Posted on Fri 23 October 2015

the small print is never in your favor

Let us suppose that you, like approximately 1 75% of the US population, have a cellphone. And let us suppose that you use one of the big 4 wireless companies, Verizon, AT&T, Sprint and T-Mobile. VZW is expensive but has the most geographical coverage. T is a little less expensive and has almost as good coverage. SPR and TMO have good urban coverage, good highway coverage, not necessarily so great in rural areas, and are usually cheaper or have other compelling reasons for you to use them.

A year or two ago marked the transition from a classic era of pricing, in which your monthly cost was your monthly cost (modulo excessive usage charges - who can forget that Verizon can’t 2 do math?) including the costs of some number of minutes, some number of text messages, some amount of data, and of course the phone that you had picked out. The differences in phone pricing were largely covered by an initial charge, and all the rest was included as a standard hidden cost. If you ended your contract earlier than 24 months, you had to pay an ETF, an early termination fee, which was often $300 or more. This covered the residual cost of your phone, and usually a big profit on top.

The new paradigm is that you pay for your phone service each month, and then you have the choice of buying your phone at the beginning ($75 - 1000) or paying an upfront fee ($0 - 300) and leasing/buying it over 24 months with a monthly payment ($6 - 45). It’s flexible! You pay less up front, if you want! And there are no more ETFs.

Why are there no more ETFs? Because the lease/buy contract does not end simply because you are no longer getting service from the telco. Oh no. You stop paying for service, yes. You no longer receive service. You do not stop paying for the phone, because that is a separate contract.

Typically you are on the hook for the rest of the lease payments, and then you are done.

Sprint, however, has found a new way to be evil.

Sprint just sent me an ad for their latest, not-so-greatest phone. If you were to buy it outright, they want $700. If you lease it from them, they want $20 a month for 24 months: $480.

Here is the new fine print.

Early termination of lease/service: Remaining lease payments will be
due immediately, and requires device return or payment of purchase
option device price in lease.

Huh. So you pay all the lease payments no matter what, even if you return the device immediately. That’s not a lease. If I lease an apartment for 24 months, and in month 16 I break the lease and my landlord agrees to let me out of it, I don’t pay 8 months of rent while I’m not in the apartment. If I had to do that, I wouldn’t call that terminating the lease. I would call it, specifically, not terminating the lease.

OK. And what is the third option?

Upon completion of 24 mo. term, customer can continue to pay
monthly lease amount, purchase or return the device.

Yes, if you don’t notice, Sprint will continue billing you $20/month forever.

Charming behavior. I bet the other telcos do it, too.

  1. Comscore Reports Jan 2015↩︎

  2. Verizon Math Blogspot↩︎

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