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.