Do you own a smartphone? Chances are, you do.
But do you know what's in your smartphone contract? Chances are ... you don't.
Various sources offer various estimates of the extent of smartphone "penetration" of the U.S. market, with comScore, for example, estimating that more than 166 million Americans (68.8% of the market) now own smartphones, while the analysts at statista.com think we're closer to 78%.
Now here's the catch: The vast majority of these smartphones are postpaid (as opposed to being funded by prepaid "refill" cards). And that means that to use one, you have to sign a contract. A long contract.
How long is it?
If you haven't read your own, personal contract, don't be embarrassed. By all indications, not all smartphone providers want you to read it. Otherwise, AT&T (NYSE:T) for example -- the nation's No. 2 wireless provider -- wouldn't give you a 18,622-word document to peruse as a condition to buying its service.
Yes, 18,622 words. That's equivalent to 74-and-a-half pages of double-spaced type -- about right for a short novel, but a bit long for a readable contract. And what exactly is contained within those 74.5 pages?
More than you think. In addition to such expected, and perfectly reasonable, terms as the requirement that you use an AT&T SIM card or a device locked to AT&T when using AT&T service, or the requirement that you remain a customer for 12 or 24 months -- long enough for AT&T to recoup its investment when it gave you that cheap iPhone -- it turns out that your cell phone contract also contains a small handful of "gotchas" that you may not be aware of. Gotchas like ...
7th Amendment? We don't need no stinking 7th Amendment
Right at the outset, AT&T sets the tone for the rest of its contract with this zinger, bold-faced and all-caps: "THIS AGREEMENT REQUIRES THE USE OF ARBITRATION ON AN INDIVIDUAL BASIS TO RESOLVE DISPUTES, RATHER THAN JURY TRIALS OR CLASS ACTIONS, AND ALSO LIMITS THE REMEDIES AVAILABLE TO YOU IN THE EVENT OF A DISPUTE."
Now, if you've ever taken a social studies class, you may be under the impression that the 7th Amendment to the U.S. Constitution guarantees you "the right of trial by jury ... according to the rules of the common law" in any matter "where the value in controversy shall exceed twenty dollars." And it does. Unfortunately for you, the moment you sign up for cell phone service with AT&T you "voluntarily" waive that right.
In the event you ever get into a serious disagreement with your cell phone provider, you can forget about taking it to court. Arbitration, or if you're lucky, small claims court, is your only resort. And no fair joining a class action lawsuit, either. There's too much strength in numbers for AT&T's liking.
(By the way, No. 1 national wireless provider Verizon (NYSE:VZ) has much the same requirement in its contract.)
Freedom of speech? Well, OK. But be polite about it
According to The Wall Street Journal, the average smartphone customer in the U.S. today pays $60 a month for mobile service. With that much money at stake, you'd think wireless companies would do anything in their power to make customers stick around and keep paying -- and they will, but only within reason.
That said, "AT&T may interrupt, suspend or cancel your Services and terminate your Agreement without advance notice for any reason including, but not limited to... Any conduct that involves the use of abusive, derogatory, insulting, threatening, vulgar or similarly unreasonable language or behavior directed at any of our employees or representatives whether it be in person, over the phone, or in writing."
Keep that in mind next time you call AT&T to complain about poor service -- and mind your manners. And once again, be aware that Verizon has similar language in its contract, albeit Verizon narrowly tailors its reservation to warn that you may be shut off only if you "threaten, harass, or use vulgar and/or inappropriate language toward our representatives."
A deal's a deal -- except when it isn't
Speaking of those $60 monthly dollars, that's not necessarily all you will pay for your smartphone service. Because AT&T also reserves the right to "change any terms, conditions, rates, fees, expenses, or charges regarding your Services at any time."
Of course, in the legal world, we usually refer to such "changes" as breach of contract. So if AT&T does decide to change a material term, it has to give you the opportunity to cancel your contract -- and keep your phone, no early termination fee required. In such an event, AT&T will give you 30 days to decide whether you want to keep your smartphone service under the new contract terms. (Pro tip: Verizon will give you 60 days.)
Why hi-tech loves snail mail
But what if you like your smartphone plan, don't want to change it, and are just upset about one tiny issue? Say, a charge on your monthly bill that doesn't seem quite right?
According to AT&T (again, bolded and in all caps): "IF YOU DISPUTE ANY CHARGES ON YOUR BILL, YOU MUST NOTIFY US IN WRITING AT AT&T BILL DISPUTE, 1025 LENOX PARK, ATLANTA, GA 30319 WITHIN 100 DAYS OF THE DATE OF THE BILL OR YOU'LL HAVE WAIVED YOUR RIGHT TO DISPUTE THE BILL AND TO PARTICIPATE IN ANY LEGAL ACTION RAISING SUCH DISPUTE."
Yes, you read that right. The phone company that's giving you wireless Internet and roam-free cell service -- communication as if by magic, through the ether -- wants you to make all your complaints by snail mail. Otherwise, you're on the hook for any charge that shows up on your bill. (Incidentally, unless you tell them otherwise, AT&T will send you your bills by email.)
For context, Verizon gives you 180 days to dispute a charge on your bill, and generally speaking, says it's fine to dispute charges over the phone. Verizon only requires snail mail notification in the event that you "wish to preserve your right to bring an arbitration or small claims case regarding such [billing] dispute."
Don't let Verizon off the hook
So far, you may have been getting the impression that Verizon is kinder to its customers than is AT&T. And if you got that impression -- you're right. It is. For one thing, it takes AT&T 18,622 words to translate a contract that should read "we'll turn your phone on, and you will pay us" into complex legalese, while Verizon gets the same job done in a comparatively svelte 5,230-word contract.
Verizon also uses plain English, sans legalistic gobbledygook, to explain most of its contract terms, and sounds almost apologetic when explaining a term that customers might not like. For example: "You must pay all taxes, fees and surcharges set by federal, state and local governments. Please note that we may not always be able to notify you in advance of changes to these charges."
But even in an easy-to-read contract, there are bound to be certain terms you won't like. We've already mentioned several that mirror terms in AT&T's Wireless Customer Agreement. Here's one that doesn't:
"Please note that many notices we send to you will show up as messages on your monthly bill. If you have online billing, those notices will be deemed received by you when your online bill is available for viewing . If you get a paper bill, those notices will be deemed received by you three days after we mail the bill to you."
We mention this just in case you're in the habit of throwing out junk mail, or have your smartphone bill on autopay, with each month's charges automatically deducted from your bank account. If you think that means you can safely forget your monthly bill entirely -- don't. There could be important information in there that you need to know, so read it.
On the plus side, though -- hey, at least now you don't have to read the contract.
Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.