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Carriers Blame the iPhone For Data Caps and Increased Upgrade Fees
zacharye writes "Bruised mobile carriers such as AT&T and Verizon are 'fighting back' against Apple's iPhone, despite the fact that the device has helped them eke out consistently higher average revenue per wireless subscribers since its launch. To hear the carriers tell it, the iPhone is a major inhibitor to their profits as last year they were 'only' generating wireless service profit margins in the 38% to 42% range. But ever since these beleaguered companies started 'fighting back' by implementing data caps, increasing fees for device upgrades and implementing longer waiting periods before users can switch devices, they’ve seen their wireless service profit margins surge. AT&T reported a 45% margin in Q2 2012 and Verizon reported a record-high 49% margin."
Anyone who spent 10 mintues with the iPad, and iPhone would realize they are enormous bandwidth hogs. You don't have to be a telcomm. engineer to see that video chat, and Netflix are killer apps. in terms of backhaul, spectrum and popularity.
They didn't plan properly, didn't spend appropriately and now they are punishing and blaming their users for using these devices exactly as they were designed.
In other news, in other parts of the world, some carriers just do manage their infrastructure correctly and the prices are actually going down instead of going up.
So please, stop blaming the customers and start rethinking your now-stinking strategy.
Write boring code, not shiny code!
what kind of horseshit do they teach at harvard business school anyways? fuck.
With the iPhone and Android devices, people find them useful enough to - gasp! - actually USE mobile data allotments!
I can see why AT&T and the other carriers were caught off guard there.
#DeleteChrome
They're discouraging the iPhone?
I'd have never thought corporate greed for profit could actually do a good thing in the long run. Darn it, I sound like a capitalism-apologist right there.
Entia non sunt multiplicanda praeter necessitatem.
That's just obscene!
Poor carriers.
I for one can't wait for the day when a Star Trek style communication system is the norm and companies can't gouge your arses with fees and extraneous charges just because they feel like it.
The carriers went to great pains to advertise all of the bandwidth-hogging things you can do with their phones, such as video chat, streaming movies etc. Now that their ad campaigns have proven successful and people are actually doing all those things, the carriers find that they cannot hold up their end of the bargain. Their solution to this problem is to blame their customers for using what they were sold.
They need to put some of those profits into improving their infrastructure so they can deliver what they sold. An awful lot of businesses would be very happy with profit margins half of what these guys are getting.
Some mornings it's hardly worth chewing through the restraints to get out of bed.
are the telecoms themselves. If they put some of their "profits" into upgrading their networks, and making them more efficient, they wouldnt have bandwidth problems. This is where capitalism/greed fails. Companies feel they have to pus shareholders first, instead of customers.
The saying "the customer is always right" has morphed into "the shareholder comes first".
End shareholder dominance and you end customer sacrifice.
CANCEL your smartphone accounts and go to pay-as-you-go accounts, which will kill the telecoms profits and force them to bow to customer demands.
CUSTOMERS should come first not shareholders.
These ass clowns could have money shooting from every available orifice, on-demand and in any denomination they desire (Including Berkshire-Hathaway Class A stock), and STILL they'd complain that their revenues were impacted.
Basically they're using the following formula:
100% profit is:
* Not actually having a service to keep running/support/etc.
* Having no employees.
* Having people give them money for nothing.
Anything beyond that is some horrific imposition on them that fatally impacts their fiscal stability...
Chas - The one, the only.
THANK GOD!!!
I run two small businesses, both in tech, not telecom, and I would shit myself with happiness if I made a 40 to 50 percent margin. I am content, competing, and making do with half that or less.
Next you'll be crying because you eat steak every day. GTFO and STFU.
Silence is a state of mime.
c'mon, I dare ya.
if this is supposed to be a new economy, how come they still want my old fashioned money?
If this is actually true, and carriers are not just being greedy then charge apple users more, don't sell a phone at $199, sell it at $399. That way apple makes their money and the carrier doesn't take the hit. Please stop asking android users to do not want a iphone to subsidize apple purchases. If they don't sell as well at $399 then apple can always come down on their price, but that is their hit, not the carriers, or the users. Done. That's call capitalism.
If Samsung can make a phone and sell it to a carrier at $300 bucks, and apple charges $600 for their phone, then charge the user the difference. Don't raise upgrade fees or data plans, since your markup is the same. Now if apple is trying to strong arm you into charging their user charging the same, while they still reap their profits, then tell them to go pound sand, and if apple lost lets say Verizon & at&t as carriers, then that will hurt them, and they will drop the price. Stop letting apple be a bully.
I always figured termination fees would come in at close to 100% profit, as it takes less than 10 minutes of an employee's time to cancel a contract (and the employee is paid terribly so those 10 minutes are trivial in comparison to the fee itself). Considering Verizon and - to a lesser extent - AT&T are masters of the termination fees, I would think their profit margins would actually be higher than what was stated in the summary.
Damn_registrars has no butt-hole. Damn_registrars has no use for a butt-hole.
Why is this focused on iDevices? Aren't these the same carriers keep touting their Android handset sales numbers? I really don't believe there's any case to be made that the Android devices and the apps that run on them don't use proportionate bandwidth to their counterpart iDevices.
So, this must be in part about their higher profit margin on said Android devices, no? That, and their fee-grabbing greed regarding any use of their network. ...first ones against the wall when the revolution comes....
This is proof that there is no competition in Wireless. They are in Collusion.
AND to get me off my Grandfather Plan, they are going to have to offer something better than "higher prices and lower service". The problem is, I can't shop, as they all have about the same pricing now and it seems that nobody wants my business.
Oh, VZ just offered me $50 "loyalty" on upgrading. Um, hey VZ nice try. Here is a nice warm FUCK YOU
Agent K: A *person* is smart. People are dumb, stupid, panicky animals, and you know it.
When companies become actively hostile to their customers, it's generally a sign that there isn't enough competition in the marketplace.
Since they can't hide their crappy data service with a handset that makes the consumer not want to use it, they are forced to create artificial barriers to act as a facade for their crappy connectivity.
These comments are my own and do not necessarily reflect the views or opinions of my employer or colleagues...
They may be bandwidth hogs, but it's still BULL SHIT!
* Having people give them money for nothing.
They already have this one, its called 'text messaging'
Raising prices/cutting services raises profits. Film at 11....
How about offering a plan that pays people to text instead of making calls? I've never understood why consumers should pay to send texts. Texts uses far less bandwidth than voice and can be send in bursts during bandwidth utilization lulls. Maybe texts are just so lucrative that no one wants to shoot the golden goose, but SOME company should be trying to attract customers with a "we'll pay you to text" plan.
But ever since these beleaguered companies started 'fighting back' by implementing data caps, increasing fees for device upgrades and implementing longer waiting periods before users can switch devices, theyâ(TM)ve seen their wireless service profit margins surge
When AT&T started arbitrarily throttling unlimited data users I immediately dropped the 2 gig data plan I had for my iPad. When they decided to enact the 3 gigabyte throttling standard for unlimited users, but would not state the minimum speed these users will get, I decided I will not renew my contract on the unlimited data plan I have with my phone. Unfortunately I still have an expensive ETF, so I will wait until the contract is up.
I'm curious if this profit margin will still be this high in the next two years when people's contracts run out. I'm willing to bet that in the next five years AT&T and Verizon will be running Sprint'esque ads with the CEO saying "we want you back! *sniffle*". (It is an amazing coincidence that Sprint is the one still offering properly unlimited data right now...)
"I like to lick butts!" by MobileTatsu-NJG (#32700246) (Score:5, Informative)
I seem to recall (around '05) that the future cellular market was in Consolidators, like USCellular. (Companies that own no towers, but resell bulk-purchased access to end users. Shades of MCI...) Admittedly, this was just prior to the Smart Phone, so things might've changed just a bit.
Point here is: Perhaps Apple outta get into the market in the same way those Consolidators were: buy up a boat load o' access, then resell it to us. Tell ya what, the telcos have jumped the shark: I'd pay for an unsubsidized NEW phone as long as it was accompanied by a new paradigm. (EG: "Caller pays" like the rest of the world; transparency, net-neutrality, and one single data-miner of my activities with a hope-in-hell of a privacy policy, to name a few.)
So they have tv commercials advertising all the things you can do with the data and then they complain when you do.
Coder's Stone: The programming language quick ref for iPad
I've no problem with bandwidth caps or the concept of usage based pricing. If the real bandwidth hogs are stretching the system beyond capacity it makes sense to restrict them.
The trouble here is where the benefits of such an approach haven't been fed back to the end user as lower costs, but instead have been taken by the telecoms firms as increased profit.
The cost of cell phone plans in the US is outrageous. And knowing how much they can make from a punter with a smart phone, the carriers offer next to no low cost provision for users with dumb phones or those with smart phones that have frequent access to wifi and only need a few hundred MB of data a month,
Now they do this with tablets as well. If you have an iPad, Vodafone UK charge less than $5 a month for 250MB of data. AT&T in the US want tree times as much, $14.99
The company would be so much better if there weren't so many users!
As a AT&T customer I'm accustomed to being at any event - from stadium games and music festivals, having 4 bars and not being able to use the network. I guess I can understand because you never know where a stadium will pop up and when people might go there.
I remember Virgin Fest added capacity for Virgin Mobile, but everyone else was SOL.
Slashdot's rate-of-post filter: Preventing you from posting too many great ideas at once.
Having complained bitterly about cellular prices for years myself, it actually pains me greatly to say this... but here's the thing: AT&T and Verizon are just applying standard economic principles; continue to raise prices until you can make the profit you want while expending the least amount of resources (money, time, effort, etc.). The side effect of this is obviously that many people who want lower prices will go to the less "greedy" carriers, like Sprint or T-Mobile, (which I will most likely be doing myself, not too long after the next iPhone becomes available) but the profit loss from those customers departing the greedy carriers offset by the profit increase from the remaining customers... and the greedy carriers' network performance improves in the process. Then, if their net numbers fall too much, they still have the option to dial the crazy back down a bit. (Not that I think they will necessarily... but they could. In theory.)
It may be increasingly annoying to us consumers to have to deal with the ever-changing business models of these greedy-no-good-predatory-profiteering-duopolistic-carriers... but the unfortunate reality is: it really is "just business," and not greed, per se.
(And yes... I almost pressed delete on this whole blasted message when I started to think about how much some Slashdotters are going to hate this point-of-view... but the heck with my Karma. Sometimes, ya just gotta say it like it is.)
I thought this was health care!
Sorry, but gray text on gray background is making my eyes bleed.
Why don't they just come out and call a spade a spade. It's all the porn that's being watched and downloaded on said devices that's causing the problems.
The current political and business climate would never allow for this, but would it ever make sense to run the infrastructure side of wireless as a highly regulated public utility, in the manner of electric utilities (ie, basically give them a fixed, 15% pricing margin, regulated by a board with public meetings and documentation).
But have these entities only sell wireless "service" to the actual resellers, which would act as the carriers generally do now in terms of selling wireless services to users.
The infrastructure side would simply be a fixed-profit business, with maintenance, network costs, tower expansion, etc all built into the business model up front, along with regulatory requirements that would require that wireless and backhaul capacity be mandated to maintain X% overhead. Actual technologies could then be regulated as well, so that all towers used the same wireless technology so that any phone from any "wireless reseller" would work, with no network lockout.
The wireless retail sellers would then be competing on actual customer service and business efficiency, since wireless data volumes/minutes would be sold at a regulated price at the wholesale level and there would be no technology lock-in (eg, CDMA vs. GSM vs. HSPA+ vs. LTE, etc).
You would still have innovation in the industry in terms of handset hardware and the resellers would not have any way to manipulate pricing (ie, starve capital investment for short-term profit, then jack up prices to complain about infrastructure overuse). Back-end network innovation is limited anyway, since I don't think carriers actually develop wireless technologies in-house, and the debate over those kinds of upgrades would be done in public before the utility commissions versus the bogus marketingspeak of carriers ("Now!!! We had 3G, now we're offering the new 4H, and soon the 5K speeds!!!!111).
For really large events (like South by Southwest), the phone companies often bring in microcells - those REALLY work, simply by moving devices on to more towers.
Phones are not all on the exact same frequency at the same time... there is a range they communicate over.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
How small? One tower for every two homes in order to raise the cap from 3GB to 100GB/month?
Why not a tower (microcell) in EVERY home, provided by the carrier... along with fiber to the home. That would go a huge distance to alleviating the vast bulk of over the air network traffic and greatly reduce the need for new towers (new tower funds are where you would get the funds for giving microcells to every customer from).
"There is more worth loving than we have strength to love." - Brian Jay Stanley
They refuse to aggressively upgrade their infrastructure and instead pay their execs and shareholders with the money they could use to generate even more profits in the future.
I hope Google smashes them and I hope it's bloody and painful.
"My God...it's full of trolls!"
Wasn't there some news about Android users subsiding iPhones? Is this more of the same or will it make it worse?
Does that 38% margin include the phone subsidy cost too?
All of the smartphones besides Blackberry have always been data-hogs. RIM's phones evolved from their earlier 'pager' devices which supported push e-mail over networks with much less bandwidth than a cell phone network has (think of pagers, ambulance dispatching, etc.) That's why e-mail network traffic for a Blackberry used like 1/10th of the bandwidth that the equivalent functionality of an iPhone uses.
But users don't care about things like that, and neither did the carriers -- they pushed the iPhones hard because they were cool and hip and whatever (or more likely because their margins were higher).
No shit. If life's so hard maintaining service for these phones, why don't they drop them? Don't give me any, "It's what our customer's want," bullshit because the customers want data without ridiculous caps and outrageous fees but I don't see any progress towards that (no, the latest shared data plans do not meet that end).
Okay, so the carriers are implementing data caps on the "Unlimited data" plans... how's that different from saying: "we're no longer supporting an 'unlimited data' plan, you will now need to choose from the tier of plans ranging from a quarter gigabyte up to 4" or something like that...
I realize I'm being whiny, but I'm tired of hearing that you get 'unlimited' when it's anything but...
I'll be more than happy to take my iPhone and go to a different, non-douchebaggy carrier, thus freeing up some bandwidth. Glad to help out.
Per a link in that very article, Verizon made $1.83 billion profit on sales of $28.6 billion last quarter. That's not a 49% profit margin. That's a 6% profit margin. They had a "49.0 percent segment EBITDA margin on service revenues (non-GAAP)". I don't claim to know exactly what that means, but its not profit margin the way I (and I think most other people) understand profit margins.
The real problem is not whether machines think but whether men do. - B.F. Skinner
That's obscene. You don't make profit margins like that without buttfucking the workers, the stockholders, the government, the environment, or all four.
When they offer a unlimited plan, i would assume they got 24*7*bandwidth per week. okay, maybe some mixed calculation.
Unlimited is unlimited, and if they want something to blame, they should start with themself. Why did they offer unlimited, when they really meant a volume rate?
Telecos actually putting in the pipes they charged for AND got grants from the government to put in? If they did a half-decent job of this, iPhones plans would probably be cheaper then most voice/text plans are today.
But like every company, they went after short-term profits, and completely ignored everything more then a week away.
Honestly, the government should seize their assets, and put the major stockholders and officers in prison.
As I said, you simply divert already existing money you allocated to build new towers, into money to provide microcells.
You don't need as many towers when most of the traffic can go over local microcells instead of the "real" towers.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
And we could call it "WiFi"! That sounds catchy.
Ha Ha.
Can the WiFi handle calls from GSM handsets as-is? No.
Does your WiFi router improve your cell phone reception? No.
The whole point again is to eliminate ALL load off the towers when someone is at home, so you need far fewer towers and everyone gets better service to boot.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
A few years ago before the iphone came out, the cell companies offered free or extremely cheap (sic) cell phones as a loss leader to get you onto a contract. I found it ironic that when people bought the iphone entirely out of their own pocket, AT&T required them to still have a two year contract.
Is this still the case?
--jason
I just started my switch over to T-Mobile. When I graduated from college and entered the big boy world, I needed to secure my own plan for my wife and me. Having come from a Verizon plan with unlimited data for my iPhone, I wanted to keep our devices and hopefully the same level of service. Verizon's rates have gotten so ridiculous, I was looking at a $160/month bill just to hook up one smartphone and one basic phone. There was absolutely ZERO flexibility from Verizon.
Compare this to T-Mobile, where I pay $70/month for two lines with 1000 minutes, unlimited texting, and unlimited HSPA+ data (throttled above 2GB of course). Even with the lack of subsidized devices, T-Mobile's plan will save me well over $500 a year all told, and their coverage in my area is just as good as Verizon's. I quickly remind Verizon reps of this every time they tell me "well you see, you're also paying for the network..."
The big 3 carriers have become much too comfortable being at the top for so long. They're starting to fall, and quickly, as shady business practices and economic pressure push value-conscious consumers to seek out cheaper cell providers and alternatives to mobile voice and data service.
The number of phones that support it is growing
In other words it is totally pointless to bring this up because it does not work for EVERYONE right now.
My solution works for everyone, without requiring millions of people to buy new handsets.
My solution exists today, AT&T sells it. And again unlike your solution it works for anyone, not just people that buy specific phones.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
All Y'all need to thank Ronny Raygun for this.
Back in the 80's Ronny eliminated the Windfall Profits tax which encouraged companies to to drop prices, pay employees and invest in infrastructure.
So it good to see how happy you Republitarians are with the results of this.
The average return for a major US company since the end of WW2 is only 10%
When companies are making 50% those are monopoly profits.
All fiber, wire & spectrum should be seized via Eminent Domain and turned into non-profit co-ops.
People in other countries already have gigabit fiber to the home & 155Mb cell phones.
Spectrum is not the issue, it's cell density. When you have 3 cells in a triangle, and you put another cell in the center of the triangle, you reduce traffic per cell by 1/3, and they serve a smaller radius.
Their argument that "no one wants ugly cell towers because of NIMBY" is specious, since they can be placed on the top of any building inside a weather dome, and even if they're not in a dome, they don't have to be ugly:
http://gizmodo.com/304357/ericssons-tower-tube-give-cell-towers-a-touch-of-scandanavian-design
What in the world did they expect? iDevices give access to the internet. People FREAKIN' LOVE the internet! Thus, with iDevices, people will use the internet!
What did they expect people to do with an iPhone? Talk to people? Hell no! We had that capability for years! iDevices are for surfin' the webz and consuming high-bandwidth digital content and, sometimes, being interrupted by taking a phone call.
AT&T reported a 45% margin in Q2 2012 and Verizon reported a record-high 49% margin.
That means their prices are about 40% too high.
Corporations are obligated to maximize shareholder value, without breaking laws. This means trying to make as much money as possible.
I paid for it .... so I have the right to use 100% of it.
If (some) Android users are too stupid and pay for a service that they barely use that is their problem. But just because a telco doesn't like when I use the service that I ALREADY PAID FOR, I'm not going to stop using it.
My contract says I have unlimited access .... meaning, I use as much as I want or can. I should not have to justify myself for using what I paid for.
(and) the passing jiggling big bootys.
Yes yes.
But how much shareholder value is there in a company that tanks because they've cut their own throat with regards to growth and expansion of assets?
Chas - The one, the only.
THANK GOD!!!
This is /. after all, "jailbreaking" should be customary here.
all carriers suck cock...they fuck over everyone and blame it on the customer.....try getting a decent plan in canada....its legal terrorism for fuck sakes!!!!