|
Why would any company offer you 450 dollars to switch to their service, as AT&T is doing for T-Moibile customers? Sounds like they would really like to have you as a customer.
First, this is an admission by AT&T that T-Mobile is being successful in luring away customers with its creative (if not really great) offers. T-Mobile offers phones at the real price (without hiding the price into the two year contract) and allows customers to pay off the phone with monthly installments. It also offers higher calling and data package limits. Most “talk” portions of cell bills these days are unlimited, of course, but the action is around how much high speed data you might get before they go you back to lower, 3G speed. The marketing dance is around how much you have to offer at what price to get customers while still preserving the value of all that capacity and its ability to generate more revenue when people go over the set limit.
Second, this is also a confession by AT&T about how much money they can make by getting a customer. They are also telling their customers how much money they are wasting when they jump into a two year deal. There is no way to tell from the outside whether they will automatically earn back that 450 dollars over a two year contract, but I would assume they expect to make that and then at least another 450 when they get a customer. Plus, once they’ve got a customer, most tend to stay with the carrier, whether out of habit or because of the “new phone!” offers that the carriers constantly push out. In any case, if they get you for two years, they aren’t hurting. They are likely to have you for five or even ten years, on average.
The cell phone business in the U.S. is right on the edge of getting nasty. T-Mobile, the weakest of the major carriers, had to do something to stay in the game once their merger with, guess who?, AT&T was turned down by the federal government, so they decided to shake up the market a bit. This is heading in the direction of a price war, something none of them want. They are making piles of money and they want to keep those piles growing. The roll out of the smarphone is one of the biggest bonanzas in recent American business history. Now that the networks to support it are largely completed, the money is flying in.
The big guys are Verizon and AT&T with Sprint and T-Mobile brining up the rear. The carriers have avoided a price war to date by treating “non-contract”, prepaid customers like some alien species or untouchables. Boost Mobile, Cricket, Simply Mobile, MetroPCS, Net10 and others are sold in out of the way stores that cater to lower income people, even though they use the same networks and have better deals. The trick of the major carriers, successful so far, is to keep the good phones, the newer innovations, out of the hands of the pay as you go customer. Sure, you can get a phone and service, but you will look like a dork carrying around an old phone with old features. That’s the goal, anyway, even though some of the phones offered are up to date. (The best phones have high price tags, which keeps them out of the hands of paycheck to paycheck workers generally.)
The fad aspect of cell phones has played into the hands of the carriers and they have used the advantage by coming out with new phones all the time. (It was reported elsewhere that Samsung makes 5,000 different iterations of cell phones: 5,000 different models. How are you supposed to choose?) As soon as you get a new phone, it seems to be outdated by newer phones with better features. Of course, some of this is pure illusion, but we fall for anyway.
We, collectively, are wasting billions of dollars on cell phones. Doesn’t matter? Suppose we took half that money and built schools and hospitals in Guatemala or used it for some good cause here in the States. Imagine what could be accomplished. In Europe and elsewhere, they get better deals. The last time I checked the website of a major carrier in the U.K., all of their phones were “free” in the sense that they were included in the cost of the service. No upfront payment, no monthly payment, other than the service contract. One carrier in France announced recently that data would be included in the contract, no extra charges. You can also change carriers much more easily in Europe and elsewhere around the world. More service, less money is the general rule in Europe, but the carriers here have so far managed to keep prices high and the phones expensive, with “unlimited” data plans highly, what’s the word?, limited.
Why do bad deals, or not very good deals, go on and on? It is a sign of the relative prosperity in this country, along with the “gotta have it” factor, even for lower income earners, that crummy deals for cell service continue. This is unlikely to last. Some of the public has awakened to the fact that signing a two year contract to get a discount on a phone is not a great idea. The little, pay as you go carriers are growing, but since the money flows back to the major carriers anyway, the majors aren’t concerned. Yet.
Doug Terry, 1.3.14
|
