AT&T to charge more for early device upgrades, no-contract purchases

Written by  //  April 5, 2011  //  Telecommunications/Technology  //  No comments

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AT&T’s new upgrade fees will apply to a number of smartphone devices
in its portfolio.

AT&T customers looking to trade in their mobile phones before their 24-month contract is up, but are not eligible for an upgrade, will have to pay more for the change — on top of the cost of the device — as per a new policy the carrier quietly effected April 3.

The same increase applies to customers wanting to purchase a device without a contract.

Early upgrades, usually considered as such until the customer has reached the 20th  month of their contract, will increase by $50 on smartphones, including the iPhone, while other mobile equipment will see a price increase of $10. The price to buy smartphones without a contract will also increase by $50, except for the iPhone, and by $20 on other basic wireless devices, AT&T said.

“We’ve reviewed our early upgrade and purchases of new smartphones and other devices without a contract,” said José Juan Dávila, vice president and general manager of AT&T Puerto Rico. “Only those customers who are not eligible for an upgrade or who do not want to sign a contract will be affected.”

In Puerto Rico, AT&T is the dominant wireless carrier with more than 900,000 customers, but it is not clear how many of them would be affected by the policy change.

According to industry reports, AT&T implemented the policy change to make up for the losses it has had to absorb related to cheap upgrade options, such as the $49 iPhone 3GS, which it offered a significant discount after the iPhone 4 debuted.

“The company might have shot itself in the foot by offering that cheaper upgrade option. Any massive change in the upgrade fee for the iPhone would end up causing a huge public backlash against the company,” said VentureBeat, a technology website. “AT&T likely chose to increase the price incrementally to see if it can recoup some of the costs of subsidizing the iPhone 4 — and the next version of the iPhone.”

However, as AT&T stated, the upgrade fees will apply to a variety of the smartphone devices it carries in its portfolio.

“As mobile equipment becomes more sophisticated, their costs increase in the same way,” said Dávila. “This change reflects our increase in costs, but still allows us to offer our clients the latest models before they are eligible for them.”

Historically, wireless carriers have had the practice of heavily subsidizing wireless devices, with the expectation that the monthly fee for voice and data plans will make up for the investment. Generally speaking, carriers see a return 10 months into the wireless contract.

“Now, our customers will benefit from our promotional prices after month 20 of the contract,” Dávila added. “We’re in the best disposition to work with each account or upgrade needs our customers may have on an individual basis.”
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