Here is a best guess- I don't have specifics why it is increasing. I know that Asurion is raising the price they charge Sprint for the coverage, so the end user price for the coverage is changing as well.
I do know that the TEP coverage charge 100% subsidizes the cost of running the service and repair centers nationwide. Less money being paid for ESRP/TEP coverage (like fewer people opting for the coverage) means fewer service and repair centers to work on the phones. This in turn means fewer places to take the phone to have it fixed which means longer drives to get to a location that can work on phones, etc., etc. until there are no service locations left at all to fix phones.
On a related note, every exchanged phone costs Sprint on average $100 including shipping, parts, licensing, labor, etc. so the more exchanges that happen the less money Sprint has for other programs or services. Most people don't think about why there are limitations on how long it takes to exchange a device, why the techs must look at the phone first before exchanging them, etc. Those limitations are all designed to ensure that a phone that has a simple problem isn't being exchanged unnecessarily. When people are purposefully gaming the system it then forces the company to make changes to try and prevent the manipulation, some of those changes then affect everyone else that wasn't doing anything wrong because of a few bad apples.
Phones are getting more expensive and so is fixing and replacing them
Larry ~ OKIESTRO
I used halcyoncmdr134's explanation as he has store experience and has a very good understanding- don't want to plagiarize him.
It's been $7 since at least 2009. Also, to go along with Larry's explanation above, remember that Assurion is a seperate company. They run the exchange game (also known as ERP) for every major and several minor mobile phone companies in this country. Also, look at the rise of smart phones -- about 5 years ago, very few people had a clue what one was and today it is rare not to see one everywhere you look. These phones cost much more money to make and they are much more difficult to repair because of the underlying hardware structure (this leads to more replacements). And, recently, the iphone was relisted as a phone that is covered under the service (by assurion). Lastly, the ERP is mainly used to damages cause by customers, which are not covered by the warranty. In many cases, parts cannot be salvaged from the phone and it is a total loss to assurion.
Sprint runs the ESRP. Technically, they cover the same things as the manufacturer would (for free) if you sent your phone to them. The big difference is on-the-spot service and on-site swaps, where permissible. Also, under the ESRP, you can get in and out without much of a service disruption. Whereas, the manufacturer will sometimes charge for shipping (even if it is a defect) and you have to wait for the turnaround. Lastly, Sprint swaps are almost aways new hardware, whereas the manufacturer almost always has an ample supply of refurbs.
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