Beat the High Cost of Cell Cancellation

The Federal Communications Commission has taken an interest in the $175 or $200 per-line fee charged by cellular telephone providers when you cancel service before the end of a 1-year or 2-year service contract. Their polite interest may turn into a mandate to justify, pro-rate, and reduce these fees, but there's also an easier way out you can use today. These fees grew in size and unbreakability after number portability kicked in for cellular carriers, as a phone number no longer provided a lock on a customer.

The FCC is working on brokering a deal that would allow cancellation with no fee within 30 days of signing a contract or 10 days after receiving the first bill--longer than the typical 7 or 14 days offered by many carriers for service rescission. Prorating fees, reducing them monthly by a proportional amount, would also be required if the deal goes through.

Verizon Wireless already prorates, AT&T began a few days ago for new contracts, and Sprint Nextel and T-Mobile will modify their plans this year (T-Mobile promised by June 30 last year; Sprint by the end of 2008). Any FCC deal would supercede current options, as well as take over the task from states. That last move is sure to irritate consumer groups--the AARP has already tsk-tsk'd it--because states are often the first bulwark and a strong advocate for consumers in disputes. The feds, much less so.

Whatever happens, it appears unlikely that $175 or $200 termiantion fees that remain constant over 2 years will remain in place. The worst case might be a $60 fee at 1 year and 11 months; the best might see the fee drop to zero before 2 years is up. There may be exceptions for poor coverage, too; if you can't get good service today where you need it, there's no exception that lets you avoid the fee.

These fees may involve some gravy for a carrier, but because U.S. carriers so heavily subsidize handsets and some smartphones, the fee also covers the portion of that phone's cost that they didn't recoup from you in subscription profit while you were a subscriber. That obviously decreases over time, but it's a real cost.

Now I said there's an easier way to deal with these fees. Horse trade. A few years ago, when I reviewed T-Mobile's regional launch in Washington state of HotSpot@Home, a converged cell/Wi-Fi calling service, for The New York Times. T-Mobile wasn't making review units available, so I went to a store kiosk, bought a plan, router, and handset, and returned it all within 14 days with the Times paying the small amount of service fees involved.

When I went to return the phone and router, without anyone knowing I was a reporter, the kiosk's manager tried to hard sell me on keeping it. I said, the service worked fine, but I have two Cingular lines, and it would cost me $200 each to cancel and switch. He said, no problem, we can credit you that and give you an extra $150 if you stay with the service for a year. I said, would you put that in writing? He said, of course.

This isn't unusual. If you're looking to sign up for a plan that's about $60 to $80 per month from another carrier, bring them a gross fee of between $1,500 and $2,000 before any overage charges and add-on services you buy, salespeople on the phone or in company stores will typically be happy (after pulling a green-lit credit check on you) to eat your early-termination fees. They know that you might pull the same on them in the future, but then they'll get their termination fees, too. (The same works with switching subscription television among cable, satellite, and fiber.)

You can sometimes turn double agent, too, calling your current provider and explaining that another carrier has offered to pay the fees in order to get a new subsidized phone before your contract is up.