Wireless carriers are gouging us — particularly in North America, where the USA and Canada have the most expensive cell phone plans in the world. We’ll look at the many ways cell phone companies are taking advantage of us.
Carriers don’t stop at just having the most expensive plans in the world. From long contracts to fees upon fees, carriers have set the system up to take advantage of customers.
SMS Message Costs
Carriers can transmit SMS messages for free (or almost free), but they may cost ten to twenty cents or more for you to send. Various reports have pegged the markup on text messages at anywhere from 6,500% to 7,314% — that’s quite the profit margin and would be unheard of in many other industries.
Of course, you can opt to save money by paying a monthly fee for an unlimited texting plan. This seems like a big savings, but the fee you’re paying is still pure profit for the carriers.
Better yet, carriers will bundle unlimited texting in expensive plans — unlimited texting, unlimited calls, and a small amount of data for only $80 per month! The texting is free for carriers and they know you’ll use much more data than cell phone minutes, so they can include it in your monthly plan to justify a higher price and distract you from the fact that you’ll be paying more for additional data.
Given such high mark-ups, it’s no surprise that apps allowing people to text for free are becoming so popular.
Carriers make additional money by adding hidden fees. AT&T recently added a new $0.61 fee to its customers’ monthly bills. It’s called a “Mobility Administrative Fee,” and it will bring AT&T hundreds of millions of additional dollars. AT&T told The Verge that this fee will “help cover certain expenses, such as interconnection and cell site rents and maintenance.”
In other industries, this would just be considered the cost of doing business. When you buy something from a store, you pay what the item is priced at. There’s no hidden fee to “help cover certain expenses, such as the cost of shipping the good to the store and the cost of renting the property.” The additional fee just goes towards AT&T’s bottom line.
Contracts That Make Phones More Expensive
Want a new phone? You’ll probably walk into a carrier’s store and buy it there. Phones are advertised very cheap — often “$99″ or “$199″ for the latest smartphone, with some phones even being advertised as “free.”
There’s just one catch: You’ll have to sign on to a long contract to get that cheap phone, committing to pay a certain amount of dollars every month for the next two years (or three years in Canada, which has the longest cell phone contracts in the world.)
Sounds pretty good, right? Sure, you’re committing to pay a certain amount every month for a few years, but you’re getting the phone cheap up front.
Well, it isn’t a good deal — it’s a terrible deal. Buying a phone on-contract is a mistake for the same reason buying a television on an installment plan is a mistake. When you buy any product and pay a monthly fee for it, you’re paying more than the cost of that product over the long term — it’s better to put the money down up-front. You’ll pay less in the long run.
Wireless carriers have trained people to buy phones on-contract and pay extra for the phones over the long run. People who would never buy electronics or appliances on installment plans do the equivalent for cell phones.
No Discounts for Bringing Your Own Phone
The only thing worse than buying a phone on-contract is buying a phone off-contract. Many carriers don’t actually give you a discount if you bring your own phone — you’ll still be paying the same amount every month. The carrier hasn’t given you an almost-free phone so it has no reason to charge you extra, but that charge is bundled into the normal monthly fees so you can’t avoid it.
But hey, if you’re going to be paying the same amount of money, why not get one of those cheap new phones and sign on for a two-to-three-year-long contract? This also gives you a reason to immediately sign up for a new contract every time their contract expires — you might as well get a new phone if you’ll be paying the same monthly fees anyway.
When you’re locked into a contract and facing hefty cancellation fees, you can’t be lured away by cheaper cell phone plans elsewhere. You’d have to pay an early termination fee to pay back the subsidy and perhaps even pay a separate cancellation fee.
Long contracts also mean you can’t upgrade as frequently. A customer on a three-year contract in Canada may only be able to upgrade their phone every three years — not every two years — or they’ll have to pay additional upgrade fees.
Want to use that mobile data you’re already paying for on your laptop? You’ll probably have to pay an additional fee to add tethering access to your account. You’ll still use just as much data as before, so it won’t cost the cellular carrier anything extra, but it’s another opportunity for them to ding you with a fee. Sure, you could try to tether using third-party apps, but this traffic could theoretically be detected and your carrier could ask you to pay up or be disconnected. They could also just helpfully add the tethering fee to your monthly bill if they notice you’re tethering.
Making Service Providers Pay to Send You Data
North Americans already pay the most for data service, but that’s not enough for carriers. Carriers want service providers to pay to send data over their networks. ESPN is in talks with carriers and proposing that it will pay them so ESPN’s traffic won’t count towards customers’ data caps.
This is a win-win for carriers: They won’t have to increase data caps as people want more data. They’ll just keep data caps low and encourage each service provider to pay them to make their service available. Your bill will stay high, your data will stay low, and services will have to pay so you can access them. Pity the poor startups and small companies who can’t afford to pay off the carriers — people won’t be able to use those services.
This is the sort of reason why people push for net neutrality — greedy wireless carriers and Internet service providers want to charge service providers extra so their data becomes privileged.
When you leave the country, you’ll have to deal with other wireless carriers gouging you. Be aware of roaming fees or you may become the next person on the news with a bill for $22,000 or more because you dared to use your phone’s data connection outside the country. Cellular carriers are generally free to add as much mark-up as they want when negotiating roaming agreements, and they take advantage of this.
You can mitigate many of these problems by opting by purchasing a phone up-front and opting to go with a prepaid carrier, so it’s not a surprise that prepaid carriers are becoming more popular in the USA.
Chris Hoffman is a technology writer and all-around computer geek. He's as at home using the Linux terminal as he is digging into the Windows registry. Connect with him on Google+.
- Published 06/2/13