With iPhone 4G in the Wings, AT&T Raises Fees and Starts Boosting Network

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With Apple’s iPhone 4G still likely for announcement in early June, AT&T has now started beefing up its struggling 3G network with Wi-Fi, only days after announcing a huge hike in early termination fees (ETFs) for all smartphone and netbook users.

As of June 1, the ETFs for iPhones and other “advanced, higher-end devices” from AT&T will leap by $150, to $325 from a current level of $175, AT&T officials said, in an open letter to customers sent out on Friday

At the same time, ETFs for simpler feature phones will actually fall from $175 to $150. The changes in fees apply only to new contracts and renewals, as opposed to “customers who are within their two-year consumer service agreement or have an existing enterprise service agreement,” according to AT&T’s letter.

Yet with AT&T’s fees for iPhones and other smartphones rising steeply, pricing on existing iPhones are taking a nosedive This week, Wal-Mart has started advertising pricing of only $97 for 16 GB iPhone 3GS phones purchased in its retail stores. Many see this price reduction as further evidence of an impending iPhone 4G launch at Apple’s Worldwide Developers Conference in June.

Hefty as it might seem, especially in today’s tough economy, AT&T’s new $325 ETF is slightly lower than Verizon’s $350 ETF on the Motorola Droid and other high-end devices.

AT&T, however, has been plagued for years by customer complaints of dropped calls on its Wireless Data networks.

In fact, on Tuesday of this week, AT&T started buttressing its 3G wireless services in New York City with a free Wi-Fi hotspot in Times Square, a trial implementation that could quite conceivably lead to other WiFi hotspots from AT&T elsewhere on the planet.

Big Loses Ahead?
AT&T might lose 40% — or six million of its roughly 15 million iPhone customers — if and when Apple starts making a model of the iPhone operable on Verizon’s wireless network, predicted Drake Johnstone, a Wall Street analyst at Davenport & Company, in a recent note to clients.

However, Johnstone also views AT&T’s new and higher ETF as one of several factors — along with AT&T’s “sticky” family-talk and business-discount plans and gradual improvements to AT&T’s network over the past year — which could tend to keep customers from drifting away to other networks.

Also on Tuesday, AT&T talked up plans to let customers move most of its phones — with the exception of the iPhone — to other wireless networks as part of the settlement of a class action suit filed in Alameda, CA.

Yet even when unlocked with the free code that AT&T will now make available to customers, phones designed for AT&T’s network will only work on other GSM-compatible networks, and these are limited in the United States to T-Mobile USA and a few smaller carriers, according to a report on Dow Jones Newswire.

Further, AT&T customers who decide to unlock their phones and move them to other networks will be subject to paying ETFs.

Under AT&T’s new ETF plan, the $325 ETF for iPhones and other “advanced, high-end devices” will be lowered by about $10 for every month that the customer remains on the two-year agreement. The ETF for feature phones will drop by approximately $4 for every month the customer has stayed on the plan, according to the letter sent to AT&T customers.

 

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