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The Irksome Cellphone Industry 272

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.'"
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The Irksome Cellphone Industry

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  • Impossible (Score:2, Insightful)

    by Anonymous Coward on Saturday July 25, 2009 @11:23AM (#28818891)

    You can't legislate somebody or something into being nice.

  • Re:Impossible (Score:5, Insightful)

    by wealthychef ( 584778 ) on Saturday July 25, 2009 @11:26AM (#28818919)
    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.

  • Data plans (Score:3, Insightful)

    by Anonymous Coward on Saturday July 25, 2009 @11:31AM (#28818951)

    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.

  • by nurb432 ( 527695 ) on Saturday July 25, 2009 @11:31AM (#28818953) Homepage Journal

    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.

  • By doing what every other industry does: try to please customers instead of entrap and bilk them?

    "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.

  • by Anonymous Coward on Saturday July 25, 2009 @11:49AM (#28819095)

    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.

  • by Manip ( 656104 ) on Saturday July 25, 2009 @11:51AM (#28819107)

    While it is true that cross-EU countries do suffer charges, that will only be the case for a little longer. The phone operators have already reduced the charges once and the EU is trying to get rid of them entirely, so phoning in France or the UK costs exactly the same and receiving calls is free.

    The US system is completely screwy. It is frankly shocking that you guys pay as much as we pay to send a text and on top of that you get charged to receive texts too (including adverts and other unsolicited text-spam). US voice isn't quite as bad because a lot of US carriers allow free inter-network cell calling as opposed to the fixed rates you often find in the EU.

    All in all, the US seriously needs some REAL competition as opposed to a small handful of large companies fighting for business while offering exactly the same terrible deal to consumers.

  • by _Shorty-dammit ( 555739 ) on Saturday July 25, 2009 @11:56AM (#28819157)

    They'd rather struggle, apparently. Why offer good/honest service at a good/honest price and keep customers while continuing to attract more, when you can just gouge the ones you have as much as possible? The movie theater industry has the same problem. Good movies or no, more people would go to the movies and buy from the snack stand if they didn't charge $17 for a Snickers and $43 for a popcorn and drink. Lots of people don't like going to the movies simply because the snacks are overpriced. So even if they do go, they don't go to the snack bar. If all these theater owners would wise up and charge reasonable prices for the goods in the snack bar, more people would utilize the service, and more people would go to the movies, and they'd make more money overall, despite making less on one sale. The cell industry is no different. Despite the fact that SMS text messages cost nothing to send, they're quite content to gouge customers for a service that costs them nothing to provide. They gouge for internet data usage. They gouge for MMS. They gouge for airtime. They're electing to remain oblivious to what customers actually say about them, because they claim they're struggling to make it as is. They claim they offer a fair service at a fair price, despite all the facts that prove otherwise. $5 from 1000 people will always be better than $10 from 100 people, but they'll never clue in that growing that 100 people into 1000 people is indeed just as simple as lowering their prices to something sane.

  • by Anonymous Coward on Saturday July 25, 2009 @12:05PM (#28819215)

    That's hardly useful to the vast majority of people who already have a lot of friends, coworkers and family that have their existing phone number.

  • by cr64 ( 801987 ) on Saturday July 25, 2009 @12:14PM (#28819295) Homepage
    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.
  • by hansamurai ( 907719 ) <> on Saturday July 25, 2009 @12:26PM (#28819387) Homepage Journal

    That acts of Congress actually work?

  • by maxume ( 22995 ) on Saturday July 25, 2009 @12:32PM (#28819423)

    Since the early 90s or so, GM and Chrysler weren't selling crap (no seriously, they might not have been as low maintenance as Toyota, but they weren't crap).

    The problem is that they made impossible promises 20-30-40 years ago, and the unions agreed to them (when the media talks about 'labor' costs of Detroit cars being higher, they aren't just talking about hourly, they are talking about funding retiree pensions and medical).

    The unions then agreed to work in new American factories for Toyota et al., with greater automation and lower wages. Go figure that GM and Chrysler couldn't compete.

  • Fix Lobbying First (Score:2, Insightful)

    by Bob9113 ( 14996 ) on Saturday July 25, 2009 @12:32PM (#28819427) Homepage

    Apparently, persuading cell carriers to treat their customers decently would take an act of Congress.

    Risks, it's all about the risks. How is Congress doing with the health care bill? At the moment, the biggest supporters remaining are the AMA, health insurance companies, and drug companies. Carbon credits? The big supporters at the end included the coal industry.

    The cellular corporations are abusive monopolies and a giant, fetid, trust. And if legislation gets anywhere near passage, they'll be the ones writing it.

    The reason Larry Lessig got out of the copyright fight is because he realized Congress had to be fixed first, before any progress could be made. Same thing here. Until we disconnect Congress from the grip of lobbyists, it is not possible for good legislation to pass.

    I want a solution, badly. I completely understand that the current path is a path toward more unearned wealth concentration. The first, mandatory, step is to break the grip that lobbyists have on D.C. It is the only first step that can lead down a path that is not worse.

  • Re:Impossible (Score:3, Insightful)

    by commodore64_love ( 1445365 ) on Saturday July 25, 2009 @12:37PM (#28819463) Journal

    I must live in an alternate reality United States.

    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. I have no contract and I'm free to quit whenever I feel like it. You don't "have" to sign a contract if you don't want to, or pay an arm-and-leg for a phone since there are plenty of cheap ones around.

    I do think the exclusivity deals need to end. It reminds me of the dark ages of 1970s when the only phone you could get was an expensive AT&T phone. Even modems had to be bought direct from the phone company (or else use an acoustic modem with a phone cradle). But now thanks to government regulation, we can buy any $5-10 phone or $20-30 modem and just plug it directly into the wire. That's the kind of freedom we need with cellphones - no requirement that you "have" to use an AT&T phone with your AT&T service.

  • So? (Score:5, Insightful)

    by zippthorne ( 748122 ) on Saturday July 25, 2009 @12:47PM (#28819539) Journal

    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.

  • by Anonymous Coward on Saturday July 25, 2009 @01:03PM (#28819687)

    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 (Score:4, Insightful)

    by Dogtanian ( 588974 ) on Saturday July 25, 2009 @01:06PM (#28819709) Homepage

    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.

  • by nine-times ( 778537 ) <> on Saturday July 25, 2009 @01:09PM (#28819733) Homepage

    I notice he doesn't necessarily address the complaints, though:

    Myth #1: Americans pay more for wireless service. Fact: Americans pay ten cents per minutes less than Europeans.

    Among the 26 countries in the Organization for Economic Cooperation and Development, Americans use the most wireless minutes per month, about four times more minutes than the average European consumer. Americans get the lowest cost per minuteâ¦an average of 10 cents lower per minute than Europeans pay.

    So Pogue complains that customers are getting double-billed for calls (which doesn't happen in Europe), and Verizon responds by saying Americans use more minutes and pay less per-minute than Europeans. Those ideas aren't in conflict. I would guess that Verizon is saying Americans use more billable minutes, which makes even more sense if they're being double-billed. Whether this is a better deal depends on how the math works out. If Americans are only paying half of what Europeans are paying per-minute, but are essentially being charged twice for every minute, then it's a wash.

    Now maybe it's true that Americans aren't getting such a bad deal. I'm just saying Verizon's vague responses don't really give enough information to evaluate them, and they don't address the complaints.

  • Re:Data plans (Score:1, Insightful)

    by Anonymous Coward on Saturday July 25, 2009 @02:14PM (#28820207)

    "But then again, it could just be greed and corruption"

    Look them up. Greed is wanting more than one needs or deserves. Corruption is an impairment of moral principles.

    Overselling bandwidth to people without a QOS agreement is bad customer service.

    Don't misuse terms to pretend that they should be forced to behave the way you want them to.

  • Re:Impossible (Score:2, Insightful)

    by lokiomega ( 596833 ) on Saturday July 25, 2009 @02:34PM (#28820351)
    It's a good thing for them that you're expendable then.
  • Re:Impossible (Score:5, Insightful)

    by ceoyoyo ( 59147 ) on Saturday July 25, 2009 @03:12PM (#28820671)

    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?

  • by Hurricane78 ( 562437 ) <deleted&slashdot,org> on Saturday July 25, 2009 @03:29PM (#28820803)

    Sorry, for answering all your questions and killing all the buildup at once. ;)

  • by Erbo ( 384 ) <> on Saturday July 25, 2009 @04:24PM (#28821235) Homepage Journal
    Actually, the carriers could just buy the Congressmen to avoid this sort of thing. If Verizon is making $850 million a year off people waiting through 15-second voice mail system prompts, as Pogue claims, surely that will buy off enough Reps/Senators to let them keep doing it indefinitely.
  • Re:phone costs (Score:3, Insightful)

    by Dragonslicer ( 991472 ) on Saturday July 25, 2009 @04:55PM (#28821455)

    "cell phones being "free" or 20-60 dollars"

    Pray tell, where are these? I went into a verizon store to replace the two phones my kids lost, and *after* all the discounts and what not, I walked out abut $120.00 poorer.

    Did you sign a new 2-year contract for those phones? If not, then of course you'll pay regular retail price. That's kinda the whole point of this discussion.

  • Re:phone costs (Score:5, Insightful)

    by ciscoguy01 ( 635963 ) on Saturday July 25, 2009 @07:06PM (#28822533)

    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.

Variables don't; constants aren't.