I would negotiate a lower amount. First, this is standard practice, when a contract is over, the plan always continues month to month, it was your responsibility to call and cancel the cell plan. The benefit of NOT being in a contract is that you can cancel without being charged an early termination fee (ranging from $200-$400 depending on the carrier).
I would not ask the friend for the money, this is a debt from 4-5 years ago, also you knew about the debt previously and forgot about it. I could see possibly asking for some money when you first told them to "back off" but this is years down the road.
Do you have a lump sum to pay them, I normally try to negotiate for 50% and offer a lump sum. I'm not sure, I've heard conflicting information, but any activity on that account might start your 7 years over again (but at least it would be paid). I would pay it, they provided a service and deserve to be paid for that service, if they agree to a lesser amount then that's their decision, but I don't think it's right to stiff them just because.