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The Irksome Cellphone Industry
gollum123 writes "David Pogue of the NYTimes wonders why Congress is worrying about exclusive handset contracts when there are more significant things that are broken, unfair, and anti-competitive in the American cellphone industry. He lists text messaging fees, double billing, handset subsidies, international call rates, and 'airtime-eating instructions' among the major problems not being addressed by Congress. 'Right now, the cell carriers spend about $6 billion a year on advertising. Why doesn't it occur to them that they'd attract a heck of a lot more customers by making them happy instead of miserable? By being less greedy and obnoxious? By doing what every other industry does: try to please customers instead of entrap and bilk them? But no. Apparently, persuading cell carriers to treat their customers decently would take an act of Congress.'"
Sure you can, indirectly. Force them to compete for their business by making "exclusivity contracts" illegal.
Currently hooked on AMP
DOUBLE BILLING In Europe, youâ(TM)re billed only when you place a cellphone call â" not when you answer one. And youâ(TM)re billed only when you send a text message â" not when you get one. In this country, thatâ(TM)s how itâ(TM)s always been for landlines, too.
That's not completely true. You are billed if you receive the call, provided you are not in your home country (if you are in France spending a few days of vacation, and your contract is with a Spanish operator, then you get billed if you got a call while in France). Fortunately, the European Comission is working on reducing the prices for that double billing. It is something that I guess lots of people in USA would like to see Congress doing.
I got 2M unlimited (really unlimited) data plan on my cell phone. Costs roughly 10 euros/month. Now, why can't Americans have the same?
Seriously, the voice calls are prioritized first in the networks, and it's practically indifferent to the network operators what the rest of all that already built bandwidth is doing. There shouldn't be lack either, unless if the operator really grossly undersized their networks. The impact around where I live at is zero but the customers get a pretty nice service.
That service is good enough to cover the costs. What is important is that it enables new sorts of (business) concepts for mobile phones and mobile applications. That's where the local operators have their stakes in: things like virtual wallets and such. By not making the data plans itself near free utilities the American operators are in fact stalling innovation. I kind of feel sorry about the lack of vision there. Instead of that the operators choose to pretty much just poop on their future revenues which is baffling to me.
Someone in congress must have wanted to move his iphone to a new carrier. They don't really give a damn about an issue out there in DC unless it effects them personally, or are paid off to care.
---- Booth was a patriot ----
TEXT-MESSAGING FEES Why has the price of a text message gone to 20 cents, from 10, in two years? There was no big technology shift. There was no spike in the cost of electrons. And speaking of anticompetitive: Is not it a little fishy that all four big United States carriers raised their text-message fees at essentially the same time?
That is not a question of being nice or not being nice - if that's true, their behaviour is illegal, plain and simple, and should be punished.
The industry response to these charges has been interesting so far. Apparently Pogue got at least one executive at a major carrier's attention long enough for a PR piece to follow that tries to poke holes in some of the complaints...
In Japan the situation is pretty similar, while probably cheaper overall. From a few years back, the trend is the sale of a device for zero yen, while subscribing a 2-years contract. The "zero yen" is actually "You pay xxx yen monthly and, monthly, the carrier reimburses xxx yen" giving a zero-yen illusion (xxx being the actual devicePrice / 24). You may cancel the contract at anytime, but you'll have to pay the xxx * remaining-months (24 - months you paid) yen to the carrier. It is a good way to keep customers for at least 2 years. The iPhone 3G for instance is "free" (2 years contract) since March 2009.
Slashdot, fix the reply notifications... You won't get away with it...
For example, a couple of weeks ago I began receiving robocalls to my mobile number from some "collection agency." They were obviously looking for someone else so I wasted a couple of minutes of airtime waiting for a human to pick up. After picking up, the twit basically said "we have the right person and you owe us $X" and that the calls would continue. I told them to never call me again and remove my number from their list. Now the robocalls continue at odd hours of the night and morning. When I complained to my carrier (ATT), they basically said "there's nothing we can do about it. BUT if you sign up for this new service for $4.99/month you can block specific numbers." So I complained that they were extorting money out of me to protect me from harassing phone calls. They suggested I complain to the FCC and didn't offer to help at all (other than suggesting yet another monthly fee).
I'd love to just punt ATT, but they offer the best coverage around here. I'm open to suggestions on how to deal with this. ATT wouldn't even agree to block all "unknown/blocked callerID" numbers for me.
Sigh....
"Industries" don't function that way, though individual companies can and do.
GM and Chrysler sold crap, they knew they were selling crap, and their "exit strategy" was to have you and me and everyone else REWARD them for producing crap. Toyota, on the other hand, focused on what their customers wanted - a reliable means of transportaiton.
More to the point, for the slashdot audience - Windows. It's crap. And yet, any efforts to end the lock-in are met with all sorts of fud, both from Microsoft, and teir partners, in an effort to continue to entrap and bilk and ass-rape their customers. Vista was supposed to be "the best Windows ever." That has changed to "We feel your pain - Windows 7 will be the best Windows ever." But no refunds for the millions who ended up stuck with crap. Costomer-focused? Nope - you're just peons to be lied to and raped and your wallets and purses pillaged.
Show me this dream world where whole industries are trying to please their customers. It's still the exception, rather than the rule.
One wonders to what extent the dominant business model of frantic and very often highly deceptive advertising effectively locks out the theoretical competitor willing to deal fairly with customers. If over here a service offers a very nice handset for a hundred dollars or for nothing after a sneaky rebate that may or may not be paid, "unlimited access" (to the Internet) with many lawyerly caveats that make it way less than unlimited, plus some seemingly large number of talk minutes per month that somehow ends up being rather less and which quietly saddles the heavy user with many extra fees, etc., then how exactly does the theoretical ethical service over there attract (the better class of) customers in all the noise and hand-waving?
Telling potential customers that they will get less and pay more than with advertised plans from competitors, even if they actually get more and pay less, is a hard sell. When everyone else is lying, how do you prove you are not just another sleazy liar? Are there even enough potential customers of the ethical service provider in any given coverage area willing to take their eyes off the shiny new handset long enough to squint suspiciously and intelligently at the fine print?
There must be a few smaller service providers that aren't crooked, scattered throughout the country. I wonder how well they are doing financially.
A truly excellent pizza parlor is a delight unto the heavens. Treasure the sauce and the toppings!
You can't legislate somebody or something into being nice.
Sure you can, indirectly. Force them to compete for their business by making "exclusivity contracts" illegal.
Yes, but why stop there? Here's what I'd like to see:
THAT would be customer-friendly.
It is a miracle that curiosity survives formal education. - Einstein
This is entirely why Android was developed and is so fundamentally important to the future of our communications. Today, without Android, what we're seeing is the case for network neutrality in the form of ringtone racketeering. Carriers are locking down your cell phone and forcing you to buy music from them. With every passing day we're using our computers less and our cell phones more. The difference between the two is that your carrier has total control over your cell phone while your ISP has no control over your computer. Suppose five years down the road you're still buying phones subsidized by a contract with software loaded onto them by Verizon. These phones end up replacing your desktop because they are now just as powerful. Now every time you want to listen to music, you are forced to suffer through a store worse than iTunes.. and let's even say Verizon forces you to use Bing instead of Google. This is bad for you as a consumer, and this is bad for Google as a content provider.
Enter Android, where the operating system is open and available at no cost for any number of phones and presumably on any number of carriers. Now we see a future where everyone can run the same software on their phone regardless of carrier. Any time one carrier decides to lock down their phone people will quit buying it. It's not viable. Since we're talking about wireless data, it's easy enough to simply switch to another carrier. Now we've forced the telco's into companies that treat you fairly and compete for your business because they will become insolvent if they don't. We end up with network neutrality and control over our own hardware, and we did it organically without the use of government.
Android is not the be-all, end-all phone operating system. However, if successful it will force all other cell phone platforms to provide the same level of freedom through market controls.
If the carriers thought that their customers really wanted no contract plans, they would compete for that business. As it stands, it is really not hard to get mobile service without contracts. Even pre-pay plans can be quite economical. Unlocked phones are readily available if you are willing to pay for them up front. Unfortunately most people are willing to sell their freedom for $50 off the cost of a phone, so the carriers keep doing it.
The iPhone and Blackberries would bounce up to more normal $800+ pricing.
I call BS. You can buy an 8 gig ipod touch today for under $200. According to the iSupply teardown, the GSM chipset in the iphone costs $2.80.
$179.00 + $3.00 != $800
Humpty Dumpty was pushed.
So? Separate out the phone financing. It should have been separate all along. It can share the bill with the service, but you should be able to drop the service part and either buy out the phone or continue the financing deal.
The way they have it now, they get to play "unregulated bank" (like paypal) at usury rates and even worse: when you finish paying off the phone, you still get to pay the subsidy rate as if you were still paying it off! (and no, I don't think $5--$10 off if I sign another 24 month contract is sufficient. I shouldn't have to sign a contract to get the rate I should be getting anyway)
There is definitely a market failure going on here, and while I oppose regulation on principle, something does need to be done to bring back competition or fix the issue. If competition is impossible in this market then regulation is in fact warranted. And the regulation should be onerous enough that the companies prefer the market solution over the regulatory one.
Can you be Even More Awesome?!
At one time, the stock market was a place where people could invest in companies that they believed were well run, stable, and had products and services that people wanted. Stock was a mid to long term investment.
Now it's treated as little more than casino gambling. It hardly matters if a company actually has a product or not anymore as long as it looks like the stock will go up. Long term stability isn't even a consideration. An "investor"'s wet dream is to buy a big chunk of stock in a company that then burns 100% of it's accumulated good will, cash reserves, and future to raise stock prices. As long as they can sell just before the dead carcass hits the ground.
That's why CEOs like Chainsaw Al Dunlap were Wall Street darlings right up to the point the street realized that Al and company would hide the signs to jump off so they could get THEIR stock sold off at the top.
That's why the internet bubble happened. It's not that astute investors actually believed that mail order pet food was the wave of the future, it's that they believed enough people would buy stock in it (people who believed the same thing they did) that the stock would skyrocket (as it did). Each resolved to sell it off near it's height (mostly to smaller more naive investors) before it dawned on everyone that people buy pet food at the grocery store. Meanwhile, smarter but less flashy small companies with real prospects for the long term couldn't get the time of day from investors. Arguably the few successes from the dot-bomb were companies that had what would traditionally be considered a good investment and were able to wrap it in flashy pie in the sky crapola long enough to get investors.
The more stodgy telecoms are popular investments mainly because they have plenty of momentum to burn in exchange for unsustainably inflated profits. On the corporate side, their big play is to be too ubiquitous for consumers to avoid. You can run to an upstart, but they in turn depend on the old telecoms who will either crush them or beat them down and then buy them up.
My phone cost $40 upfront, but they gave me 40 dollars of free calls, so essentially the phone was free and I was just paying for my airtime.
Yes, but that could be one hour of calls.
Actually, I meant that as an exaggerated joke to prove a point, but then I realised that a lot of "normal" phone-to-phone calls I could make on my pay-as-you-go phone work out at virtually that (in UK money) per hour.
Anyway, point I was going to make is that $40 "worth" of calls sounds nice, but isn't great if the calls are horribly expensive. In fact, they could charge twice as much for the calls, give you the same hour (or whatever's) worth and announce it as "OMG!!!!! $80 worth of free calls with this $40 phone".
Which sounds like an even better deal, when in reality it's way worse because you don't actually get any more free, and your calls are twice as expensive.
Same applies with dirt cheap printers that take horrendously priced ink carts. Buying a new printer because that $40 model comes with an ink cart worth $30 "free"? And the more they overprice the ink, the more that "free" cart is "worth", and the more the printer costs to run. It would make more sense to buy a printer where (e.g.) similar replacement carts were $10. But people don't think like that.
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The first three and likely the last two would be nicely fixed simply by making it illegal for a cell service provider to have anything to do with selling phones. The wired phone company used to pull the same thing - you had to rent the phone from them for some high monthly rate, and they'd only let one of their phones be hooked up to their wires. Then that all changed. When was the last time you bought a landline phone from the company that provided service for it?
Heh. You wouldn't have to pay a higher rate for a phone.
The whole problem is caused by this:
There is no competition at all. The cellphone carriers keep a stranglehold on the equipment, with fake subsidies for the equipment which is a piece of subterfuge used to keep customers locked into long contracts. They mark the phones up to $300 or $400, then give you a big discount for signing a 2 year contract.
The carriers should not be allowed to sell phones at all.
If the carriers were just carriers, they would only be concerned with satisfying their customers.
The carriers have very valuable FCC licenses. They have some amount of responsibility that they operate in the public interest, however little anymore.
You would buy your phone from a retailer, and Motorola, Apple, Nokia would be beating down the door at Walmart to sell those phones, which would then work on all networks. They would be sold in a highly competitive market. Prices would decline. There would be no way to mark them up and then discount them since you would be buying from a retailer who has no interest in your service. The kickbacks would stop too.
Then the carriers would be free to compete with each other and there would be no anticompetitive subsidy locking of handsets, no contracts to keep you locked in, and the prices of the service would decline.
This would be pure business. Manufacturing, selling, providing service, all independent of each other.
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