Ditching Your Cell Phone Provider on the Cheap

For wireless customers, the price of freedom has long come in the form of exorbitant early termination charges. A customer who abandoned a contract before it was set to expire could expect to pay as much as $200. And for a family of four looking to ditch their wireless plan, fees could climb to an astronomical $800.

But now, customers are fighting back — and claiming some sizable wins. Last month, a California court ruled that Sprint's early termination fees were illegal because they were, as the court decision said, "implemented primarily as a means to discourage customers from leaving" their contracts.

Sprint was ordered to pay $73 million in damages. And Verizon Wireless recently agreed to pay $21 million to settle a lawsuit filed by subscribers in California that alleged its early termination fees were excessive and violated state law.

The activism seems to be working. "I think carriers are finally waking up. They don't want to tick off the customer," says Jeff Kagan, a telecom industry analyst. Now, instead of charging a flat fee no matter what, carriers are prorating penalties, which decrease as customers get further along in their contract. Moving to a prorated fee structure is "something they're all going do," Kagan says, "and I think you'll see them do it fairly quickly."

The New Cost of Breaking Up

With the exception of Sprint, all the major carriers have made their early termination fees more subscriber-friendly. (According to a company spokeswoman, Sprint plans to institute a new prorated fee schedule by the end of the year.) Here are their new prorated plans:

Ensuring an Amicable Split

To help reduce your chances of going through a contentious divorce with your carrier, follow these steps:

Take a Test Drive

Take advantage of the free trials most carriers offer, suggests Jeff Blyskal, senior editor at Consumer Reports. "Check out the service, use it where you'd be traveling to or in your home," he says. If you're unhappy for whatever reason, return the phone, get a refund for the handset and activation fee, and try another service.

Seek Flexibility

Worried you won't be able to stick to a long-term relationship with your carrier? If that's the case, look for the shortest contract possible, says Blyskal. That way, if you're dissatisfied with the service, you won't be locked in for too long. Verizon, for example, offers a one-year contract. Just be aware that discounts on phones vary depending on the type of plan. "You'll pay a little more for the phone, but you'll have your freedom at least," says Blyskal.

If even a year seems like too much of a commitment, consider a prepaid plan. In most cases, you'll have to pay full price for the phone, but having the freedom to leave at will, without paying a penalty, can make it worthwhile.

Here are prepaid and pay-as-you-go wireless plans that are currently available:

Look for Legal Loopholes

Almost all of the major carriers have a "material adverse change" clause. Under this clause, if a carrier changes the terms of a contract, say by raising the text messaging rate, it must provide notice to subscribers and give them at least 14 days to bail out without worrying about paying an early termination fee. "That opens a small window of time to fight the company to get out of the contract legally," says Joe Ridout, spokesman for Consumer Action, a consumer advocacy group. Make sure to read any notices you receive from your carrier carefully, he says. If you continue to use your service beyond the "get out" date, it's an indication that you accept their changes.

If your rates have been raised and the company refuses to waive the early termination fee, filing an official complaint with the FCC and your public utilities commission "will maximize your chance of success because phone companies don't like to get in trouble," says Ridout.