In one of the most significant legal rulings in the tech industry this year, a Superior Court judge in California has ruled that the practice of charging consumers a fee for ending their cell phone contract early is illegal and violates state law.

The preliminary, tentative judgment orders Sprint Nextel to pay customers $18.2 million in reimbursements and, more importantly, orders Sprint to stop trying to collect another $54.7 million from California customers (some 2 million customers total) who have canceled their contracts but refused or failed to pay the termination fee.

While an appeal is inevitable, the ruling could have massive fallout throughout the industry. Without the threat of levying early termination fees, the cellular carriers lose the power that's enabled them to lock customers into contracts for multiple years at a time. And while those contracts can be heinously long, they also let the carriers offer cell phone hardware at reduced (subsidized) prices. AT&T's two-year contract is the only reason the iPhone 3G costs $199. If subsidies vanish, what happens to hardware lock-in? Could an era of expensive, but unlocked, hardware be just around the corner? It's highly probable.

Of course, the carriers aren't going to take this lying down. Early termination fees are seen as critical to business, so carriers are expected to look for ways to reclassify the fees (such as by calling them "rates," part of the arcane set of laws that covers the telecommunications industry). The industry is also pushing for the federal government to step in and claim oversight over the early termination fee issue, which would invalidate any state ruling. The FCC is generally more tolerant of such fees, though Chairman Kevin Martin has proposed a plan whereby the fees are decreased the closer you are to the end of your contract.

The FCC may also buy the argument that, since carriers are nationally based (and consumers can use their phones anywhere in the country), that a single policy should apply across the nation, rather than creating a patchwork of legislation that could lead to confusion and chaos caused by having 50 different policies.

Is the early termination fee dead? Not yet, but it's looking a little haggard.

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Good. Being able to cancel my current contract would've made me purchase the iPhone 3G, even if it cost the same amount as the phone before it.

That's completely stupid. People are happy to sign the contract just so they can get a free or cheap phone, but when they want to cancel early, they complain about having to pay back the discounted portion of the phone (that's all it really is, after all).

This is exactly why I purchase phones IN FULL, and then use them on my account. This way, I have no contract. In spite of this, I generally stay with the same company for a long, long time. I've used BellSouth/Cingular/ATT always, except for a short gap during which time I switched temporarily... but I do have one number on my plan that has been in continuous service since 1994.

I had no idea you could go through any of those companies and not have a cellphone contact. I'll have to call up AT&T and get more info on that and possibly use your idea.

The only exception is the iPhone, as you cannot buy it from ATT without a contract. You can purchase an activated one from eBay and swap your SIM card to it without contract. However, visual voicemail will not work unless you have the actual iPhone plan, and some other things may not work correctly without some type of fix (YouTube, for instance).

I generally buy an unlocked phone from eBay for use on ATT networks. I have picked up several refurbished GoPhones for cheap on ATT's website (<$40) and then instead of using the GoPhone plan, used them as my regular service phone or activated additional lines with them.

I believe ATT now allows you to purchase phones in full and without a contract, but with a plan on their "pick your plan" gophone service, however, these are pay in advance and, if I'm not mistaken, do not include mobile to mobile. (they used to not)

You have to be pushy with the sales clerk, because they want to sell a phone with contract (at least one year) because they get commission on these contracts. At some point they will need manager approval (or at least the manager will have to tell them how to set it up correctly) and will put you on a "1 month" contract, at which point you will have month to month contracts similar to how people are listed after their two years are up.

If you want ATT, just make sure you pick up a GSM phone with the 850mhz band, as many (non-US) phones are tri-band 900/1800/1900, and will not have service anywhere that ATT uses 850. Most higher end phones are quad band, which includes the 850. If you want 3G, make sure it supports HSDPA also.