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Early Termination Fees and Other Carrier-Based Charges
We identified three types of wireless fees that can be lowered or avoided by choosing the right carrier (although some, such as the notorious early termination fee, are more pervasive than others), by changing phone usage practices (e.g., using less data, especially when outside the carrier's coverage area), or by closely monitoring your wireless bill. The first group of fees varies based on your carrier of choice, and these include activation, phone upgrade, and early termination fees, as well as charges for late payment and adding another line to a family plan (see chart).
Activation Fee.This one-time charge for opening a new line falls in the mid-$30 range at Verizon Wireless, AT&T, and Sprint. Only T-Mobile holds back, although it does charge $10 for a SIM card starter kit for new customers who don't already have a SIM card. One new Verizon Wireless customer writes on a company discussion board of defecting from Sprint after being hit with an activation fee, not realizing that Verizon Wireless demands the same toll. In reply, another Verizon Wireless user points out that activation fees are standard practice but says they are often waived during promotions by carriers or by third-party suppliers (such as Radio Shack and Best Buy), and sometimes even by customer service representatives who are eager to win consumer allegiance.
Phone Upgrade Fee.This fee causes great umbrage among customers who regard it as just another money grab by providers. Phone upgrade fees range from zero at T-Mobile to $30 at Verizon Wireless and $36 at Sprint and AT&T. This fee, atop the price paid for the new phone, prompts many threats (often realized) to switch carriers. One Sprint customer took a stand when told the phone upgrade fee would be waived but then wasn't and a lengthy follow-up chat with customer service netted only a 50 percent reduction. He posted his conversation in the company's online forum and then switched to a budget carrier that doesn't charge as many fees. As with the activation fee, forum posts reveal that polite persistence sometimes pays off with a fee waiver or discount.
Early Termination Fee.Consumers fed up with fees imposed by their current provider and considering a switch should stop and count to ten. Canceling a service contract invariably triggers the dreaded early termination fee (ETF). This fee varies by carrier and also depends on the type of device. The starting ETF for smartphones (and other "advanced" devices) exceeds $300 with Verizon Wireless, AT&T, and Sprint and slowly drops as the original contract expiration date nears; the T-Mobile ETF starts at $200, but all new T-Mobile contracts are month to month, which means no ETF to fret over. This fee is notoriously difficult to avoid because it facilitates customer retention.
That said, a contract breach flaps both ways. When AT&T added an administrative fee in May 2013, some people claim to have ended their contracts prematurely without paying the early termination fee. Most customers have no such luck with AT&T, although other posts indicate that some have secured a credit and some have entered into arbitration to void their contracts. Similar scenarios have played out with the other carriers as well.
Late Payment Fee.Another carrier-imposed fee covers forgetfulness, as in, the bill was paid after the due date. Although many consumers arrange for automatic payment with a credit card or bank transfer (both of which make it easy to miss or overlook extraneous charges), anyone who writes out a check or executes a bank transfer each month will be fined for a late payment, sometimes after one day and sometimes after a grace period (subject to state regulation). AT&T charges $5 for tardiness compared with the greater of $5 or 1.5 percent of the amount due at T-Mobile and Verizon Wireless. Sprint charges the maximum allowed in each state, which tops out at 5 percent of the bottom line.
Additional Line Fee.Family plans offer groups of people (not necessarily related) an opportunity to lower the monthly mobile phone bill by sharing services. Sharing minutes and data can also lead to disputes about overage fees, so check out plan features very carefully; some offer unlimited everything. Also consider how many people want in on the sharing, as well a the fee for adding a line. T-Mobile allows a maximum of four lines with a low $10 fee for the third and fourth (the first two come bundled for $80), while Sprint allows up to 10 but charges $40 for the second, $30 for the third, and $20 for each additional.
Administrative Fee.Carriers justify the administrative fee as necessary to defray operating costs, generally those charged by local carriers for handling wireless calls and/or renting and maintaining cell sites. Administrative fees range from 61 cents for AT&T customers to 90 cents (for each line) with Verizon Wireless and up to $2.50 with Sprint. Online comments we read indicate these small fees enrage customers more out of principle than out of anger over the actual amount. AT&T came late to the game when it instituted an administrative fee earlier this year; Verizon Wireless and Sprint have been doing so since 2005 and 2008, respectively. T-Mobile takes a different tack and charges no administrative fee but has the highest regulatory programs fee, which it says helps pay for the cost of abiding by government mandates. (The three other major carriers impose similar, though lower, regulatory fees; see page 4 for details.) Customers have little chance of wriggling out of administrative or regulatory recovery fees. Back to top »
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