AT&T will soon have the highest activation fees in the wireless industry after an August price increase takes effect, boosting activation and upgrade charges for existing customers and adding a new $15 fee to activate a phone you already own and want to use on AT&T’s network.

AT&T confirmed that effective Aug. 1, the activation fee for new one or two-year contract plans will increase by $5 to $45.

The company also plans to add a $15 activation fee for new AT&T Next customers wishing to activate a “bring your own device” (BYOD) and sign up for a new line. For now, Next customers already committed to an installment plan before Aug. 1, 2015 will have the $15 activation fee waived for their next upgrade, but will pay the fee after that. AT&T warns it may drop that waiver at any time.

An AT&T spokesperson would only say, “We are making a few adjustments to our activation and upgrade fee structures,” in an e-mailed statement.

AT&T raised its activation fees from $35 to $40 last year and Verizon Wireless followed in January. It is very likely, based on earlier rate changes, Verizon will eventually match AT&T’s fee increases.

Houston residents excited by this week’s launch of AT&T U-verse with GigaPower have been quickly disappointed after learning the service is available practically nowhere in Houston and likely won’t be for some time.

The upgrade, offering up to 1,000/1,000Mbps broadband, was launched Monday with an announcement “select residents” in Bellaire, Pasadena, and northwest Harris County, Tex. will be the first to get the service.

Bellaire, known as the “City of Homes,” is a primarily residential community of 6,000 houses surrounded by the city of Houston. AT&T’s Houston headquarters are located in Bellaire, and the company maintains good relations with the local government. Larry Evans, AT&T’s vice president and general manager for South Texas told the Houston Chronicle that is a key factor for getting GigaPower upgrades. Evans said Bellaire, Pasadena and northwest Harris County have been very cooperative in clearing red tape and letting AT&T install fiber infrastructure for GigaPower with a minimum of fuss from permitting and zoning authorities.

Bellaire is a mostly residential community surrounded by Houston.

The larger city of Pasadena, with a population approaching 150,000 is another case where close cooperation with the city government made the difference. The city council contracts with AT&T to supply telecom services to the local government as well.

As in other AT&T service areas, actual availability of GigaPower is extremely limited. A search of prospective addresses in Pasadena found service available in only a few neighborhoods. In Bellaire, only a few streets now qualify for service. We were unable to find a single address in “northwest Harris County” that qualified for U-verse with GigaPower, but AT&T claims that “surrounding communities” would also have access, without disclosing the names of any of them. That makes it extremely difficult to accurately use AT&T’s service qualification tool to verify coverage.

Jim Cale found he pre-qualified on the website for U-verse with GigaPower service, but his hopes were dashed when a representative informed him his order was canceled because, in fact, GigaPower was not actually available on his street.

“My neighborhood was wired with fiber to the home when it [was built] a few years ago,” shared “Ed From Texas.” “AT&T is the provider and that was one of its advertised features. Who do I need to harass at AT&T to get Gigapower turned on for us?”

Gene R. is in a similar predicament:

“I can’t even get U-Verse and I am two blocks from loop 610,” he said. “AT&T says they don’t know when it will be available. I suspect…never.”

Richard dumped AT&T in the past for not meeting the speeds U-verse advertises, but is hopeful an all-fiber network might finally bring better speeds.

“I dropped AT&T’s MaxPlus because I never got anything approaching the 18Mbps speed I was being billed for,” he wrote.

AT&T will sell several U-verse with GigaPower plans in Houston. The packages below include waivers of equipment, installation and activation fees, if you agree to allow AT&T to monitor your browsing activity:

• U-verse High Speed Internet Premier: Internet speeds up to 1Gbps starting as low as $110 a month, or speeds at 300Mbps as low as $80 a month, with a one year price guarantee;
• U-verse High Speed Internet Premier + TV: Internet speeds up to 1Gbps and qualifying TV service starting as low as $150 a month, or speeds at 300Mbps and qualifying TV service as low as $120 a month, with a one year price guarantee;
• U-verse High Speed Internet Premier + TV + Voice: Internet speeds up to 1Gbps with qualifying TV service and Unlimited U-verse Voice starting as low as $180 a month, or speeds at 300Mbps with qualifying TV service and Unlimited U-verse Voice as low as $150 a month, with a two-year price guarantee.

These offers all include a provision in the service agreement allowing AT&T to spy on your browsing habits ostensibly to supply “targeted advertising.” But the terms and conditions do not limit AT&T from broadening its monitoring of your usage for other purposes. If you opt out, the price goes up to $109 monthly for 300Mbps service and $139 monthly for 1Gbps broadband and you will pay installation and activation fees.

AT&T says the monitoring is done purely to power its targeted ads. Some examples:

• If you search for concert tickets, you may receive offers and ads related to restaurants near the concert venue;
• After you browse hotels in Miami, you may be offered discounts for rental cars there;
• If you search for a car online, which may include window shade, you may receive an email notifying you of a local dealership’s sale;
• If you are exploring a new home appliance at one retailer, you may be presented with similar appliance options from other retailers.

“You might receive these offers or ads online, via email or through direct mail,” says AT&T on their Internet Preferences page.

The “price guarantee” provision is actually a contract obligating you to stay with U-verse for 1-2 years or face an early termination fee of $180. AT&T also warns your Internet speeds will deteriorate “if two or more HD shows [are] viewed at same time.” Usage caps apply, as usual. GigaPower customers signed up for the fastest speeds receive 1 terabyte, or 1,000 gigabytes, of data per month. Customers will get warnings if they exceed the cap twice. The third time, and going forward after that, they’ll pay a $10 fee for each 50GB over the cap.

NETGEAR 7550 Wi-Fi Router

Frontier has also introduced a “pay as you go” broadband plan, selling prepaid, up to 6/1Mbps DSL service (speeds not guaranteed) to customers on a daily, weekly, or monthly basis to its customers in Michigan, Ohio, and Washington without a term contract or credit check. The cost to get started is substantial, designed to discourage current broadband customers from considering a switch to a prepaid plan.

If Frontier is not offering a promotion waiving equipment and installation fees, customers must buy Frontier’s Welcome Kit ($39.99) which includes:

• NETGEAR 7550 Wi-Fi Router
• Power Cord
• Ethernet Cable
• Phone Cord
• 3 In-Line Filters
• Installation Guide

Customers who need Frontier to handle the installation or clear up any line problems will need to pay a $99.99 installation fee.

Those capable of managing the installation themselves will have to pay a $19.99 activation fee.

Three different plans are available:

• 1 day = $9.99
• 7 days = $24.99
• 30 days = $39.99

Frontier says the plans are perfect for seasonal residents, but it also penalizes those who take a break during the off-season. Once service is inactive for more than 60 days, a $34.99 reactivation fee applies to switch it back on.

AT&T’s solution for rural Americans without access to broadband service arrived this week with the introduction of an $80/month plan bundling a mandatory wireless home landline with a 10GB usage-capped Internet plan.

AT&T Wireless Home Phone and Internet has undergone market testing in selected northeastern areas (largely outside of AT&T’s landline service territory). This week the service became available nationwide and is marketed to customers disconnected (or soon will be if regulators approve) from AT&T’s traditional landline service. AT&T is petitioning to dismantle its rural and outer suburban wired landline network and transfer customers to wireless service. But AT&T’s wireless replacement is both expensive and usage capped with an allowance that is just a fraction of what AT&T DSL offers:

• Customers start with a $20/month wireless landline phone replacement, powered by AT&T’s wireless network. Customers will keep their current phone number and home phones and will be sent a “Home Base” device that will interface between AT&T’s wireless network and up to two telephones. AT&T does not permit its device to be connected to your existing home phone wiring, so it strongly urges customers to buy cordless phones. The device is portable so it can be taken with you when traveling. The standalone service offers unlimited nationwide calling, Voicemail, caller ID and call waiting;
• Those interested in also purchasing broadband can add one of three different data plans: $60 for 10GB, $90 for 20GB and $120 for 30GB. AT&T charges a $10 overlimit fee for each extra gigabyte. You cannot buy broadband service unless you also subscribe to AT&T’s wireless landline product. That means the lowest possible price for rural broadband is $80 a month for up to 10GB of usage. Access may be over AT&T’s 4G LTE network (5-12Mbps maximum speeds) or their much-slower, but more common 3G network. In contrast, AT&T sells DSL for as little as $15 a month with a 150GB usage allowance included.

[flv]http://www.phillipdampier.com/video/ATT Wireless Home Phone Internet Intro 5-2014.flv[/flv]

AT&T introduces its new solution for rural America — wireless home phone and Internet service, at a price much higher than what urban customers pay. (1:42)

AT&T’s Home Base

AT&T’s Wireless Home Phone and Internet includes plenty of fine print and disclaimers:

• A two-year service commitment is required to avoid a $199 charge for the Home Base device;
• 911 service is not guaranteed and you will be required to give your physical location to the 911 operator so they can send help to the proper address;
• A backup battery powers the Home Base allowing up to 1.5 hours of talk time and 18 hours of standby time. However, a standard corded phone that does not need electric power to operate is required to place or receive calls (including 911) during a power outage;
• Not compatible with wireless messaging services/text messaging, home security systems, fax machines, medical alert & monitoring systems, credit card machines, IP/PBX Phone systems, or dial-up Internet service. May not be compatible with DVR/Satellite systems;
• Call quality, wireless coverage, and service reliability are not guaranteed;
• Well-qualified credit approval required;
• An activation fee (undisclosed) also applies.

There are many surcharges that also may apply, including a $35 restocking fee, federal, state, and local taxes and the universal service fee. Customers must also pay AT&T-originated fees kept by AT&T, including a $1.25 “cost recovery charge,” a gross receipts surcharge, administrative fees and any government-originated assessments that AT&T passes on to customers in various states.

[flv]http://www.phillipdampier.com/video/ATT Wireless Home Phone Internet Setup 5-2014.flv[/flv]

AT&T explains how to set up and configure its Home Base to receive phone and broadband service wirelessly. (3:16)

AT&T and Verizon Wireless are thrilled customers are moving away from subsidized smartphones, because both are raking in extra revenue they are not returning to customers with lower plan prices.

In the past, customers have usually chosen discounted new phones that come with a two-year contract. A smartphone that retails for $650 sells in the store for $199 or less, with the $450 subsidy gradually repaid through artificially high service plan prices over the length of the contract. The subsidy system didn’t hurt long-term revenues because the money was eventually recovered and contracts locked most customers into place for at least two years. But Wall Street has never been thrilled by carriers tying up subsidy money on the books for two years.

For a transition away from the subsidy system to be fair, providers need to lower plan prices enough to drop the subsidy payback. But neither AT&T or Verizon Wireless have done that.

AT&T customers choosing an $650 iPhone on contract under the subsidy system will pay $200 up front, a $36 activation fee, and $80 a month for a two-year plan with 2GB of data. Total cost: $2,156.

If you buy your own iPhone and finance it through AT&T, which most customers are likely to do, the cost is $65 a month for the service plan, no activation fee, and a device installment payment plan of $32.50 a month for 20 months. Total cost: $2,210 or $54 more than the subsidized plan costs.

Verizon Wireless is a bigger taker.

Sign a two-year contract with Big Red for that same phone and 2GB plan and you will pay $200 up front, an activation fee of $35, and $75 a month for the service. That adds up to $2,035. Buying a no-contract iPhone without a subsidy costs $27 a month for the installment plan, no activation fee, and $65 a month for the service. That totals $2,210, $175 more than a subsidy customer pays.

Big spending-customers can realize some further savings by upgrading to plans with a bigger data allowance, but those plans won’t make sense if you don’t use up your allowance.

Both companies claim the unsubsidized plans save customers money, but they actually don’t for most because neither lowered plan rates enough and are now pocketing the difference. Verizon and AT&T also argue customers don’t have to pay several hundred dollars up front for a phone, which is true, but they will pay more for it over time. It is also true these unsubsidized plans allow for earlier upgrades, but customers are paying for that privilege.

It’s hard to say whether AT&T and Verizon Wireless will pay fair value for old phones as customers choose to upgrade. If they don’t, customers could effectively hand both companies even more money through undervalued trade-ins.

At least 40 percent of AT&T customers are choosing the unsubsidized route through AT&T Next and the company couldn’t be more pleased.

In a conference call with investors this week, AT&T’s chief financial officer told analysts wireless service margins were up to 45.4%, with AT&T Next having a positive impact on that margin.

John Stephens noted that with the retail price of smartphones being in the $600-650 range, more customers are being convinced to sign up for AT&T’s handset insurance plan, which provides AT&T with two benefits. First, the insurance earns AT&T more than it pays out in claims and second, devices returned under the insurance program are refurbished and then sent to other AT&T customers filing claims in the future.

Tim K. Horan from Oppenheimer & Co., Inc. believes AT&T’s total subsidy expenses/internal costs are around $400 for a subsidized phone but only $100 for a phone sold on the Next unsubsidized installment plan.

With competition from T-Mobile starting to have an impact on both companies, AT&T and Verizon Wireless have plenty of room to further lower their rates and still come out ahead.