Get Your iPhone Fix: Early Termination Fee Avoidance, Maybe

On day 21 of month 9 of the year 2012, Anno Domini, the sixth incarnation of the “Jesus Phone” sprang forth. After the riots quelled and the thirsts of the most ardent worshippers of the late Great Jobs were quenched, the masses already bound to another telecom deity wondered: Is there a way to break my loyalty and obligation and instead pay tribute to another minion of the Great One?

In plain English, many people who are stuck in two-year phone contracts based on their previous phone purchases want to how to escape their lengthy contracts. There are three ways. Pay the early termination fee, find a loophole, or breach your contract.

The Evil ETF: Liquidated Damages

We jokingly call it evil, but the ETF is merely a standard way of measuring damages. When a phone company sells you a device at a reduced price, they cover a large part of the cost of the phone in exchange for your two years of loyalty. Ordinarily, when a contract is not fulfilled, the measure of recovery is whatever it takes to make the phone company whole. Calculating that, based on the cost of the phone subsidy over two years, would be difficult.

Instead, the prevailing rate for an ETF is now at about $350, which is reduced $10 per month until the contract is complete. When the iPhone costs $200 from a carrier, and $650 from Apple directly, that actually seems like a fair estimate of damages. If you want out early, you can pay this fee and be free of future obligation.

Pay Money? Pffft. Find a Loophole

Contracts can only be modified in writing with the agreement of the parties. That means, when a carrier changes the contract, you can reject the changes and cancel your contract. Of course, this often means a protracted fight, hours on the phone with “supervisors” and threats of legal action, but it’s wholly possible.

For example, earlier this year, Sprint changed its handing of corporate discounts. Previously, a 12 percent discount would apply to the entire bill. Now, it only applies to the primary line (assuming a family plan). That meant a difference of a couple of dollars per month, per additional line. Under the terms of the contract, customers were able to leave, ETF-free, and Sprint was left without a leg to stand on. Note that the change has to be material, meaning it has to have a significant impact on your service or bill. A $0.02 change probably wouldn’t work.

Meh. I’m Still Not Paying…

You dirty breacher! If you breach your contract with a carrier, expect the serial number on the phone to be blacklisted (which makes it useless for almost anything but repair parts) and to get harassing bills and phone calls. You’ll be billed for the ETF, any outstanding balance, and probably collection fees once the bill is sent to a collection agency. Your credit will be dinged and you’ll be pestered regularly.

Then again, for many people in this economy, that’s nothing out of the ordinary, nor is it a deterrent.

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