Crazy Carriers: Why It’s Cheaper To Cancel AT&T & Jump To Verizon For The iPhone 4S

Here’s irony. My contract with AT&T, despite the increased cancellation fee added last year, is doing little to keep me from jumping ship to Verizon. As it turns out, it’s cheaper to leave AT&T than stay. And AT&T doesn’t seem to care, which doesn’t bode well for their bottom line.

No Upgrade Pricing For You!

I’m 13 months into my AT&T contract. I’d like to go to the iPhone 4S, from the iPhone 4 that I have now. To do this, AT&T wants to charge me $450, for the 16GB version. It hasn’t been long enough for me to get the discounted $200 upgrade pricing.

Do I want to spend $250 extra, to get this phone now. Sure. But I don’t have to. Instead, I can go over to Verizon, where as a new customer, they’ll charge me only $200, since I’ll be starting a new two year contract with them.

This is where AT&T’s contract should be working as a disincentive, right? After all, last year they upped the termination fee from $150 (if I recall correctly) to $325. But actually, all that’s doing is working as an incentive to leave.

NOTE: Originally I said the prices above were for the 32GB version. I’ve changed that to 16GB. If you do go 32GB, the savings is still the same — because it’s $100 more on both “sides.”

Fine, Your Termination Fee Is Less Than Full Price

You see, each month, that termination fee drops by $10. I’m 13 months in, so that $130 off my termination fee, leaving only $195 to pay if I go.

$195 to leave AT&T and get a new phone on Verizon; $250 to say and get a new phone with AT&T. I’m not a math wizard, but even I can tell that’s saving me $55 right there.

I called AT&T to see if they’d waive the upgrade fee. I got transferred from the first rep — who said giving upgrade pricing wasn’t possible — to a customer service rep, who spoke with me longer. At first, he tried to tell me that I wouldn’t be saving as I thought.

No, I explained, pointing out the math for him. He countered saying I’d have to pay sales tax on the termination fee (really?) plus an activation fee with Verizon.

If All Things Are Equal, Then I’ll Still Leave

Let’s assume he’s right. Let’s say I have to pay 10% sales tax on that fee, which is well above California’s already high rate. That’s $20. Activation at Verizon, that’s $35. That’s $55 in all, exactly the amount I was going to save by leaving.

Assuming I didn’t want the hassle of shifting carriers, and moving to a longer contract, maybe that would be a deterrent. Then again, maybe I’m annoyed enough at my carrier not wanting to keep parity with a competitor that I might decide I want to go.

If I Walk, You Lose, So Why Are You Letting Me Go?

As it turns out, there’s still another $200 in savings, which I’ll get to in a moment. But let’s review things as they stand so far.

I’m telling AT&T that I’m leaving. That at worst, it’s costing me nothing. More likely, it’s saving me $55. That it is even potentially saving me $255. You’d think they’d want to match, right? Right?

I mean consider that I pay AT&T about $80 per month. That money is walking out the door, if I go, right over to Verizon. If they waived that $250 extra for me to upgrade, that’s at worst three months of revenue they’ve “lost.” But they would have done that by getting me to renew my contract for another two years, taking me all the way back up to that $350 penalty. It seems worth doing.

Let’s Talk Trade In!

Now the bigger sweetener. Verizon runs an excellent trade-in program. My existing iPhone, which is in great shape, is currently worth $202 (oddly, if I had a 16GB version, I’d get like $20 more!). The program, which I’ve used before, is easy. Mail in your phone, get a Verizon gift card. They don’t even want the charger or cable! Then apply that gift card to your Verizon bill, and you’ve got about 2 1/2 months of service for free.

I explained this part to the AT&T rep. He didn’t seem to believe me. Why would Verizon take in AT&T phones? Hey, I don’t know why, and I don’t care. They do, and it makes it even cheaper to leave.

Now, I’m sure all this might work in reverse. There could be customers at Verizon are thinking that it makes more sense to jump to AT&T on a cost basis. If so, I’d hope Verizon would have more sense than AT&T, to think they’d rather keep the long term paying customer rather than collecting the very short term termination fee they’re going to get.

This Isn’t Just Unique To Me

After I posted this, Jon Worrel commented that this was a unique case that can’t be applied to AT&T’s many customers. Not so. As I told him:

This isn’t a specific situation. I’m at this point into my contract because I bought a new iPhone 4 when they came out. Actually, I was a month behind the HUGE numbers of people who did on AT&T (and only AT&T, because only AT&T had it then).

Now ALL those people are in exactly the same situation as me. If they want a new phone, there is an exceptionally good reason for many of them to leave — especially when AT&T will be telling them no, you have to wait 1 1/2 months for that upgrade pricing. They can wait, or they can move now at no cost, potentially a $55+ savings or potentially a $255+ savings.

All they risk is for some, having to leave unlimited data plans.

Will Termination Fees Rise Again?

Sadly, what I expect will happen after the latest round of defections is that the termination fees will go up again, perhaps with less reduction in cost over time. But, that might also work against the carriers.

Right now, I already view that termination fee as potentially part of the cost I might pay on the phone. Even with it, it’s less than paying for a full priced unlocked phone (to get that from Apple, you’d pay $750 versus $450 for the locked, non-upgrade price).

Take the termination fee up, and consumers might start looking more closely at full priced phones, especially if they really can use those on different carriers, without a problem (despite what you might think, you cannot do this with the iPhone 4S “world” phone. My post from yesterday, iPhone 4S: Even Unlocked, You Won’t Be Network Swapping This Phone, explains more).

Speedy AT&T, Potentially, For The iPhone 4S

I actually do wish I could stay with AT&T. I’m a fairly unique situation. I carry two phones, an Android (currently a 4G Droid Charge, see my review Verizon 4G Android Faceoff: HTC ThunderBolt Vs. Samsung Droid Charge), and an iPhone. I want to be up on both those platforms, for coverage reasons.

I usually use my Droid, because Verizon has a more reliable network and because the 4G speed is really fast. Really fast. I’d like to keep my AT&T phone, because it’s nice to have an alternative network, for when I’m at some large event, or if I encounter an odd case where Verizon isn’t working well.

The iPhone 4S, from what I understand, while it’s not 4G, will still be faster on AT&T than Verizon. That, along with having AT&T as a backup, makes it appealing to stay.

All of this I explained to the AT&T rep, as well as the fact that because I use Google Voice, I don’t even have issues about switching my number. No one knows my AT&T number. They only know my Google Voice number (My Life With Google Voice Number Porting, Six Months In explains more about this).

Honey Badger, Er, AT&T Don’t Care

None of that mattered. There was no hostility on either end. There was just nothing he said he could do (though Cynthia Schames tweeted to me she got the fee waived). As for me, I said there was no reason for me to say — and when my Verizon phone arrives next week, I’ll be moving over. Goodbye AT&T, I guess.

Bonus Time: Hotspot Pricing Considerations

By the way, in looking at all the options last night — Verizon, AT&T and Sprint — Sprint comes off as the cheapest and unlimited, but I actually think Verizon is better, especially if you want a hotspot on your phone.

I’m not a big talker, so the 450 base minutes that both Verizon and AT&T offer are fine for me. The base 2GB of data is $5 more with Verizon. But Verizon still offers a $5 for 250 text plan, which AT&T killed in favor of a $20 unlimited plan. I don’t text much, so I don’t need to pay that extra $15 (though renewing my contract, I wouldn’t have to).

Sprint, of course, gives you unlimited text, voice and data for $80. That’s up against $80 for AT&T with unlimited text, 450 voice minutes and 2GB data. As for Verizon, it’s $75 for 250 text, 450 voice minutes and 2GB of data.

Now bring in the hotspot. Verizon offers a 4GB hotspot plan for $40. That means for only $10 more, you double that baseline 2GB to 4GB plus you get a handy hotspot on your phone, which can then let your computer or iPad / tablet tap into the connection.

On AT&T, the the hotspot plan also doubles you up to 4GB — but the cost is $20, or $10 more than Verizon is charging. As for Mr. Unlimited Sprint, if you want a hotspot, you’re going to pay $30 for it on top of the $80 you’re already paying for “unlimited” data — and have your hotspot capped to 5GB.

Everyone’s going to be different, but I never use more than 2GB per month on my phone. 4GB is pretty roomy, and it means with Verizon, you get a hotspot service along with good amounts of text, voice and data on a super dependable service for $80, versus $85 on AT&T and $110 on Sprint.

Good luck with your buying decision, if you’re going for the new iPhone. Again, see  iPhone 4S: Even Unlocked, You Won’t Be Network Swapping This Phone for some additional things you might want to be aware of.


Comments

  1. says

    Timely. I’m sure there are millions of people wondering which way is the best way to jump from their carrier. I’m jumping from T-mobile for $100 to Verizon you say?

  2. Jon Worrel says

    Without even reading your entire argument, I can already tell that this is a highly individualized, consumer-specific case. If it economically benefits you to jump ship at 13-months into your contract, then the decision is rightfully yours.

    This specific situation cannot be generalized to a multi-million AT&T iPhone customer base, however.

  3. says

    Well, John, as I said to you on Google+, I’ll repeat here and add into the story:

    This isn’t a specific situation. ‘m at this point into my contract because I bought a new iPhone 4 when they came out. Actually, I was a month behind the HUGE numbers of people who did on AT&T (and only AT&T, because only AT&T had it then). Now ALL those people are in exactly the same situation as me. If they want a new phone, there is an exceptionally good reason for many of them to leave — especially when AT&T will be telling them no, you have to wait 1 1/2 months for that upgrade pricing. They can wait, or they can move now at no cost, potentially a $55+ savings or potentially a $255+ savings. All they risk is for some, having to leave unlimited data plans.

  4. says

    Danny, you lost me when you started doing the math for the hotspot. Is Verizon offering a hotspot for only $5? If it’s $75 for the base plus $40 for the hotspot isn’t that $115 or am I missing something?

    And John, this is exactly the same situation that a LOT of your customers are in. Not to mention the fact that we’ve probably all grown tired of dropped calls on your network.

    Will it be better at Verizon? I don’t know but if it is cheaper for me to switch to Verizon and get the new iPhone, you can bet I’ll be finding out for myself. You can’t ignore this post as an outlier or a “specific case” this is the position you face with a large number of your iPhone users.

  5. says

    Ben, Verizon is $75 for 450 minutes voice ($40) 2GB data plan ($30) and 250 text ($5). You can do a 4GB hotspot plan instead of the 2GB data plan (unless I completely misread things) for $40. So you’d be $40+$40+$5=$85.

  6. DIZ says

    32Gb iPhone 4S is $300, not $200, guy.

    Anyways. As Jon said, this a completely individualized case – and you’re taking this WAY too seriously/over-looking some very key things. From your point of view, a consumer would basically be bouncing back and forth between AT&T & Verizon every single year a new iPhone comes out. So what are you going to do when you terminate AT&T, sign up for Verizon, and next year another iPhone comes out and you’re not eligibile for the full discounted price on Verizon? Terminate Verizon and jump ship back to AT&T after writing up a novel on the internets venting out your sorry emotions for having to pay a few extra bucks? Why should AT&T give you the phone at a discounted price before your contract is up when they haven’t yet made the money back that they’ve personally spent on you to Apple for that fully discounted iPhone 4 to be in your hands that you purchased 13 months ago? Do you even understand what contract renewals are for and why you get equipmented at a discounted price when it is renewed? AT&T subsidizes the equipment, making it back over time in your contract. If AT&T would side in your favor they’d be losing out on the money that they’ve spent on you for your last upgrade purchase, and losing even more money buy spending even more money on you for this current upgrade (that you do not have) purchase. If that’s how things worked then we wouldn’t have mobile phones on any network. AT&T can give a piss-less about you, an undedicated customer leaving their network is only going to help them. AT&T should write up a novel about customers/people like you, not vice versa. Horrible article full of nonsense, sorry.

  7. says

    From your experience, who has the better cell service? I have only had AT&T since the first iPhone and now the 3Gs which is in dire need of the upgrade to 4s. My contract is up so I can go wherever freely.

    But, AT&T has hooked me up with free unlimited mobile-to-any-mobile calling and I’m grandfathered into the unlimited data (of which I barely use in a given month). If I want a similar plan of 450 minutes with unlimited text and 2GB data, it’ll be more expensive than what I’m paying at AT&T.

    Most every Verizon iPhone user who had AT&T before in L.A. swears by Verizon. I haven’t heard a single person saying they wish they had stayed with Verizon. Just wonder if that’s really the case. Plus, Verizon’s data is slower than AT&T’s right? Noticeably?

    Good article. I dug your insight.

  8. jay says

    Can’t you just pay the termination fee, ebay your iPhone 4 for $250, and sign up as a new ATT customer, get the 4S for $199, and be happy with ATT?

  9. Aidan says

    I’m confused. $195 to leave AT&T and get a new phone on Verizon will cost $195 + $200 for the new phone, which is $395. $250 to get the new phone with AT&T seems like the better deal to me.

  10. Dave Zatz says

    It’s still somewhat specific… based on monthly spend. My wife has unlimited mInutes and her AT&T bill runs about $120/month. For the second year in a row she gets upgrade pricing and we’ll be swapping her iPhone 4 for a 4S. As for me, I’m on Verizon With a 4 and my 4S price is $649. Not sure what my plan is yet. Maybe do nothing, or maybe jump ship. Hm.

  11. Bart says

    You’re talking about a money savings on a waste of money. :) Most people who bought their phone at the same time as you are going to stay with that phone until their two years is up. They’re saving money by not breaking their contract and by not buying a full-price phone.

    In the long term I think what AT&T did was right. They can’t give people an iPhone every year at subsidized prices and it does them no good to encourage it. Three years in a row that means they’d be betting on a customer sticking around for longer than 6 years to get a pay-off and you’re already showing yourself to be less loyal than people who are waiting out their 24-months.

    The original subsidized price is what they did to earn your 24-month loyalty. You took it and are asking for more favors.

  12. gregorylent says

    america is crazy.

    buy the phone. get a service you like. no contracts. like the rest of the world.

  13. says

    The phone on VZW’s network will be slower.. noticeably. The other knock is the ability to talk and do data at the same time? Unless VZW has changed something with their 3g network, only some of the 4gLTE devices are capable of this?

    I have the HTC thunderbolt and am generally quite pleased with the speed, and the coverage. Not so much with the VZW preinstalled bloatware on the phone.

    My monthly bill runs $95 a month with 900mins the limited text plan and unlimited corp. data access. There is a corporate discount in there as well. Moving up from the 450 min plan added $20 to my bill :( corp data access on AT&T was somewhat outrageous as I recall.

    Once the iPhone has 4G LTE radios, I will likely jump. The iPhone is more user friendly than Android, Syncing is seamless and the camera is *much* better. The Android camera API leaves a lot to be desired IMHO.

  14. jay says

    As an aside: according to ATT, I upgraded to an iPhone 4 8/11/2010 and they say I can have full discount upgrade on 1/11/2012.

    Note: I did not buy the iPhone 4 until OCT 2010, I looked it up from my credit card statement.

    Not sure about their math, but I have been a customer since 2003, maybe that figured into the equation.

    Just sharing a real-world, obviously an ATT error-filled, example.

    As I say, don’t get the math, buy that is what the website says today
    I’ll take it.

    The bigger issue: once your phone has been amortized, shouldn’t they just drop you monthly fee by $10 or $15 if you DON’t get a new phone or “bring your own”?

  15. says

    Diz, oops! Yes, it is $300. And yes, people can and potentially will bounce.

    If you want the latest iPhone — and many do — until this release, you couldn’t jump. It was AT&T only. Now any carrier you’re with, you have two other choices you can jump to. It changes the game.

    AT&T doesn’t have to give me anything. Did I say they had to? I said actually there was no hostility on either side. AT&T saw no sense; I saw no sense staying. Maybe AT&T feels it wins, even if I take my regular monthly payments elsewhere. I certainly feel I’m winning leaving.

    As for subsidies, yes — having owned a cell phone for what, 15 years, I have a pretty good understanding of how they work. I also have a pretty good understanding that over the past 13 months, AT&T has made over $1,000 from my monthly fees. If I cancel, they make up whatever else they may have subsidized through the cancel fee. That’s what it’s there for. So they’re losing nothing — other than me continuing to pay them another $1,000 to $2,000 over the following year or two, because I’ve gone elsewhere.

    Ryan, Verizon has been better, in my experience. The new iPhone 4S is supposed to be faster on AT&T. But the network itself might still be sluggish. Can’t really tell. If speed is really important, get an Android phone on Verizon’s 4G network.

    Jay, the rep kind of suggested adding a new line and doing that. Potentially I could. But Verizon makes that all easier, right? If AT&T did the trade-in program and eBayed it for you, even happier.

    Aidan, it’s not $250 to get a new phone on AT&T, because I’m not yet eligible for the upgrade. It would be $450. So paying the $195 fee, paying the $300 for the new phone (I had the price wrong) and getting the $200 trade-in still is cheaper.

    Dave, yes, it gets different if you have a plan you like, especially if unlimited date or minutes or important for you. As for your plan, jump to AT&T :)

    Bart, 200,000+ new sales on AT&T for the iPhone 4S? Those are all brand new people? I know four different people offhand who are upgrading outside their upgrade period, because they want the new phone. But regardless, I’m saving money by breaking my contract. Others might, as well. It’s up to them.

    As for what AT&T can or can’t do, see my response to Diz above. By not “encouraging” me by waiving, or even partially waving the upgrade fee, I’m walking away with $1,000 to $2,000 of businesses.

    GregoryLent, yeah, it doesn’t work like that in the US. It is a crazy system, made harder by us not being all GSM, as it is in Europe. I had a UK phone for 12 years. The system there was awesome.

    Tims, the phone on Verizon will be just as fast as an iPhone 4 would be now, on Verizon. It’ll just be faster on AT&T, so they say, not that all the other phones got slower. But yes, if you want speed on an iPhone, and you feel AT&T’s network is dependable, that’s the way to go.

    But like you, I have an Verizon 4G phone. We both know what real speed is about :) Wish we had LTE iPhones.

    Thanks for the comments, everyone. Let me be clear again. I’m not angry at AT&T. I’m not thinking whine whine, where’s my upgrade. I’m not entitled to one. I’m just saying that because there are now other options for owning a iPhone, that deterrent of a termination fee isn’t so much for me any more — and I think potentially, that’s the case for many people.

  16. says

    Diz, added a note — I had prices for the 16GB version listed for both sides, so net, my math was still correct — you can break even, save or save big by moving, if you’re in the same situation as me. Go to the 32GB, same thing, because it’s $100 more on both sides.

  17. Bart says

    I’m actually one of the people who are deciding to get the 4S before my contract expires (in May… I was waiting for a white one before, which screwed me over). But if I decided to switch to Verizon I just don’t think I’d be “saving money”… I’ve already made my bed by deciding not to wait for my two years to be over.

    Yes they make money off you through your cell phone plan but what will happen when the iPhone comes out next year? And the year after and the year after? Every year they have to loose $200 just to keep you? I’m not sure if you (and I) are worth it to them. Plus what percentage of our cell phone plans is really profit (besides the crazy pricing on texts, which they won’t be making on iMessage users).

  18. Ryan H says

    Shush Danny! :-) You’re giving away a secret that I’ve known for years, and it’s because the carriers are now becoming aware of this loophole that they have been raising the termination fee in order to cover the resale value of the $700+ dollar phones they subsidized. Before they raised the fees I was able to actually make money carrier hopping and upgrading phones. Now I can just upgrade very cheaply. I just don’t want them to raise them any further.

  19. says

    My husband and I each have an iPhone 3G, so we’re certainly eligible for upgrade pricing, but AT&T’s service is an issue where we are, so I’ve just been looking around at pricing as well and discovered a nice deal with Sprint. Check for a corporate discount with a business email. If your company doesn’t have a corporate plan, you’ll still get a coupon for a $50 activation credit per line, good through the end of the year.

  20. says

    Danny, thanks for writing. Timing was dead on for me (Just switched today) to Verizon from AT&T. Reason: AT&T drops calls like crazy. Unreal. Maybe it’s my area in Virginia, but dang… I buy coverage to get coverage not a bunch of dropped calls.
    I was with Verizon, switched to AT&T when the 3GS came out (sadly enough) and have paid the price all the way through. When I called the Verizon “Win-Back” department, they were more than happy to oblige to get me back. I won’t state the details of my deal, but it involves Verizon basically giving me a very large cost in free stuff to get me back.
    Sadly, AT&T really didn’t care when I called to give them a chance to keep me, which was out of courtesy more than anything (I’m southern, it’s how we roll)… Keep up the good work – your math looks good to me, and so does Verizon’s :)

  21. Shane says

    I will say, this is unusual. at&t start bugging their customers to renew once the first year is up. Doesn’t really make any sense, but it’s not surprising. If I had to guess, this is either how they are handling the fact that Apple puts restrictions on everything–how cheap you can sell an iphone, and how many at that price; how many you can sell a day; the extent of the promotions that are offered. Because, yes, Apple approves all and designs most promotions for at&t, etc. It could be that they want to make sure new customers get first dib, maybe?

    Also, you could just wait a month and you would be able to get it then.
    I guess, Apple writes the rules.

    It’s not even a real upgrade from what you have. Especially if you leave at&t (Verizon won’t utilize the new downloading speeds because of their network architecture; and no voice+text) From what I’ve heard, this is more of an update dressed up as a new product.
    I heard they tightened the DRM as well– Of course!
    I actually can’t stand the iphone; I had a 3g(i think?) and I couldn’t stand how I felt like I was playing with a demo operating system. A pretty-looking and smooth-running, tiny tiny demo. It’s completely useless for anything real world. And apple gives you zero freedom. Anyways though, I’m ranting.
    I wish you the best and good luck

  22. Shane says

    Ryan
    Yes, data is slower on cdma, Verizon. Cut in half if I am not mistaken. But unless you have fast internet and a good amount to download it won’t really make much of a difference in the next couple years.

    at&t has a far better system, simply because it’s the same system the rest of the world uses. As for which company is better, it’s hard to say. Depends on the circumstances. Being a long time at&t user you are probably better off staying. I’m in the same boat as you: Houston Cellular > Cingular > ATT.

    One thing to keep in mind. Verizon phones don’t have a good resale value. AT&T (all gsm) sell for nearly twice as much on the used market. So take that how you want. You won’t make as much selling a used phone, but you can pick up a cheap used phone. Doesn’t sound like you are planning to though

  23. Peter Hinman says

    I’m still confused about the costs for international (GSM) roaming if I go with Verizon. Is there a setup fee for them to turn on the service or is there a monthly fee (somewhere I read $30) to maintain it? And is the SIM already built into the 4GS or is it something to get installed? I don’t mind the high roaming rates for the occasional call abroad, but I couldn’t justify a monthly fee to maintain the ability to get off a plane in Paris and call my hotel.

  24. says

    My company issues out iphones and ipads to all of our technicians and sales team because we have recently gone paperless. The problem is AT&T drops calls like it’s their job and often times it happens when we are communicating with our customers. We did not have that problem with Sprint, but we really like what Apple products bring to our paperless accounting and dispatch system. We want to make a move to another carrier, but haven’t tested Verizon’s reliability.

    You mentioned that Verizon’s network is more reliable, so that has me thinking it might be time to make the switch. What other differences have you noticed between AT&T and Verizon’s network?

  25. says

    There are a lot of shift going on around from AT&T to Verizon’s. Our company had the same move as the company of Benjamin (previous commenter) and we had the same problem with AT&T. Calls were really unreliable and we had to explain constantly to our clients about the drop of call. We shifted to Verizon, despite the imperfections of the network; I can honestly say it offers a better service. Still the decision should be taken in different views and cases at all times. See what works for you and your company/business and start from there.

  26. says

    Danny, I worked many years in the now dwindling land-line telephone industry. Both the “new” AT&T and Verizon have a similar pedigree from the old Bell System + AT&T. A former insider going by the pen-name of J Edward Hyde wrote “The Phone Book” in 1976, exposing many corporate practices that Ma Bell did not want the public to see. I see a lot of the same games played out today.

  27. Likert Smith says

    I love your plan, and I too and now switching: I’m going to switch to Verizon and get a new iPhone 4S, and pay out the remaining termination fee on my AT&T contract. Yes, terminating the contract will cost me $150, but I won’t have to pay $90/month for my AT&T contract. Savings? HUNDREDS! Why doesn’t EVERYONE do this?