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?
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.
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.