According to a study by the U.S. Government Accountability Office, 42% of mobile users won’t switch carriers due to the outrageous early termination fees (ETF). According to the report, even when mobile users are somewhat or very dissatisfied with their cell phone provider, the cost of early termination keeps them locked into the contract.
Exorbitant Termination Fees Keep Subscribers Trapped
Out of the 270 million American wireless subscribers in 2008, the study showed 10% were dissatisfied. That equates out to 27 million unhappy customers. One would think that 27 million American voters could have a lot of pull in getting the government to regulate the costly early termination fees. And in fact, Information Week reported on December 4, 2009, that four U.S. senators have introduced a bill seeking to limit the EFTs charged by cell phone providers.
Smartphone users can face up to $350 EFTs. Some cell phone service providers such as Verizon, have literally doubled their EFTs for customers purchasing some of the Smartphones with a one or two year service agreement. Verizon argues that customers have a choice to purchase the phone outright, with no service contract thereby eliminating the EFTs. For example, with a two year contract, the Samsung Omnia II is $199 through Verizon. You can purchase this phone “unlocked” for about $550. Seems like the pricing is pretty equal to me, with the option to pay upfront charges or EFTs. And of course if you stick it out for the 2 years, your price is only $199.
I think the real question is whether being locked into a service contract is worth it. If you are happy with your service provider then yes, I think the contract is fine. If you are a new customer, perhaps there ought to be an early opt-out clause with a sliding scale EFT depending on how long you have keep the service.
Which way does your mind bend around this? Are you ready to chuck it all and do the prepaid phone service rather than a contract? And is the service just as good? Let me know what you think?
