Crave

(Credit: Boy Genius Report)

Aside from the cost of the device and the expensive monthly plan, you might have to face an additional charge just for the privilege of getting a smartphone.

According to a document found by the Boy Genius Report, Verizon Wireless has raised its $175 early termination fee to a whopping $350 specifically for "advanced devices," which probably includes all smartphones. The termination fee won't stay at $350 however: the sum will decrease by $10 for every month of service.

This isn't exactly painting Verizon Wireless in a positive light here, though we suspect it's just a way for the carrier to prevent customers from dropping a phone and selling it for a premium on eBay or Craigslist. The new $350 ETF will go into effect on November 15.

After my rant last week on T-Mobile's upgrade fee, I check with the other major carriers to see if they subjected their long-time customers to the same thing. Though T-Mobile isn't alone in charging $18, other carriers may apply it under different circumstances.

AT&T: AT&T also charges an upgrade fee for long-time customers. This is true even if the customer is out of contract and is singing a new one with a higher monthly cost.

Sprint: As some readers pointed out on my previous blog, Sprint also charges customers off contract to upgrade from a regular phone to a smartphone. According to a carrier spokesperson, however, Sprint waives the fee if the customer orders their new handset online. If the customer buys it in a retail store or over the phone, then they will have to fork over the $18. Though it's nice to hear that Sprint waives the fee for some customers, I'd much prefer that it waive according to how long you've been with the carrier rather than from where you buy your phone. Why does Sprint even operate retail stores?

Verizon Wireless: According to a Verizon spokesperson, if a customer is off a contract and is eligible for an upgrade that person won't be subject to an upgrade fee for buying a new phone and signing a new contract.

U.S. Cellular: Ditto with U.S. Cellular. A spokesperson says that it won't charge an upgrade fee either.

If you agree with me that upgrade fees are outrageously unfair to loyal customers, then I encourage you to contact your carrier. Below you can find links to the customer service pages of the carrier Web sites. I threw in Verizon and U.S. Cellular for good measure.

T-Mobile
AT&T
Sprint
Verizon Wireless
U.S. Cellular

The MyTouch 3G: it will cost you.

(Credit: Corinne Schulze/CNET)

Despite what you might think, I don't believe all cell phone carriers are evil. Like any big faceless corporation, they're not always going to get it right, but I'm confident that carrier execs don't just plot to screw the customer.

Yet, every so often something happens to shake that confidence. On Sunday, I accompanied a friend to the main T-Mobile store in San Francisco. He's been waiting for weeks to finally ditch his clunker Nokia 6133 and upgrade to the MyTouch 3G. As a five-year T-Mobile customer who had been off contract for three years, he was ready to sign a new contract and agree to a more expensive monthly plan with data.

We were greeted by a friendly T-Mobile sales rep and our buying experience proceeded smoothly as my friend picked out his data plan, signed the new contract, and activated his MyTouch. Just as he pulled out his card, however, the trouble started.

The rep announced that he'd have to pay an $18 "upgrade fee." Uh, pardon me? I broke in and asked why a long-time customer who was signing a new contract and was agreeing to a costlier monthly plan was subject to the fee. With a smile and a relentlessly cheery demeanor she replied that she didn't know, but that he'd have to pay it anyway.

My beef with the upgrade fee is two-fold. First off, it should be waived for customers like my friend. He had only purchased two phones during his entire five years with T-Mobile so he was eligible for an upgrade. But now he's charged for being eligible? Wireless carriers hate customer churn, so I can't grasp why T-Mobile is charging a customer to not jump ship to another carrier.

Secondly, the fee is nothing more than a way for T-Mobile to make some cash. While supplying a phone and offering service to customers costs T-Mobile money, I don't understand the inherent cost of moving a customer from one phone to another. As I see it, the fee is all about helping T-Mobile's bottom line, but isn't my friend doing that already by remaining a customer?

When I contacted T-Mobile for an explanation, a spokesperson responded that the upgrade fee helps the carrier offer great value in its device and rate plan pricing. I appreciate the response, but I couldn't disagree more. Loyal customers should be rewarded for remaining loyal, not charged for it.

Try as I might, I can't get that worked up about carrier exclusivity. If a cell phone carrier and a manufacturer want to pair up and offer a handset for a certain period, I'm not going to oppose it purely on principle. Granted, such deals may not be fair to absolutely everyone, but I'd argue that there are much bigger problems with how the U.S. wireless industry operates.

Yet, a few U.S. Senators don't appear to agree. On July 7, a few weeks after a Senate committee grilled national carrier reps on device exclusivity, Sen. Herb Kohl (D-Wis.) wrote letters to both the federal Communications Commission and the Justice Department's antitrust division asking the agencies to investigate the issue and suggest possible regulatory proposals.

The original iPhone made carrier exclusivity an issue.

(Credit: Corinne Schulze/CNET)

"The practice of large cell phone companies gaining exclusive deals to the most in-demand cell phones is a serious barrier to competition," Kohl wrote. "Consumers are unlikely to obtain cell phone service from companies if they cannot obtain desired handsets."

I'm no carrier lackey, but I find it fascinating that Congress is just now noticing that carrier exclusivity exists. The practice, which is hardly unique to the United States, has been around for a long time. So from where is the sudden interest coming?

... Read More

Class action suits against carrier early termination fees (ETFs) are nothing new, but now it appears one case may come to an end.

Though it has yet to be approved by the court, T-Mobile has proposed a settlement in an $11.5 million class action suit filed in August 2008 in the U.S. District Court for the District of New Jersey. The suit alleges that T-Mobile broke federal and state laws when charging the ETFs.

The settlement would cover T-Mobile subscribers who were charged a flat-rate ETF from July 23, 1999 to February 19, 2009, or those whose service contract included an ETF during the same time period. The settlement would resolve several other pending cases that challenge T-Mobile's flat-rate ETFs.

T-Mobile customers who file a claim form will be eligible for one of three awards, according to the terms of the settlement. Customers who paid an ETF can receive up to $125. Customers who were charged an ETF but did not pay and did not receive a full credit within 30 days, can receive up to $25.

"Non-cash" relief will be provided for customers who had an ETF in their contract. Such relief could include 50 bonus minutes a month for three months, 100 bonus text messages a month for three months, "T-Mobile HotSpot" access for three days, or the right to have your contract with T-Mobile contain a prorated ETF. T-Mobile began prorating ETFs in June 2008.

As fast-growing Facebook closes in on MySpace in the U.S. in terms of unique visitors later this year, it's burning through millions of dollars a month (some claim it's as high as $20 million), with no magic levers to reverse the trend in the short term.

In November 2007, when Facebook took a $240 million stake from Microsoft, the investment was at a $15 billion valuation. Now it's down to $4 billion and probably less. As Caroline McCarthy reported a few days ago, rumor has it that "one potential investor submitted a term sheet for a valuation in the neighborhood of $2 billion."

As Facebook works its way toward a probable IPO, the big question is: how can it show it can make money? Well, one way--and I'm not the first to suggest it--would be to charge a nominal monthly fee. With that in mind, I ask a simple question: how much would you be willing to pay to use Facebook per month?

A lot of people I ask say they'd pay $1 a month--or, preferably, a yearly fee of $10 if paid in one shot. But some say they have Facebook fatigue and would rather quit than pay a dime.

Comments?

Getting chippy: Some bloggers think that the iPod Shuffle's accessory situation is a nightmare scenario for iPod fans.

(Credit: CNET)

In not-so-shocking news, iLounge is reporting that third-party headphones and headphone adapters for the new buttonless iPod Shuffle will require an Apple-licensed authentication chip.

This doesn't come as any great surprise to us because exacting licensing revenue from iPod accessory makers has become a brilliant way for Apple to add to the company's bottom line. But that "Apple tax," so to speak, does get passed on to consumers, and iLounge and others are now assuming that Apple headphone adapters will cost a minimum of $19 and possibly as much as $29. The handful of VoiceOver-compatible headphones that have been announced carry a starting price of $49.99.

The question, of course, is whether Apple has gone too far in requiring you to use only its headphones--or some sort of Apple-approved adapter or headphones for the device. (You can plug third-party headphones into the new Shuffle, and it will play music, but you can't control the volume or navigate songs).

iLounge is calling it a "nightmare scenario" for longtime iPod fans. "Are we entering a world in which Apple controls and taxes literally every piece of the iPod purchase, from headphones to chargers, jacking up their prices, forcing customers to repurchase things they already own, while making only marginal improvements in their functionality?" iLounge Editor in Chief Jeremy Horwitz asks in his review of the new iPod Shuffle. "It's a shame, and one that consumers should feel empowered to fight."

Meanwhile, over at Engadget, Nilay Patel is calling Apple's attempts to "lock down headphones" a sad new low that "makes the lack of physical controls on the Shuffle seem even more ridiculous."

What do you guys think? If the report is correct, is Apple going too far, or is this just a smart business move?

(Source: iLounge via Engadget)

Update: Gizmodo's posted a story going back and forth on whether the chip is an "authentication" chip or a "control" chip that's required for approval as part of Apple's "made for iPod program." It appears "control" is the correct description, but that hasn't been confirmed by Apple.

It's no secret that Sprint isn't enjoying the best of the times at the moment. Though the carrier narrowed its loss in the fourth quarter of 2008, it lost 1.3 million subscribers during the same period.

As that loss is far from an isolated incident, it's not surprising Sprint is now offering existing customers a $100 referral fee for bringing new subscribers to the carrier. All you need to do is enter the names and e-mail addresses of up 12 of your friends on a special Web site. Sprint will send the chosen few an e-mail inviting them to switch and you'll get your money after they have service for 30 days.

Though the idea of a $100 prize--or a $1,200 prize if all 12 of your friends switch--sounds attractive, I wonder if it's worth irritating your pals with a nagging e-mail from Sprint. Sure, they'll get a $25 Visa gift certificate if they make the jump, but I'd still check with them first.

Q: I was wondering why U.S. carriers have not picked up Nokia's N-series phones. Why wouldn't a carrier like AT&T or T-Mobile want such high-end handsets to attract customers?
- Zoheb

A: There are a few answers, Zoheb, but they all boil down to money. More so than in other countries the cell phone market in the United States has long centered on the service rebate. Carriers discount phones to attract customers and their contracts, while customers are trained to expect free or discounted handsets. While this dynamic is beginning to change due to the growing popularity of unlocked phones, service rebates largely rule the day here.

Nokia N96

(Credit: Corinne Schulze/CBS Interactive)

Though the rebates have their upside--customers can get $200 knocked off the price of a nice smartphone--they have their downsides as well. And I'm not talking about service contracts. Rather, the widespread use of service rebates has helped to "dumb down" the cell phone selection in the United States. With notable exceptions, carriers tend to keep their phones below $300 to make them as affordable as possible.

The problem with the N-series phones is that they cost well over $500 (the fancy Nokia N96 is $776 unlocked). So even with a service rebate they're going to remain pretty expensive. Sure, there will be customers like yourself who will be willing to buy one, but that's not enough incentive for a carrier to buy a several thousand of them. Instead, they're going to pick handsets that will sell in the biggest numbers.

T-Mobile G1

(Credit: Corinne Schulze/CBS Interactive)

We also have to remember that the N-series phones are complicated with a lot of different features. U.S. carriers tend to be in the driver's seat when it comes to choosing phones for their lineups. They have a lot of say in how the phone looks and what features it has. Thanks to the iPhone and the T-Mobile G1 this is also beginning to change, but they still like to exert their control. I'd wager than the N-series phones are simply too complicated for U.S. carriers. There are too many parts and features that the carriers can't control. Also, I'm sure that carriers haven't figured out how to monetize all the services on a handset like the N96. That's yet a another deterrent against picking it up.... Read More