fee hike - from $175 up to $325 - would take effect on June 1 for smartphones and netbooks. The ETF on other types of phones, referred to as feature phones and messaging phones, will drop by $25 to $150. Apple's iPhone announcement is expected in early June, possibly at the company's Worldwide Developer's Forum, which will be held June 7-11 in San Francisco, a week after the fee hike.

AT&T says the timing of the fee hike is not related to any particular device. Still, it's pretty convenient that the company will impose this new fee, especially if Apple cuts a deal with another vendor for the iPhone in the next two years. Under that scenario, iPhone customers who buy under the new fee would be discouraged from defecting - or forced to pay up.

Critics of AT&T's service - myself included - have argued that iPhone is carrying AT&T but if the device were to be available through another carrier, those lucrative customers might consider jumping to a carrier with better service, notably Verizon. It's also cost them new customers - myself included - who were not willing to switch because of service issues, regardless of the device.

In all fairness, AT&T is not the only carrier drawing criticism over early termination fees. At $350, for example, already has a higher ETF for smartphones than AT&T's new fee. When it raised its fee, it caught the attention of Washington, as well. Early termination fees among the carriers been on the radar of federal regulators, who are concerned that the fees make it difficult for consumers to switch carriers.

Previous coverage: Bill aims to limit wireless early termination fees; Do we need this?

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