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$200 Penalty Fee?!

M

misguidedeskimo

macrumors newbie
Original poster
Aug 5, 2008
4
0
I was in line to get an iPhone today, but when I gave the Apple Store worker the last four digits of my soc. security, they said that I do not have the ability to "upgrade" at the moment, which means that I would have to pay a fee for "breaking my existing contract" with AT&T. I called my primary AT&T store AND AT&T customer service, and they all said that I would have to pay at $200 penalty fee if I wanted to get an iPhone ...

1. What the hell does this mean? I am technically not "breaking" my contract if I'm STAYING with AT&T am I? I'm just adding an additional service to my plan (for the 3G!)

2. For the majority of you - were you also penalized $200 when you got a new iPhone? Or did you get the iPhone when you contract was up?

3. Is there ANY WAY I could bypass this fee? And if so... HOW?!

*edit: thanks for all your knowledgeable insight/advice thus far. i was honestly just confused (not angry/upset) and wanted to know some answers, so hostility/belittling in your answers isn't needed - thank you! :)
 
The fee is because you are terminating an existing contract with at&t and starting a new one, with a subsidized iPhone. The penalty is likely to cover the costs of your last phone. People with original iPhones were not penalized because they paid full price for the phone, so the new iPhone counts as their subsidized phone (although it likely restarts the contract).

I have heard of people picking up an iPhone EDGE, activating it, then going to the store. They can get an iPhone 3G for the subsidized price, but your mileage may varry on that one.

TEG
 
The $200 higher price is not a penalty, think of the $199 price as a discounted price (what it essentially is) for new customers and for existing customers eligible for an upgrade (which it seems your not)

If you purchased a subsidized phone from AT&T within the past 22 months, you will not be eligible for the subsidized price on the iPhone 3G and will have to pay $399 if you want it now.

Its the same with every other AT&T cell phone, the iPhone is no different now. In fact, its the same with ALL cell phone companies. You can't receive a subsidized price all the time, only when eligible.
 
It is a $200 penalty for the subsidization of the previous phone and government charges for cancellation of the initial contract....nothing to do with the discount. It's the same thing for all carriers.

BTW, a $500 deposit? You must have no credit and an iPhone was probably not the best financial choice for you.
 
misguidedeskimo said:
1. What the hell does this mean?
Click to expand...

It means that at some point in the past 18 months, you bought a phone at a discounted price through AT&T that wasn't an iPhone.

Does that mean you're breaking a contract? Sort of. Ever wondered why some phones are free, or really feature-laden phones can be had for under $100? Well, the phones actually cost quite a bit more than that, But because AT&T and other cell companies know that customers don't like to shell out tons of cash for these phones, the cell carrier basically eats part or all of the cost of these phones, up to $200 (and sometimes more). In exchange, you sign a contract that says you're going to stick with that phone and have AT&T service for 2 years. The fact that you're committing to being an AT&T customer for that long helps AT&T recoup the hit they took in selling you a phone below cost, and at a significant loss.

If you cancel service before that period, the cell company charges you an Early Termination Fee... basically getting back the money they lost and can't recoup by you staying a customer with them.

Likewise, AT&T and other cell companies will avoid selling you another phone at a discounted price, if they haven't had time (about 18-24 months) to make up their previous loss. If they did, they'd never make any money. that's why if you've bought a discounted phone recently, AT&T will not want to sell you an iPhone on the cheap.

Is there a way to not sign a contract like this? Absolutely. You buy the phone at the "no commitment" price. That cost is typically about $200 more than the discounted cost, because AT&T has no assurance you'll stay for any length of time, and so isn't going to sell you the phone at a loss.
 
Tallest Skil said:
It's called an Early Termination Fee and EVERYONE charges it. Suck it up.
Click to expand...

Ummm, no, not exactly (or "FAIL!!!" if that means more to you). You may have missed it, but ETFs were just declared illegal in California and it is likely that other states will follow suit, pun intended.
 
I used to think this was a concept everyone understood.

But since the new iPhone came out I've learned just how many people didn't understand what they've been doing with cell companies all these years.

Kind of surprised me, but there it is.

stlblufan said:
You may have missed it, but ETFs were just declared illegal in California and it is likely that other states will follow suit, pun intended.
Click to expand...

Well, if that happens then the $200 will get added back on to ALL iPhones.

Big improvement. :rolleyes:
 
stlblufan said:
Ummm, no, not exactly (or "FAIL!!!" if that means more to you). You may have missed it, but ETFs were just declared illegal in California and it is likely that other states will follow suit, pun intended.
Click to expand...

Not exactly and not yet. A judge did decide that, but there will be unavoidable appeals. Also, the FCC could step in which is lenient towards *big and juicy* fees.

Small White Car said:
Well, if that happens then the $200 will get added back on to ALL iPhones.

Big improvement. :rolleyes:
Click to expand...

Exactly. If there is no way to lock customers into contracts, all phones are going to get more expensive.
 
stlblufan said:
Ummm, no, not exactly (or "FAIL!!!" if that means more to you). You may have missed it, but ETFs were just declared illegal in California and it is likely that other states will follow suit, pun intended.
Click to expand...

Which is why AT&T has a pro-rated ETF along with a 30-day trial period ... this should be acceptable for CA and the proposed fed rules.

Though there will likely be some fine tuning on that fee and how it is pro-rated (and that it is specifically tied to the cost of the phone.)

---

The ETFs deemed invalid were the ones that whacked you for $200 in the final month of the contract -- I think. And in some cases the ETF was higher that the retail cost of the phone.

So expect the ETF to be specifically tied to the cost of the phone subsidy in the future.
 
Sun Baked said:
Which is why AT&T has a pro-rated ETF along with a 30-day trial period ... this should be acceptable for CA and the proposed fed rules.

Though there will likely be some fine tuning on that fee and how it is pro-rated.

---

The ETFs deemed invalid were the ones that whacked you for $200 in the final month of the contract -- I think.
Click to expand...

I was about to wonder how that was true when the ETFs are legit since you got a discount for signing the contract. They should definitely be illegal if not pro-rated. I so want to ditch my DirecTV contract but I've got about 6 months left. The key to such a thing is to not sign everything in your name and count on some jobless douche to actually pay you money.
 
well you can always activate a new line! thats what i did... i still had a year left on the previous plan... and they said i wasnt eligible for an upgrade so instead of paying more.. i just signed up for a new line... my old phone my dad took over so no big deal! other than that i dont see anyway around it!
 
stlblufan said:
Ummm, no, not exactly (or "FAIL!!!" if that means more to you). You may have missed it, but ETFs were just declared illegal in California and it is likely that other states will follow suit, pun intended.
Click to expand...

Actually, YOU fail. The judgement is preliminary, is subject to appeal, and at this time, it applies only to Sprint. Verizon settled their case and so far are not affected. AT&T may follow suit. Or, the FCC may step in and overrule any state court decision, which some people are expecting.

In any case, if ETFs are universally abolished, you can expect the price of phones to jump about $200. And then we all fail.

(By the way, can we drop the "fail?" This isn't 4chan. And some of us here are actually capable of socializing, and holding a discussion without resorting to Aspergers-influenced catch phrases.)
 
You don't really have a complaint....

Really, you dont have a complaint.

See... it costs $299 for a 16gb iphone if you sign up with a new contract with At&t.

If you choose to have At&t without a contract, the same phone will cost you $200 more.

That's where the fee comes from... BECAUSE you are already in a contract, they are just charging you the additional $200. Basically, they're willing to sell you the phone without a contract for $200 more.

They've always done this, with every phone they have ever sold. Sorry.
 
Abolish the ETF and sell phones for their real price, unlocked and uncrippled. If you can't afford it, too bad. Get a better job or learn to live within your means.
 
nimda0 said:
Really, you dont have a complaint.

See... it costs $299 for a 16gb iphone if you sign up with a new contract with At&t.

If you choose to have At&t without a contract, the same phone will cost you $200 more.

That's where the fee comes from... BECAUSE you are already in a contract, they are just charging you the additional $200. Basically, they're willing to sell you the phone without a contract for $200 more.

They've always done this, with every phone they have ever sold. Sorry.
Click to expand...

Not true. You can't buy an iPhone without a contract right now. And when it is available it will cost you $600 and 700 respectively.
 
misguidedeskimo said:
I know what an ETF is - I posted because I wanted to know if there was any way AROUND it ... "suck it up" is not helping, thanks.
Click to expand...

OK? So if you know what an ETF is then I'm sure you're smart enough to realize that this is how cellular service providers have conducted business here in the United States for the past, oh, 10 years, right?

And the the ETF is actually $175, the $200 you're going to pay is the subsidy that ATT foots for every new/eligible customer that purchases a new phone. You are NOT a new customer or eligible for an upgrade, hence the reason why you must pay the $200.

Are there ways around it? Sure, there's ways around getting a ticket from a police officer after running a red light too. You tell us how you're going to do that, not the other way around - thanks.

O, and to Small White Car, I completely agree with you. This is a concept that has been in place since the days of omnipoint. The iPhone is credited with bringing 'smartphone' abilities to 'normal people', but of course this also means bright ones like our OP here also come into the game. :p
 
stlblufan said:
Ummm, no, not exactly (or "FAIL!!!" if that means more to you). You may have missed it, but ETFs were just declared illegal in California and it is likely that other states will follow suit, pun intended.
Click to expand...
No they were not.
Only Sprint's ETF was determined to be illegal because it never decreased as the contract aged.
AT&T, Verizon and T-Mobile ETF's are legal.
They reduce as the contract ages.
 
rjohnstone said:
No they were not.
Only Sprint's ETF was determined to be illegal because it never decreased as the contract aged.
AT&T, Verizon and T-Mobile ETF's are legal.
They reduce as the contract ages.
Click to expand...

Correct, Apparently pro-rated ETFs are copacetic in California. Which is probably the way it should have been anyway.

markgamber said:
Abolish the ETF and sell phones for their real price, unlocked and uncrippled. If you can't afford it, too bad. Get a better job or learn to live within your means.
Click to expand...

There's a difference between living within your means and foolhardy spending.

If you want to pay a high price for an unlocked phone and get commitment-free service, you're perfectly welcome to do that. But if you're going to stick with a particular carrier anyway, then it would seem foolish not to take advantage of an offered subsidy. But then you know what they say about a fool and his money.

In any case, if you decide to leave, you pay the ETF, which now amounts to a pro-rate on the subsidy. You still come out ahead this way, and at worst case, it's zero-sum.
 
misguidedeskimo said:
1. What the hell does this mean? I am technically not "breaking" my contract if I'm STAYING with AT&T am I? I'm just adding an additional service to my plan (for the 3G!)
Click to expand...

When you signed your last contract you likely got a phone at a reduced price. Or at least that is what you thought. The way it really works is you only pay $199 for a $600 phone and you pay the balance off in monthy installments that are hidden in the monthly bill. If you terminate the contract you have not paid off the load on ther phone yet. So they want an extra $200 to pay off the old phone.

Yes you are keeping the same service but service is only part of the contract the other half is a very expensive load. Some smart phone company exec years ago said "Let's take advantage of people who cant do math"
 
kane4fire said:
BTW, a $500 deposit? You must have no credit and an iPhone was probably not the best financial choice for you.
Click to expand...

Why? Do you know his exact financial situation? There are many reasons credit could be harmed that much (and an AT&T rep told me there were people who paid $1000 deposits!) For example, I had a year with no income - of course that killed my credit for many years. A couple years after I got my job, I got a cell phone, had to pay a $500 deposit. But there was no other way to get a cell phone other than prepaid, having the phone helped my credit rating (since I paid my bills on time of course), and after a year I got the money back.
 
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