RedSpeed Blog
What a 24-Month Telco Contract Actually Costs You
The real cost of a lock-in contract usually isn't the exit fee — it's being stuck on a plan you've outgrown while a better one sits right next to it.
Short answer: the sticker price of a locked-in contract often looks fine. The real cost shows up later — when your circumstances change and you're still 14 months from being free to leave.
Why do telcos want you locked in at all?
A contract reduces churn for the telco and, in a lot of cases, subsidises a device cost over the term. In exchange, you commit to staying — and paying — for a fixed period, usually 12 or 24 months.
That's a fair trade if nothing changes. The problem is that 24 months is a long time, and life doesn't usually cooperate with a billing cycle.
What does being locked in actually cost you?
Not the exit fee itself — most people never pay one, because most people never leave. The real cost is what economists would call an opportunity cost: for however many months remain on your contract, you can't take a better plan even if one appears right next to you.
A few common scenarios where this bites:
- A cheaper or faster plan launches 8 months into a 24-month contract — you're stuck for 16 more
- You move somewhere your current network is worse
- Your usage drops and you're paying for data you no longer need
- Service quality slips and switching would fix it immediately, if you could
None of these are edge cases. They're just normal life, and a lock-in contract removes your ability to respond to any of them.
How are exit fees actually calculated?
Typically, it's a pro-rated payout of whatever's left on the contract — remaining device subsidy, remaining minimum spend, or both. It's not usually a punitive flat fee, but it's real money, and it's specifically designed to make leaving early cost more than staying.
What does month-to-month actually change?
With a month-to-month plan, there's nothing to pay out because there's nothing left owing — you're never more than 30 days from being able to switch. RedSpeed's personal mobile and NBN plans are structured this way: no lock-in, so the only reason to stay is that the plan is still working for you.
That's a different incentive than a contract creates, and it's worth knowing which one you're actually signing up for.
Common questions
Do all telcos charge exit fees?
Most contract plans do, though the amount varies. Month-to-month plans, like RedSpeed's personal mobile and NBN plans, don't have one because there's no remaining contract to pay out.
Does no lock-in mean I pay more?
Not necessarily. Some lock-in plans include a subsidised device, which is where the real trade-off is — you're financing hardware, not just paying for service.
Can I still get a good deal without signing a contract?
Yes. Month-to-month plans can be just as competitively priced; you're trading a device subsidy for flexibility, not paying a premium for it.