By Matt Hamblen open letter to customers , AT&T said it will also drop the ETF on new and renewing customers of basic and quick messaging phones by $25 to $150 on that date, the letter said. A spokesman refused to comment beyond the contents of the letter, which described the purpose of the ETF's as a way for AT&T to offer industry leading phones below their full retail price, in exchange for a two-year service commitment. For example, a $199 Apple iPhone would cost $599 without a contract. AT&T has said that iPhone customers pay on average more than $90 in service fees each month. Some bloggers have theorized that AT&T is raising the ETF on smartphones just prior to the Apple announcement of a next-generation iPhone and because AT&T could be losing the exclusive right to sell the iPhone in the next year after years of complaints from users about the AT&T network support of the iPhone. Presumably, a higher ETF would discourage AT&T iPhone customers from going to another iPhone carrier. AT&T wouldn't comment on that theory. AT&T said the new ETF fees, which don't apply to current customers unless they renew after June 1, will scale down for smartphones by $10 a month over the two-year contract and by $4 a month for basic and quick messaging phones. Jeff Kagan, an independent telecommunications analyst, called the reduced price for smartphones with a contract a subsidy that is basically a loan to buyers, noting that the ETF and subsidies are mostly a U.S. tradition.
"Phones are expensive," Kagan said. "In many countries without early termination fees, the customers are required to spend the full $500 or more for a phone. In the United States, [carriers] started subsidizing and continue doing it today. When a carrier helps a customer buy a phone by giving them a loan of sorts, the customer agrees to re-pay that loan."Kagan said when a customer of any type defaults on a loan, there is a penalty involved. "The reason for the ETF is to protect the carriers from losing money when they give the customer a loan of sorts," he said.. ETFs have been controversial and have led to lawsuits by customers and an investigation started in January by the Federal Communications Commission about excessively high ETFs . Verizon Wireless doubled its ETF on "advanced devices," mainly smartphones, to $350 last November, and Google Inc. and T-Mobile USA, both in January, imposed an ETF on the Nexus One smartphone of $550 . In response to criticism, Google lowered its part of the Nexus One fee from $350 to $150 in February. Verizon responded to concerns from the FCC by reducing the number of advanced devices affected by the higher ETF. Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld . Follow Matt on Twitter at @matthamblen or subscribe to Matt's RSS feed . His e-mail address is email@example.com . Read more about macintosh in Computerworld's Macintosh Knowledge Center. Original story - http://www.computerworld.com/s/article/9177110/AT_T_raises_early_termination_fee_on_smartphones