CellBreaker Kills Termination Fees in Wireless Contracts (and More)

Cell phone users think of switching carriers for all sorts of reasons, such as price or network quality. But Jon Colgan points to just one reason many consumers don’t squeeze the trigger on a switch: early termination fees.

Fees that can reach $350 or more keep many consumers using phones they no longer want on plans they’re not happy with. CellBreaker, Colgan’s Durham, NC-based company, says it gets customers out of their wireless contracts without triggering early termination fees. And customers don’t even have to sit through hold music or haggle with a customer service representative to close the deal. Software will handle everything.

“We’ve wrapped our arms round all of the pain points of the process and distilled that down to about five minutes for users,” Colgan says.

Software is key to CellBreaker’s offering, but coding is not what makes CellBreaker a different kind of technology company. CellBreaker works by using the carriers’ own words against them. The key to the approach is the legalese in cell phone contracts, which promise all sorts of things such as call quality and coverage area. Carriers frequently breach their own terms of service, Colgan says. Dropped calls, delayed text messages, lack of coverage in a carrier’s covered service territory—nearly every wireless customer has experienced these shortcomings at some point, Colgan explains. CellBreaker’s software documents these contract breaches, giving the company grounds to end the contract on behalf of a customer without triggering a fee.

In Consumer Reports’ annual survey of subscribers in 23 metro areas, just half of respondents last year were satisfied with their service. More than half of those 58,000 people stayed with their carrier for two years—the duration of the contract. Colgan was nearly one such customer who would not switch.

About six years ago, he found himself in the same position as many other wireless users: He wanted to make a mid-contract switch without paying a termination fee. Reading the fine print of his contract, Colgan saw his carrier promised all sorts of things it didn’t deliver. He realized documenting those contract violations would give him grounds to void the contract without a termination fee. It worked.

After Colgan got himself out of his own contract, friends and family soon asked him to do the same for them. While still a student at the University of North Carolina at Chapel Hill, he decided to turn his idea into a company. Last year, CellBreaker made the finals of a UNC startup business competition. Shortly after graduation, Colgan launched a beta of CellBreaker’s service, charging $77 to break a wireless contract on behalf of a customer or $17 for the company to give consumers the tools to do the process themselves. For $10, CellBreaker conducts a “break analysis,” in which the company analyzes a customer’s account and lets the customer know whether it can break the contract.

CellBreaker is updating its breaking process and pricing model. Customers will still enter their carrier and plan details into the startup’s website. Software will still pull up some 2,000 data points from a user’s account and analyze them for contract breaches—signing up with CellBreaker grants power of attorney to the company to access a customer’s account information and act on that customer’s behalf. But cell phone users won’t be asked for payment details until they decide to use CellBreaker. If they do, the company will charge 25 percent of the carrier’s early termination fee upon successful termination. If that fee is high, CellBreaker’s cut could be higher than the current $77 charge.

Colgan notes that CellBreaker’s initial pricing model asked customers to pay up front and risk that a termination might not happen. Now that CellBreaker has had a year to smooth out the kinks of its business, Colgan says … Next Page »

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The Author

Frank Vinluan is a contributing editor at Xconomy, based in Research Triangle Park. You can reach him at fvinluan@xconomy.com

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