So long to the contract?

AT&T today joined Verizon Wireless in pro-rating its early termination fees, announcing today that it would not only stop charging the full ETF for customers exiting their contracts, but it would no longer force customers to extend their contracts when making changes to their calling plans or adding features. The new policies don't go into effect until an unspecified date, but something makes me suspect they'll be enacted before U.S. Senate hearings over the Cell Phone Empowerment Act, a bill introduced in Congress last month that would made many of the changes that VZW and AT&T are now making voluntarily.

Either through self-enforcement or by government mandate, it looks like the days of the ETF are coming to an end. They won't disappear entirely, but canceling a two-year contract six months early will be a lot more attractive to customers if they're charged $50 instead of $175. That means another tool that carriers use to keep their customers loyal is no longer as sharp as it used to be. Couple that with number portability, and it looks like operators will be forced to rely more on good service to keep their customers around.

I wonder if there isn't an even bigger implication here, though. If the contract no longer carries the weight it used to, perhaps it may start disappearing altogether. We're already starting to see evidence of operators going toward a more open subscription model. Prepaid customer roles are growing at every carrier. More GSM phones are being sold full-cost by retailers. Despite AT&T's onerous two-year contract, a lot of people were willing to shell out $600 for the iPhone. And Sprint is committing the ultimate of cellular blasphemies next year by launching a wireless network (I'm talking about WiMAX here) that requires no contract and offers no handset subsidy. Is the U.S. entering an age in which we pay full price for our phones and aren't chained to our carriers? Stranger things have happened in this industry.

Contact me at kfitchard@telephonyonline.com.