CellularSouth Pays Your Termination Fee

CellularSouth, a regional carrier offering nationwide service for subscribers based in Memphis, most of Mississippi and the Gulf Coast of Alabama and Northwest Florida, is running an innovative promotion where they will pay the contract termination fee (up to $200) for a new subscriber who breaks their existing contract with another carrier to sign up for service with them.

This is the first time we’ve seen this type of promotion.    Although it may significantly add to CellularSouth’s cost of acquiring a new customer, it is a way for them to stand-out and compete against the four giant national carriers.  With much more for those carriers to lose in a price war over termination fees, it is unlikely that this type of program will spread to the big carriers.  However, with industry growth rates slowing, it can’t entirely be ruled out.

We’ve always wondered when someone would try this kind of marketing program.    It has been 7 years (and one week) since number portability arrived in the U.S.    The ability to move one’s number created a much more competitive cell phone industry, as carriers were forced to compete more on price and service quality — not on holding a customer hostage because he or she couldn’t take their phone number with them.   It also led to a lot of industry consolidation which, on balance, has also probably been good for consumers as national networks are much more seamless today, with national plans the norm.   However, it also led to two-year contracts, and termination penalties of up to $200 (now up to $350 for some smartphones).  These financial penalties now are the biggest impediment to customer migration to a new carrier.

CellularSouth says this promotion is valid for “a limited time”.    This gives them maximum flexibility to adjust (or end) the promotion, depending on how successful it is and how much competitive response they see.