When you buy an iPhone from AT&T for $200, that is not the “real” cost of the iPhone. I’ve read that AT&T pays Apple around $550 for the iPhone, so they lose $350 on the sale. Of course, AT&T makes that up because you have to agree to a two year contract and AT&T collects far more than $350 from you over two years.
If you want to get out of your AT&T contract before the 24 months are over, you need to pay an early termination fee (ETF). Right now, the ETF for all AT&T phones is $175, but AT&T announced this past Friday that starting June 1, AT&T is raising the ETF for smartphones like the iPhone to $325. That amount decreases by $10 every month that you are on your two year contract (it used to be $5 a month), so if you want to leave AT&T in month 23 without waiting that extra month, the ETF drops to $95. AT&T explains the reasons for these changes in this open letter to its customers. (Note that Verizon currently has a $350 ETF, so even the increased AT&T rate is lower than Verizon.)
I presume the next iPhone will be out in June or July, so if you plan to get the next iPhone, either by becoming a first-time AT&T customer or by extending your current contract, then the new ETF will apply to you.
Frankly, I don’t see the ETF as a big deal. Right now in the U.S., you can only use an iPhone with AT&T, so as long as you plan to use your iPhone for two years, you are going to need to stick with AT&T anyway. And even if Apple starts selling an iPhone through Verizon, the iPhone you buy to work with AT&T won’t work with Verizon anyway. At least, not this year; in the future, when AT&T and Verizon both have a 4G network and a future iPhone works with that network, then the same unit could work on both carriers so it might be important to you to be able to switch from one to another. But for now, if you buy an AT&T iPhone, you’re going to want to stay on AT&T as long as you continue to use that iPhone.
The only real impact I see is that if you buy a new iPhone this June, and then in say June of 2011 there is an iPhone on Verizon and you want to switch to Verizon, at that point you will need to pay an ETF to switch. Twelve months into a contract, with the new ETF, you will need to pay AT&T $205 to jump over to Verizon.
Whether you ever switch networks or not, it is always good to know what you are agreeing to in a contract. Thus, if you plan to get a new iPhone this summer when Apple releases the next model, keep in mind that you will be agreeing to the new ETF.