The 24-month contract includes 1,000 monthly minutes of voice and 1GB of data
usage for a monthly fee of 80 (Service Package A). During the two‑year term,
Customer C may decrease the service package to 500 monthly minutes of voice
and 500MB of data usage for a monthly fee of 60 (Service Package B). Telco T also
sells an ‘add-on’ package of 500 minutes of voice and 500MB of data usage for
20 per month that can be added or dropped monthly at the customer’s option.
Customer C cannot reduce the service package below 60 without terminating the
contract and incurring substantive termination penalties. In addition, Customer C
can only reduce the service package in the month following that in which he
provides notice.
Note that this example does not assess whether the contract includes a significant
financing component.
The stand-alone selling prices of the handset and the service packages are as
follows.