Going into effect on Sunday, February 12, AT&T is increasing the activation fee on phone upgrades from $18 to $36 according to a memo issued to all AT&T store managers according to BGR. This brings the activation fee equal to the current rate of $36 for starting a brand new service plan. As directed by AT&T corporate management, store employees are supposed to define the fee as costs associated to picking out a new phone as well as activating the device. However, the increase in the fee doesn’t change when a customer is able to qualify for a new phone upgrade. Anyone planning on upgrading their phone soon can still get the $18 activation price if they upgrade by the end of today.
AT&T issued a statement regarding the doubled fee which stated “Wireless devices today are more sophisticated than ever before. And because of that, the costs associated with upgrading to a new device have increased and is reflected in our new upgrade fee. This fee isn’t unique to AT&T and this is the first time we’re changing it in nearly 10 years.”
While there certainly may be increased costs in educating the consumer on the features of new smartphones, it’s highly unlikely that the cost of enabling an existing account on a new phone has increased over the last ten years. If anything, costs have been driven down by automating the activation process and swapping out a SIM card to a new device isn’t exactly difficult.
Consumers that have already educated themselves on which phone fits best with their lifestyle will likely be the most unhappy with AT&T’s move to double the activation fee. By increasing this fee before the launch of the next iPhone this summer, AT&T puts themselves in a position to collect an additional $30 million dollars off the 1.7 million people that purchased an iPhone 4 within three days of launch during June 2010, assuming all early iPhone 4 adopters stick with AT&T for the new model.
AT&T isn’t the only carrier to increase the fee for the upgrade process. On September 9, 2011, Sprint also doubled the activation fee from $18 to $36. However, many Sprint monthly plans are designed to be cheaper than competitors like Verizon and AT&T, thus the change didn’t draw much ire from consumers. If consumers are looking for cheaper activation rates, T-Mobile charges $18 to upgrade a phone and Verizon charges absolutely nothing if the contract has been completed. Even more interesting, an iPhone user switching from AT&T to Verizon at the launch of the next iPhone will pay a dollar less to activate a brand new phone on Verizon compared to upgrading a phone on AT&T’s network.
AT&T’s failed attempt to acquire T-Mobile during 2011 was likely a factor in this decision to double the activation fee as well as newer software like iMessage that’s shifting people away from expensive text messaging plans. It’s also possible that AT&T is attempting to eliminate users on grandfathered unlimited data plans by encouraging them to consider other networks during the next phone upgrade. Families with multiple phones to upgrade will also be hit harder with this decision and may consider moving to another carrier.
Verizon got into a bit of trouble last year when it attempted to roll out a new fee that would charge current customers a $2 “convenience fee” for paying their bill over the phone or through the online site. Consumers revolted against the plan and Verizon ended up reversing the decision before users abandoned Verizon for other cellular carriers.