Last week our friends at Cnet.com reported that Verizon Wireless has essentially doubled its early termination fees for smartphones, and offered the advice to consider this fact when buying a BlackBerry, Android handset or even network for Verizon.
Of course, termination fees are not new, and the fees aren’t limited to Verizon. Virtually every carrier has these fees. It is actually what allows the phones to be sold by the carrier at less than what the manufacturer would sell the device for without a contract.
And this brings up some very good points because while termination fees are not new, mobile handsets are the types of devices where there is always something new and hot just around the corner. But to get the best possible prices you’re actually signing up for as much as a two-year contract, where by the end of it you could feel like you’re carrying around a device from the Stone Age!
And given that we’re seeing new OS upgrades, what does this mean? While there are options, you should do some homework prior to buying a device. A few things I try to do:
- Ask whether a device has any early outs should a new model come out? If you are using a BlackBerry Tour (as I am right now), find out if a Tour 2 comes out if there is a way of getting out of the contract if upgrading to a new model. This is sometimes a possibility.
- Find out what happens if your device breaks within the two years? While many carriers offer “insurance,” you should find out the monthly cost and whether you can drop the insurance over time. It might seem like a bargain to pay $5 as you walk out the store, but that’s less of a deal once your contract is close to up.
- Find out if termination fees are prorated, that is whether the “early out” decreases over time. Most carriers off this, but you need to confirm.
- Compare termination fees for different handsets. Right now Verizon is only doubling the fees for its so-called “advanced devices.” One question to ask is whether the fees drop when the device isn’t so “advanced.”
- Do some research and find out if a new handset is coming out soon that you might like better. While it is tempting to run to the store to buy the latest handset, you could be kicking yourself a month later because an even more awesome phone arrived, but in fairness that will always be the case!
Of course we expect a lot to change too. The government and the FTC are already looking into the practice of termination fees, and with the whole mobile phone industry under investigation we could see some of these practices change. Finally, remember that termination fees are actually not entirely a bad thing. As I mentioned already, the fees are there to make sure that you don’t sign up for new service and get a spiffy phone at a discount only to decide the next month you want a different handset.