Early termination fees could be a thing of the past as a small startup out of New Jersey has set up a Web site designed to bring together wireless customers looking to get out of their current contractual obligations without having to pay an ETF.
Those fees, which typically run between $150 and $200, have become a contentious issue for many wireless customers. A recent survey by Compete Inc. found 36 percent of wireless customers claimed their service contract was preventing them from switching to another operator.
The site, Celltradeusa.com, claims to take advantage of a transfer-of-responsibility process already offered by carriers to customers looking to terminate their contract, but opens the process up to a nationwide audience.
“We are not trying to do something underhanded or illegal,” said Celltradeusa.com co-founder Eric Wurtenberg. “We are simply extending something that carriers already offer to their current subscribers to a broader audience.
The self-titled “cellular exchange” Web site allows customers looking to unload their current contract-Get Out members-to register a free profile to list their remaining contract obligations. Those looking to take control of remaining contracts-Get In members-then can browse the listings and e-mail interest through the Web site to potential Get Out partners. The Get Out member will receive notification that a potential Get In member is interested in their contract and after paying a one-time $20 fee have access to those inquiries.
To further sweeten the pot, Wurtenberg said the site recommends Get Out members offer incentives to potential Get In members, including handsets or accessories.
“We usually tell people that they should offer their handset as an incentive or maybe any accessories they may have to go with the handset that they might not need,” Wurtenberg explained “People are hip to these sort of arrangements. You have things like eBay. People know how these work.”
Once two members decide on a transfer of responsibility, Wurtenberg said the site provides both tips on contacting the service provider to initiate the transfer as well as live assistance for any potential issues. Celltradeusa.com notes that the transfer process varies depending on carrier, but generally involves a credit-decision process, creating and processing the required transfer documents, and eventually signing the contract to take over responsibility.
While the process would appear to be negative for carriers as they would lose out on recouping some of the costs associated with acquiring a customer, Wurtenberg claims the Celltradeusa.com offering can be a good thing for carriers.
“We understand that carriers spend between $350 and $400 to acquire a customer and they don’t want to lose them,” Wurtenberg explained. “What we allow is for a customer that might not be happy with a particular service for whatever reason to simply transfer their contract to a person who is interested in a particular carrier and will likely end up as a happier and potentially longer-term customer.”
Analysts noted that while the service would deprive carriers of ETFs, those fees are not a recurring revenue source and usually not a significant contributor to a carrier’s bottom line. Transferring contracts also could allow operators to maintain or improve churn levels because they don’t lose a customer through the process.
Carriers had mixed reaction to Celltradeusa.com’s offering, with most scrambling to check the legality of what the site offers.
“We already offer a change of responsibility to our customers,” said T-Mobile USA Inc. spokesman Bryan Zidar. “It looks like [Celltradeusa.com] is just expanding on what we already offer to our customers.”
Verizon Wireless said that while it offers customers the ability to change contract liability in some instances, it in no way brokers deals or supports Celltradeusa.com’s practice.
“It will be interesting to see how long they stay in business,” said Verizon Wireless spokeswoman Brenda Raney.
Cingular Wireless L.L.C. and Nextel Communications Inc. did not return requests for official comment prior to RCR Wireless News press time.
While carriers appeared to be taking a cool approach to Celltradeusa.com’s service, Wurtenberg said the Web site was not trying to stir up any trouble with carriers and instead relies on carriers for the liability transfer to work.
“We’re not adversarial with carriers,” Wurtenberg said, adding the company has had some talks with an unnamed carrier interested in more involvement in the project.
Analysts also questioned Celltradeusa.com’s business model, noting the service seemed overly complex for both parties looking to unload or pickup a contract, and that customers looking to get into wireless without a contract had several prepaid options.
Despite the doubts, Wurtenberg claims the Web site has garnered interest from potential investors. “We have [venture capitalists] banging on our door, but we are a little preoccupied with just getting this off the ground,” Wurtenberg boasted.
