The stick is that for anyone using higher-end devices such as smartphones, including the iPhone, the ETF will nearly double from $175 to $325 and reduce by $10 for each month the contract ages. Now don't get scared, since this is only for new or upgrade contracts starting June 1st and doesn't apply to anyone with a current contract. That is, unless you're up for renewal and make the mistake of buying a new two-year contract.
This is not unheard of. Verizon doubled their ETF to $350 for smartphones last November. But in the AT&T case, the timing seems a little too convenient. With everyone and their brother believing that the next iPhone will be out this summer, this can hurt early adopters right in the wallet. Since AT&T doesn't seem to be the most popular of cellphone providers around here, what if the new iPhone comes out in July and Verizon gets it a few months later? In fact, it seems to me, that this might be a veiled indication that Verizon is getting closer to being in the iPhone market.
AT&T maintains that they need a high ETF since the iPhone is extremely subsidized and they will only be repaid through monthly fees that apparently $175 won't cover. Of course the opposite position is that $325 is a hard nut to swallow and upping the ETF will make people think long and hard about jumping over to Verizon, or anyone else, since we all don't have iPhones.
My suggestion for those who dislike AT&T and whose iPhone contract is coming to an end, is to not upgrade even when the new iPhone gets released. Instead, go month-to-month to buy yourself some time to see what happens. Now I know this is blasphemy for early adopters, but $325 is a lot of money. I want the shiny new toy as much as anyone, but my feeling is that Verizon will be an option sooner rather than later. If you find you can't wait anymore, you always can always cave and be instantly gratified, but forget jumping to Verizon for a good long time unless you're willing to pay the inflated price.
*Verizon is currently in the process of acquiring AOL, Engadget's parent company. However, Engadget maintains full editorial control, and Verizon will have to pry it from our cold, dead hands.