10 Things We Hate About Wireless Carriers
The consumer electronics scene in the U.S. is wonderful and horrible at the same time. The devices, technologies and innovation are wonderful. The provision of wireless access is horrible. U.S. carriers are some of the most backward, unscrupulous and anti-customer companies in the nation.
So, carriers, this column's for you. Here's what I hate about how you do business.
A recent survey by Nielsen found that low prices for wireless service is the No. 1 thing customers want from carriers. Yet this is exactly what U.S. customers aren't getting. According to a new survey from the Organization for Economic Cooperation and Development, the U.S. is in the top three most expensive countries for wireless service worldwide (Canada and Spain are the others). According to the report, Americans pay an average of $635.85 per year for cell phone service (compared with $131.44 per year in the Netherlands). Why do Americans pay five times more for cell phone service than the Dutch?2. You're a global laggard in new technologies
Dropped calls, lack of service, nonexistent coverage in many rural areas -- the inadequacies of U.S. wireless services are well known. But what really irks mobile enthusiasts is the slow rollouts of new technologies. The most bleeding-edge phones are rarely, if ever, sold in the U.S. In Japan, people are routinely using 4G services, watching TV and using cell phones as credit cards. If U.S. carriers are charging the most for service, why are we getting the least? Why are we always behind?
Sure, you've got a dozen excuses why the U.S. market can't support new technologies the way European and Asian markets do. Making up excuses is something you're really good at. Providing new technology, not so much.3. Handset discounts are a shell game, not a 'subsidy'
Like so many of your standard policies, the subsidizing of cell-phone handsets (and increasingly netbooks and other mobile broadband devices) is presented as a benefit, when it is, in fact, another way to get more money out of us.
If cell phones weren't subsidized, then we'd know how much we're paying for the phone and how much we're paying for wireless services. With the subsidy, we have no idea.
You'd probably pay $599 for a new iPhone 3GS with 16GB of storage. But for eligible customers who sign a new, two-year contract, the subsidized price is $199. Do you think AT&T spreads the $400 difference over the life of your contract? Or is it $600? $800? How much are you paying for that discounted phone? You won't and can't ever know. Subsidies don't save you money. They cost you money. The business model is to prevent you from knowing the price of your handset so you can't make an informed decision.
The truth is that the word "subsidy" doesn't describe the pricing. Nobody is subsidizing your phone. A subsidy is when one organization -- say, the government -- provides money to another organization or person to encourage some form of behavior. Some farmers, for example, get a subsidy from the government to grow certain types of crops. Food stamps for the poor are a subsidy.
When you get a "discount" on your cell phone, YOU pay the difference, not the carrier, not the handset maker. Sure, they'll bury the costs in a muddled monthly bill. But believe me, you're the one paying.
New York Times columnist David Pogue launched a high-visibility effort last month to address just one of the many ways carriers shamelessly take money away from customers for nothing. Pogue noticed that most of the carriers have mandatory, 15-second voicemail instructions that are played after your own voice-mail message is played. For example, Verizon plays: "At the tone, please record your message. When you have finished recording, you may hang up, or press 1 for more options. To leave a callback number, press 5."
Everyone already knows how to leave a voicemail message. Apple required AT&T to drop the requirement, for example, and somehow iPhone users are still communicating with each other.
Pogue estimates that Verizon, for example, takes $620 million a year away from customers for all the collective "minutes" required to listen to these messages. That's just one carrier, and just one example of how carriers make money by optimizing what they call Average Revenue Per User (ARPU).
Another example is SMS. On average, Verizon, AT&T, Sprint Nextel and T-Mobile rates for sending SMS messages have doubled over the past three years. It costs carriers about one penny to send each SMS message, but some now charge customers about 20 cents. During this three-year period, the cost to carriers to deliver SMS messages most likely stayed the same or declined, but all four carriers doubled their rates. I believe the most likely reason for the price increases was to persuade customers to choose all-you-can-eat bundled deals, which tend to cost about $20 extra per month.
And yet another example is the charging of minutes for both parties for each call. In Europe, the caller pays minutes for the call, and the receiver pays nothing. In the U.S., both caller and callee pay.
Carriers employ experts to examine all the angles to figure out which combination of bundles and packages and pricing will extract the most money from each customer. It's not about charging more money for better service. It's about charging more money for the same service.
Remember when we could sign up for a one-year contract? Why did carriers eliminate that option? The reason is that locking in customers for two years is twice as good for the carriers as one year. They make more on early-termination fees. They get to create the illusion of lower monthly prices by spreading the cost of a handset discount across 24, rather than 12, months.
Carriers collude with handset makers to artificially link handsets to specific carriers. The iPhone on AT&T is one such example of collusion, as is the Palm Pre on Sprint and the G1 on T-Mobile. Carriers and handset makers create these fake limitations for precisely the same reason movie theaters don't let you bring in your own food -- because it creates mini-monopolies that enable gouging on prices. Why do you think 10 cents worth of popcorn costs $4.50 at the megaplex?
In some European countries, this practice is considered anticompetitive and is against the law.6. You aggressively oppose net neutrality
The degree to which carriers want to reject net neutrality, which is little more than fair and equal Internet access, was revealed this month when AT&T and Verizon (and Comcast) rejected $4.7 billions in grants -- not loans, grants! -- in government stimulus money because they stipulated fairness in the provision of services.
Why would corporations reject free money? Because they've reasoned that they'll make more than $4.7 billion from you and me by rejecting the fair, equitable provision of mobile broadband services.7. You want to lock out competition
I don't know if it was AT&T, Apple or both that decided that the Google Voice app should be banned from the iTunes store, but locking out services that threaten total control is standard operating procedure in the U.S.. wireless carrier industry. Competition and innovation is the last thing carriers want. So they use their ownership of the wireless pipes to block the applications and services that would need to move through those pipes.8. Your solution to public opposition is more lobbying
As the public becomes increasingly outraged at the carriers' unethical, shameless and anticompetitive actions, their response is not to improve behavior, but to spend customers' money on hiring lobbyists to influence Congress and the White House. In a recession, when companies are cutting back and laying off workers, both AT&T and Verizon are increasing the millions spent on hiring lobbyists to influence the government.9. You're growing too powerful
With nearly every netbook, smartbook, eBook reader, GPS device, digital camera and wristwatch poised to potentially support mobile broadband wireless connectivity, the carriers are positioning themselves to seize control of the consumer electronics industry. They want to become the electronics superstores, extending their abusive business model beyond cell phones to encompass every future device with a wireless connection.10. You've forgotten that we own the airwaves
Cell phone carriers have rights, too. They own the towers and the servers that make wireless voice and data connectivity possible. They have the right to use their capital as they please, charge what they like and offer whatever combination of prices and services that the market will bear.
But all that equipment is useless without access to the airwaves, which are by law owned by the people. And that's what makes the wireless carriers business different from other industries. Companies that are granted licenses to use the publicly owned airwaves should be required by our government to meet certain standards of fairness, equal access and competitiveness. That's not happening right now. It's time to let your state and national politicians know that you want this industry reined in.