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.'"

Comments

Re:Impossible

[wealthychef]

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.

Double billing also happens in Europe

[TrollHammer]

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.

Re:Impossible

[TrollHammer]

You can punish a corportarion if it does not behave correctly - like the European Comission has done with Microsoft and Intel, recently. Quoting the original article:

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.

Industry Response

[Anonymous Coward]

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...

Compared to Japan

[hcs_$reboot]

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.

Even simple steps would improve their image

[Ritz_Just_Ritz]

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....

Re:Even simple steps would improve their image

[Anonymous Coward]

Save the number the robocalls are originating from, and set the custom ringer to 'Silent.'

Worked wonders for me when I had the same issue.

Re:Even simple steps would improve their image

[FudRucker]

switch carriers, dump AT&T, get a TracFone at your local dept. store along with an airtime card sign up anonymously online with the info from the card and nobody can attach your real identity to your new cellphone, only give the number to those that you approve of

Re:Even simple steps would improve their image

[iburrell]

Break out the Fair Debt Collection Practices Act and get them to stop. Answer the phone and get their name and address and all the info about the debt. Mail them a written request for verification of the debt. After that, all contact needs to be by mail. They are already doing things they shouldn't like calling late at night. They are supposed to have mailed you a description of the debt. Keep a log of all of the calls and violations. Send them to the FTC if they don't stop. You can even sue them and get $1000 in damages for violations.

Re:Impossible

[causality]

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:

• Eliminate all forms of being locked into a contract. Make all cellphone service a monthly deal like any other utility so that the carrier has to earn your business each month. Y'know, by being competitive.
• Require that customers can use any phone on any network of the same type, regardless of carrier. I.e. any GSM phone on any GSM network and any CDMA phone on any CDMA network.
• Ban all locking down of phones so that transitioning to another network does not require the old carrier's assistance.
• Regard the intentional locking down of cellphone applications as a prosecutable anticompetitive practice. The fines should be at least 120% of any profits made from doing so, as measured by sales of exclusive apps. Of course, the provider of the phone need not support any third-party applications, i.e. Apple would not be expected to support an application that didn't come from their own app store.
• For GSM networks, require that any fees charged for text messaging state on the bill that cell phones continuously transmit the data structures used by SMS whether or not text messages are sent, so the cost for the carrier to provide text messaging is effectively zero. Require that this statement be immediately below or next to the dollar amount and in at least a 12 point font.

THAT would be customer-friendly.

Re:Impossible

[oliphaunt]

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

So?

[zippthorne]

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.

Re:They can't improve service, it would hurt profi

[Anonymous Coward]

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.

Re:Impossible

[ceoyoyo]

Require that customers can use any phone on any network of the same type, regardless of carrier. I.e. any GSM phone on any GSM network and any CDMA phone on any CDMA network.

Ban all locking down of phones so that transitioning to another network does not require the old carrier's assistance.

Regard the intentional locking down of cellphone applications as a prosecutable anticompetitive practice. The fines should be at least 120% of any profits made from doing so, as measured by sales of exclusive apps. Of course, the provider of the phone need not support any third-party applications, i.e. Apple would not be expected to support an application that didn't come from their own app store.

Eliminate all forms of being locked into a contract. Make all cellphone service a monthly deal like any other utility so that the carrier has to earn your business each month. Y'know, by being competitive.

For GSM networks, require that any fees charged for text messaging state on the bill that cell phones continuously transmit the data structures used by SMS whether or not text messages are sent, so the cost for the carrier to provide text messaging is effectively zero. Require that this statement be immediately below or next to the dollar amount and in at least a 12 point font.
 
 

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?

Re:phone costs

[ciscoguy01]

That is all well and good, but, wireless customers have gotten "use" to the cell phones being "free" or 20-60 dollars, because of the contracts. I would prefer to pay a higher rate for a phone, and pick & choose the carrier to use it on.

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.