AT&T Lowers Cancellation Fee

> Some states, notably California, have statutes that prohibit
> penalties based on contract.

When I switched to the iPhone, that necessitated a cancellation of my
Verizon contract. I'd miscalculated the expiration by two-weeks (on
a 2-year contract), and as soon as I cited the code section in my
complaint to the local PUC, Verizon cancelled and forgave the fee.

Not only is there a statute (Civil Code sect 3275 -- look for it at
findlaw.com), there's also a fair body of published California court
decisions condemning the use of such penalty clauses in any type of
contract.

Dave Clark

Fair enough if the phone is subsidized. But if I purchase an iPhone from Apple (retail) and then activate it, is there an cancellation fee? And if so, what exactly would AT&T be subsidizing?

This whole subsidizing this thing is bunk. Why do business have to resort to cohersion to keep a customer rather than just be the BEST damn phone company to deal with in the first place?

On Apr 9, 2008, at 10:26 AM, mrnoonan wrote:

> Fair enough if the phone is subsidized. But if I purchase an iPhone
> from Apple (retail) and then activate it, is there an cancellation
> fee?

Apple does not own a telephone service network. So all activations
go through AT&T, which is the sole service provider for the iPhone.

> And if so, what exactly would AT&T be subsidizing?

I don't know that AT&T is subsidizing iPhone sales. They may not
be. But they claim that they are. They said that they would be even
before the iPhone was offered for sale.
http://www.roughlydrafted.com/RD/RDM.Tech.Q1.07/08605381-0316-478E-8828-54AB84C62CCE.html

There has been speculation that AT&T is making little, or nothing, on
the sale of an iPhone, and that they are making all of their iPhone
money on the service contract. Some have speculated that the major
benefit of iPhone sales to AT&T is the increase in AT&T's market
share over the long term.

In some European countries tying a service contract with the sale of
a product is illegal, or it is illegal to not offer the choice
between having the contract and not having it. In those countries,
the cost of a non-subsidized (that is, without the mandatory service
contract) iPhone is substantially more. In Germany the cost is about
$1,000 more.
http://gizmodo.com/gadgets/apple/german-court-rules-iphone-must-be-sold-contract+free-324736.php
http://www.tgdaily.com/content/view/34952/145/

> This whole subsidizing this thing is bunk. Why do business have to
> resort to cohersion to keep a customer rather than just be the BEST
> damn phone company to deal with in the first place?

It's not coercion, it's enticement. For ordinary cell phones, it is
a huge enticement to get a phone for free, paying only for the
service and committing to a service contract for a set period of
time. This is just like the enticement of purchasing an automobile
via financing rather than paying entirely up front, which is, of
course, very popular here in the U.S.

Would you be likely to buy an iPhone if it was close to $1,500 up
front, and you still had to purchase a service contract on top of that?

Randy B. Singer • Mac OS X Routine Maintenance • http://www.macattorney.com/ts.html

mrnoonan wrote:
> Fair enough if the phone is subsidized. But if I purchase an iPhone
> from Apple (retail) and then activate it, is there an cancellation
> fee? And if so, what exactly would AT&T be subsidizing?
>
> This whole subsidizing this thing is bunk. Why do business have to
> resort to cohersion to keep a customer rather than just be the BEST
> damn phone company to deal with in the first place?

Because most of the US population doesn't buy on service after the sale, they buy on initial price. Even if you point out to them that the "Rent-2-B-Urz" TV they got for a "low" monthly rate, they are really buying it every year. Many still go with it.

Price sells. Long term intangibles does not. At least to most people. My wife works for a major airline. Why do you think people hate the service they get. It's because they price shop for $20 off on an $800 trip. If the buyers want to shave this off then the airlines have to shave off the costs somewhere.

We don't teach economics in our schools at a practical level. And at the larger scale it tends to be oriented to a social state. At least around here based on what they've taught my kids. I was floored today by what I heard on NPR just a while ago:

http://www.npr.org/templates/story/story.php?storyId=89432191

Skip down to the "Difficult Decisions" sub head. Kids are being taught the way to deal with difficult situations is to have the local (or larger) "state" make them communally. Sorry but this is a bad way to teach kids about property rights, community rights, economics, etc...

David

You asked "Why do business have to resort to cohersion to keep a customer rather than just be the BEST damn phone company to deal with in the first place?"

Cause it costs more money? Hello! Just like the software business has become about providing the least functional, most cheaply designed and coded product that customers will still buy, most businesses are about charging the most money they can for the least service they need to provide in order to maintain customers. If you haven't noticed, there aren't too many businesses that are really competing to be the "best" at anything except profit margins. If it is more profitable to engage in screwing the customer because they really don't have alot of choice (the other providers are doing the same), you can bet they will. When you have only a few large companies to choose from, the only consumer advocate is the government -- which is why customers in S. Korea have 40MBit network connections as standard high-speed, vs. our government defining broadband as anything >256K. It's why in Europe, they have had cars getting over 70MPG (non-hybrid), while in the US, we'll be lucky if our government's low-expectations of 20something will be met by 2015 (or was it 2020).

Theory in the US is let the market make these decisions -- and meanwhile, the US is already around 5-7 years behind the tech-savvy countries and falling further behind as our standard of living drops and the dollar heads toward the value of the paper it's printed on.

Maybe if the 'market' hadn't been in the tank for the past...decade or or two after the Reagan-Bush-Bush Dynasty, the market might work -- but the market hasn't worked for almost 2 decades. NOTE: unlike the so called "expert mouths", the market has been in trouble for a long time -- anytime the government AND the citizens have to heavily borrow money to "stimulate the market" to keep it going -- that's a sick market. It's one thing to have a cup of coffee to perk one up, but financially, since the National Debt was grown into the trillions starting with Reagan, the nation has been getting perked up on the financial equivalent of "Meth". And when the bottom fell out of several industries in 2001-2002, the Pres and the Fed lead average Joe citizens down the "Meth"-finance path -- using the equity in their homes to keep themselves "stimulated" so the economy would keep on going. And now? The country is suffering from a 20 year dependency on Financial-Meth (increasing borrowing from the future to keep stimulated "today"). The only time I see businesses cleaning up their act now is when they're being investigated and execs are going to jail. Too bad that won't happen with the ringleaders in the whitehouse.

[This is the last post in this thread. -Adam]

On Thursday, Apr 10, 2008, at 1:17 AM, reaper wrote:
> Maybe if the 'market' hadn't been in the tank for the past...decade
> or or two after the Reagan-Bush-Bush Dynasty, the market might work
> -- but the market hasn't worked for almost 2 decades.

To say that "the market" in technology doesn't work simply ignores
that we now have better, faster and more efficient technical machines
for our use than ever. The world-wide technological marketplace for
new products is largely driven by American ideas and leadership.
That ranges from simple chip development, cell phone technology, to
PDAs, and the like. Who created the Apple iPhone? Who created the
Apple entire line of new computers over the past two+ years? These
developments were market driven by market forces here in the USA.
These two alone have set the technological world on fire. Where
else does the consumer get the latest innovations? Another example
of American ideas and leadership is the Web. Virtually every major
player on the World Wide Web is American.

The "market" in The Tank for two decades? I don't know what market
the poster's been looking at, but it isn't mine or anyone else's that
I know of.

Dave Clark
daveclarkimages.smugmug.com
http://web.mac.com/dave28c
http://www.clarklawfirm.com

  
        

I think all the carriers are going to pro-rated contract cancellations. I cannot recall for sure, but I think they are being compelled by law to do so. Finally!

I'm running an unlocked iPhone on T-Mobile for this reason. I don't think paying $200 to cancel a contract that expires in 3-6 months to be fair in any way. I don't savor the idea of going to AT&T and paying more for my service, but it would be kind of nice to finally be legit and not worry about upgrades / updates.

Anyone know if/when T-Mobile gets on the ball with this pro-rated cancellation fee?

JasonG wrote:
> I think all the carriers are going to pro-rated contract
> cancellations. I cannot recall for sure, but I think they are being
> compelled by law to do so. Finally!
>
I think they are doing it to avoid legislation. Most large multi-state footprint companies will go to great lengths to avoid having Congress, state legislatures, various agencies, etc... enact new rules. Congress never writes a 1 page law. It's always something much bigger and many times has much more than the original intent in it.

David