Customers unhappy with Sprint’s mobile service need not wait until the end of their contract term to switch providers without incurring an expensive early termination fee.  Sprint has changed its pricing for their monthly regulatory fees from $.20 to $.40 per month.  Although it sounds all-official-sounding, in fact it’s nothing more than pure profit padding.  It’s a “junk fee” thrown on to customer bills ostensibly to pay for the company’s costs of complying with legal regulations.  In fact, a lot of it probably ends up paying for their lobbyists.

No matter, because you can use this pesky fee to your advantage if you were thinking of switching providers.  Your contract with Sprint includes a clause pertaining to a “materially adverse changes” to your contract with Sprint, and paying even more for your Sprint service sounds mighty adverse to me.

This means you get to break your contract, leave, and pay them zero in cancellation fees on the way out the door.  If you are happy with Sprint service and want to stay, you can also use the extra charge to extract free add-ons, like a free texting plan or other calling feature.  Maybe you want a new and better phone now at a substantial discount instead of waiting until the end of your contract.  Or maybe you just want to refuse paying this junk fee.  All things are possible during your 30-day window of opportunity to your favor, depending on the representative you reach and their authority to act on your behalf.

The Consumerist has some great pointers to prepare you for the call or online chat you are about to have with Sprint.  Be prepared for some varying degrees of push back from the company representatives, many who will be under-informed about your right not to pay junk fees and get out of your contract without penalties:

• When you call, they will ask you why you are canceling and try to get you to say you are unhappy with some other aspect of the service. You need to stick fast to your guns and insist, no matter what, that the only reason you are canceling is because you are rejecting this materially adverse change in contract terms and conditions.
• Not looking forward to playing head-games over the phone? Some readers have had better luck using online chat. “They just copy-and-paste a few canned pleas for you to stay, and all you have to do is type no thanks,” says commenter ohenry. “Plus then you can save your chat.”
• Yes, you can keep your phone number and port it to another provider.
• Yes, you may be able to use this to switch to a month to month plan.
• You only have January 31, 2010 to cancel.

The Consumerist site has a comments section with the experiences of those looking for the exit.

Robert F. McDowell

Two Republicans serving on the Federal Communications Commission told attendees at Saturday’s Tech Policy Summit that “usage-based pricing” for wireless broadband could be a solution to congested cell phone data networks.

“Pricing freedom has to be essential, because a small number of users take up the majority of bandwidth. So charging some of the heavy users for that bandwidth makes sense,” Commissioner Robert McDowell said during a panel discussion at the 2010 Consumer Electronics Show.

“I think it’s time to let that happen,” he added. “Net neutrality proponents say it should be an all-you-can-eat price. But that will lead to gridlock.”

The discussion, Inside the FCC’s Communications Agenda, focused on the FCC’s agenda in light of the Obama Administration’s new policy initiatives and the current the impact technology has on regulatory policy.

McDowell was responding to industry reports that Verizon was prepared to abandon all-you-can-eat pricing for wireless data on its forthcoming 4G LTE wireless network, even though it doesn’t actually have such a plan in place at the time the panel discussion was held.

McDowell believes that since private money is constructing the networks capable of delivering LTE service, the company has a right to charge what it pleases for service, reducing demand with a correspondingly higher price for those who use the network more than others.

Meredith Atwell Baker

Consumer advocates argue that current profits in the wireless industry provide ample resources to build and upgrade networks without overcharging consumers with expensive usage based pricing designed to make customers think twice before using the service they pay good money to receive.  Unlimited use pricing is favored by consumers as well.  Most providers abandoned “all you can eat” plans at least a year ago.  Every wireless broadband plan carries some limitations somewhere in the fine print, particularly for plans that are designed for mobile netbooks or laptops.  Virtually all of them either limit usage to 5GB per month or throttle the user who exceeds that amount down to dial-up speeds for the rest of the month.

Meredith Attwell Baker, the newest Republican FCC Commissioner, seemed slightly out of her element in discussing the issue of consumption billing.

As panel moderator Kim Hart reported for The Hill newspaper, Baker has some novel ideas for easing congestion on wireless broadband networks.

“Maybe we move back to a world where people pay for roaming,” she said.

Verizon Wireless is expected to unveil three new data plans on January 18th, including a new smartphone-mandatory “unlimited broadband” 3G plan priced at $29.99 per month, according to documents obtained by Broadband Reports.

The documents, provided by a Verizon Wireless employee, show the company is moving towards mandating all of their customers select some sort of data plan as part of their monthly service.  But unlike some wireless providers that leave options open to customers, Verizon wants to herd customers into data plans based on the types of phones they use:

• Simple Phones: Basic handsets that are designed for making and receiving phone calls and sending quick text messages from a numeric keypad, typically at older network standard speeds;
• 3G Multimedia: 3G-capable phones that may include a simple keyboard, and are designed for simpler text messaging and occasional data access;
• 3G Smartphones: Blackberry, Android, Windows-capable, and eventually the iPhone all qualify for this classification.

Verizon Wireless formerly offered a paltry 25MB package for $9.99 with a 50 cents per megabyte overlimit fee and a stingy 75MB package for $19.99 per month with a 30 cents per megabyte overlimit fee.  These might be suitable for someone trying to navigate a mobile web browser on an older generation phone from a numeric keyboard, but were priced unattractively for those with more advanced phones.

The 75MB package appears to be history after January 18th, but the 25MB package will remain with a reduced overlimit fee of 20 cents per megabyte (that’s an incredible $200 per gigabyte) .  Customers who don’t want -any- data plan for their basic wireless phone will be forced onto Verizon’s “pay as you go” plan, which charges $1.99 per megabyte.  It’s this plan that subjects customers to those $1.99 mysterious “data charges” on their bill, caused when a customer invokes the phone’s web browser (intentionally or otherwise, if you believe customers.)

Customers who don’t own smartphones and don’t use their phones to access many data services will find themselves being corralled into one of Verizon’s new data plans, whether they like it or not, once they try and renew their contract or make “certain account changes” under their existing contract.  If you’re a smartphone user, your choice will be the $29.99 unlimited data plan or the $29.99 unlimited data plan.  In other words, smartphone customers don’t get a choice.  Only owners of more basic phones will be able to choose from overpriced “pay as you go” service, a paltry 25MB offering, or what the company will upsell as the “best value” — the $29.99 unlimited plan.

“Even some basic phones such as the LG VX8360 will require data plans starting the 18th,” says Broadband Reports‘ tipster. Some examples of 3G Multimedia phones: LG Chocolate Touch, LG enV3, LG enV Touch, LG VX8360, Motorola Entice, Motorola Rival, Samsung Rogue, Samsung Alias2 and Nokia Twist.

The launch of an unlimited data plan on Verizon Wireless’ 3G network will make Apple happy.  The iPhone manufacturer has reportedly advocated generous data plans for iPhone customers who find themselves required to purchase plans for both voice calling and data with AT&T.  If the iPhone’s arrival on Verizon Wireless’ network is imminent this summer, having an unlimited data plan available to customers would make sense.

Although the fine print isn’t available to us, Karl Bode at Broadband Reports notes the documents he’s seen indicate no hidden usage cap, like AT&T’s formerly advertised “unlimited” plans that were limited to 5GB in the fine print.

Broadband Reports ran an exclusive story this morning breaking the news about Verizon's new data plans.

Still, for customers pushed into purchasing a data plan they may not want, it’s another case of Internet Overcharging.  That’s particularly true with Verizon, which claims to be a proponent of “paying for what you use,” yet still doesn’t offer all of their customers that option.  Instead, customers who don’t want to pony up $29.99 a month (or don’t have to because they don’t own a smartphone) are stuck paying for overpriced “pay as you go” plans or a paltry 25MB plan priced not to sell.  Even their “unlimited” plan may not last for long.  As Verizon Wireless works towards their 4G network launch, unlimited pricing may never be a part of it.

The Verizon Wireless documents explain what’s really happening here when it instructs employees pushing data plans to up-sell customers: “think of how dissatisfied they would be if they received their bill with excessive Pay As You Go charges!”  That is a powerful tool to motivate customers to choose a more expensive plan they may not need or want, just to protect themselves from the nasty surprise of an enormous bill at the end of the month.

With the evolving wireless phone marketplace now opening up new options for consumers to bypass the wireless company’s own products and services, overcharging consumers for accessing competitors’ products on their network guarantees a nice payday for Verizon Wireless no matter how you use your phone.

It’s why year after year, despite an increasing number of minutes thrown into your plan’s bucket, your cell phone bill never seems to actually decrease.  After all of the additional add-ons, surcharges, and fees attached to the bill, it has become easier than ever to approach $100 a month for cell phone service in the United States.

Phillip Dampier

Verizon Wireless’s next generation LTE wireless broadband network threatens to bring expensive “usage-based billing” to millions of Americans using technology products that depend on wireless networking to communicate  — from the handheld tablet you use to enjoy USA Today over morning coffee, the car that delivers news, weather and traffic reports to and from work, to the portable television you use to catch up with the game while running around town.

At the Consumer Electronics Show, Verizon chief technology officer Dick Lynch warned that Verizon is likely to abandon any notion of flat rate usage pricing, particularly when Verizon doesn’t get a piece of the action from the sale of the devices that connect to their network.

Instead, Verizon Wireless will adopt a wireless version of Internet Overcharging — usage-based billing that isn’t entirely “usage-based.”

A true consumption billing system charges consumers only for what they use — don’t use the service that month and customers would pay little or nothing for service that billing period.  Instead, providers maximize revenue with arbitrary “usage allowances” which are part of the steep monthly service fee.  The unused portion of the allowance typically does not roll over, in effect lost at the end of the month.  That means you pay for not using their network.  Imagine if your electric company charged you for leaving the lights on 24/7, but you were out of town that month.  If you exceed your allowance, the overlimit penalty kicks in, and most providers set those prices high enough to sting you while rewarding them.

“The problem we have today with flat-based usage is that you are trying to encourage customers to be efficient in use and applications but you are getting some people who are bandwidth hogs using gigabytes a month and they are paying something like megabytes a month,” Lynch said. “That isn’t long-term sustainable. Why should customers using an average amount of bandwidth be subsidizing bandwidth hogs?”

Lynch

The first step to broadband pricing enlightenment is to recognize the only true “hog” here is the broadband provider with an endless appetite for your money.  Usage-based pricing schemes carry the one-two punch for consumers, with no pain for providers:

1. They discourage usage, as consumers fear using up their monthly allowance and getting socked with an enormous bill filled with penalties and overlimit fees;
2. The corresponding reduction in usage lowers the providers’ capital spending requirements to meet consumer demand, and increase profits dramatically from those who find allowances too limiting and are willing to pay the exorbitant pricing providers charge those who exceed them.

Does Verizon actually believe that $60 a month for their wireless broadband service represents a fair price for someone using “something like megabytes a month?”  Can Verizon show it is losing money on its wireless broadband service?  I think not.

Predictably, Lynch provides a “between-the-lines” slap at government intervention to force open wireless networks to additional competition in the equipment marketplace:

“The whole paradigm of how we sell devices into the public is changing,” Lynch said. “At the same time that we announced LTE, we announced an open development initiative where we encouraged third-party developers to deploy devices on our network.”

That initiative was hardly the result of a sudden change of heart from Verizon.  It came from pressure Washington applied over the “closed network” practices the American wireless industry has followed for years.  Handsets and the applications that run on them have traditionally been closely controlled by providers.  Features built into smartphones and other handsets were disabled or limited by providers before the phones were sold to the public.  Usually, this forced customers to use the services either provided directly by their wireless company, or one of their “affiliated partners.”

Verizon Wireless is signaling the consequence of a more competitive, open market for wireless products and services: usage limits and a higher bill. That’s because you didn’t buy that device at a Verizon store at their asking price, and you’ve been using it too much.

Consumers would make a grave mistake in blaming a more activist watchdog role by the federal government to force open the wireless industry to competition and innovation by third parties.  Despite Verizon’s hints that those pesky regulators in Washington are to blame for your usage being limited and your bill being higher, the blame really belongs with the carriers pocketing those proceeds.

Since regulators will get the blame regardless, isn’t it time to go all out for American consumers by transforming the wireless provider marketplace?  Here are our suggestions:

1. An end to the ongoing consolidation of existing wireless players into a shrinking number of what will soon be two or three “too big to fail” national providers;
2. Insistence on additional competition coming from new, independent players, not simply those directly affiliated with the dominant four carriers (Verizon, AT&T, Sprint, and T-Mobile);
3. Justification for confiscatory data pricing made possible from the highly concentrated wireless marketplace, particularly in smaller cities and communities.

Verizon and AT&T have both engaged in a lot of scare talk about usage and their costs to manage it.  We’d believe them, except we read their financial reports and neither company is hurting.  We’d even be willing to meet them halfway and advocate additional allocations of spectrum to provide the bandwidth an increasingly wireless world will demand, but not at their asking price with those pesky terms and conditions that ration service to consumers at top dollar prices.

Customers in New York City attempting to order an iPhone direct from AT&T's website saw this message over the weekend

While much speculation about this week’s two-day unavailability of the iPhone for those in the Big Apple has often centered on the company running out of capacity, the more likely explanations are far simpler — the regional fulfillment center temporarily ran short after a holiday rush and AT&T wanted to stem the tide of increasing numbers of bottom-feeding eBay resellers doing business in the Tri-State area.

Customers in the New York metropolitan area discovered Saturday they couldn’t order an iPhone from AT&T’s website after entering a New York-area zip code.  Customers were told “we’re sorry, there are no Packages & Deals available at this time — please check back later.”  By Monday afternoon, orders were being processed normally.

The mystery deepened when some blogs began speculating the reason for the order blockade had to do with AT&T’s data capacity in New York City, suggesting the wireless company had reached its limit and halted sales accordingly.  They had the right to speculate if online chats with AT&T sales representatives were to be believed.  The Consumerist found two different explanations during their chats:

Daphne: Welcome to AT&T online Sales support. How may I assist you with placing your order today?

Laura: Hi, I was looking at the iPhone 3Gs and the system tells me that I cannot order one in my ZIP code. My zip code is 11231. (Brooklyn, NY) Is this true? Are iPhones no longer available in New York City?

Daphne: I am happy to be helping you today . Yes, this is correct the phone is not offered to you because New York is not ready for the iPhone.

Daphne: You don’t have enough towers to handle the phone.

Laura: Thank you for your help. So the phone is not available to people anywhere in the city?

Daphne: Yes this is correct Laura.

AT&T didn’t help matters with a non-denial denial issued by AT&T spokesman Fletcher Cook, who said only that the phone company periodically “modifies” its distribution channels. He had no comment about why the company resumed sales.

By not denying the capacity narrative that gained popularity earlier this week, it confirmed it in the popular press, including two local television news reports detailing the ‘sales outage.’

[flv width=”596″ height=”356″]http://www.phillipdampier.com/video/WNBC New York iPhone Sales Stopped 12-28-09.flv[/flv]

WNBC-TV reports on the unavailability of the iPhone in New York and AT&T’s ongoing problems with reception, service, and now PR in the Big Apple. (2 minutes)

With that story feeding the greater narrative that people “love the iPhone, hate the network,” AT&T better get on the phone with Luke Wilson and start taping some new ads.

In reality, Cook’s vague statement is something you’d expect from a spokesman who hasn’t been briefed on what really happened and needed to go with something to placate media speculation.  The data capacity theory would only make sense if the company suspended sales across all channels.  Except they didn’t.  Beyond the post-holiday low inventories found by some shoppers, New Yorkers could still find and purchase the iPhone in AT&T retail stores and through third-party retailers.  One could even order the phone from Apple.  Could unofficial ‘over-eager’ customer service representatives be responsible for the volunteered excuses noted above, either of which would ignite a firestorm of bad press for AT&T?

An increasingly annoying problem confronting cell phone companies is the eBay bottom-feeder and other gray market sales of the popular phone.  Both AT&T and Verizon have had growing problems with resellers who purchase a subsidized smartphone, agree to a two year contract, and immediately cancel it and resell the phone.  And they’ve been cashing in.

AT&T sells a new iPhone 3GS with 16 gigabytes of memory for $199.  When a reseller cancels the contract and keeps the phone, they pay a $175 early termination fee.  That means the phone costs them $374.  They then easily modify the phone to work with other cell phone companies and resell it for upwards of $600 or more on eBay, pocketing a nice $226 in profit.  Demand for the iPhone abroad is high, and considering the value of the dollar remains relatively low, Europeans can snap one up at a fire sale price.  Outside of North America, wireless phone companies don’t discount handsets like the iPhone.

Verizon Wireless has tried to deal with this problem by doubling the early termination fee on smartphones to $350.  That nearly eliminates the profit motive to resell affected phones.

[flv width=”600″ height=”356″]http://www.phillipdampier.com/video/WABC New York iPhone Sales 12-28-09.flv[/flv]

WABC-TV New York calls the latest iPhone mess “salt in the wound” for many New York-area AT&T customers.  (1 minute)