Hello! And welcome to our Friday column, Worst of the Week. There’s a lot of nutty stuff that goes on in this industry, so this column is a chance for us at RCRWireless.com to rant and rave about whatever rubs us the wrong way. We hope you enjoy it!
And without further ado:
Next to perhaps the occasional spectrum auction, nothing gets my nerd-flag flying like a price war among mobile operators. The seeming lack of any rhyme or reason to pricing moves beyond simply matching – or bettering – what a rival has on tap is wonderful to watch.
As such, the past couple of months have been fantastically fun to behold as just about every domestic wireless carrier has released at least one – or a dozen – new rate plan in their attempts to entice mobile consumers. Certainly the time of year has had something to do with those moves, but other factors have come into play: Sprint attempting to re-invent itself under new management; T-Mobile US looking to remain aggressive with its “Un-carrier” moves; and AT&T Mobility and Verizon Wireless continuing their “monkey-see, monkey-do” game.
(I also do not need to mention that all of this has been happening under the shadow of the ongoing Federal Communications Commission’s Auction 97 proceedings, which this week has surpassed $41 billion in total bids. $41 BILLION!)
Despite the euphoria that has come from this activity (and perhaps “enhanced” by my location in Colorado) I have to comment on the mess mobile operators are now making of their pricing scene. What were once relatively easy to follow pricing models have become a train wreck of numbers, letters and periodic-table symbols that most consumers can in no way decipher and that even those who follow the industry on a daily basis have to admit is becoming complicated.
Years ago, domestic carriers went through a phase of eliminating so-called “regional” rate plans in favor of simpler, “nationwide” offerings. The move was designed to eliminate confusion in the market and seemed to be a stable mantra for years. But, no more. A trip into a wireless carrier store or a visit to its website is now a task best left to those educated enough to program rockets.
Family plans, individual plans, device-specific plans, data-only plans, shared-data buckets, device financing, two-year contracts, no contracts, prepaid, data overages. You get the point, unless of course you are not one of the few nerds who follow this industry on a daily basis, or basically 99.9% of the population.
The biggest confusion generator has been the move to device-financing options that allow customers to make monthly payments on their devices. This sounds simple enough, until you realize that each device seems to have a different per-month charge depending on the model as well as the length of the term – some carriers provide up to three different timeframes to choose from. These different per-month charges in turn impact how much a customer will be paying per month.
So, a single “plan” that involves payments for an iPhone 6 16 GB will be very different from the iPhone 6 Plus 16 GB and from just about any Android-powered device.
The beauty of these plans are that they don’t require customers to sign a dreaded service contract, making them think they are not tied to that carrier. However, the device financing does tie the consumer to the carrier because if they leave that carrier before the device is paid off they are forced to pay the remaining amount in full. Sort of like an early termination fee.
I have never had any issue with wireless carriers looking to recoup their upfront costs associated with signing up a customer, but the way they have tweaked the system with device financing just adds to consumer confusion.
On top of the device-financing layers, carriers also continue to offer subsidized devices tied to traditional two-year contracts. I know these sort of deals have drawn the scorn of many, but at least understanding what the upfront payment is – the subsidized price of the device – and the monthly fee is more straightforward than the fluctuations of the device-financing models.
Making matters worse, consumers who do go with a device-financing model are provided with a lower monthly fee than those who choose a subsidized device. Sure, the math on this makes sense to the guys back in finance, but try telling that to my mom.
Come on everyone. I know there is a way to keep us nerds happy while at the same time not confusing my mom. It’s called “keep it simple, stupid.”
OK, enough of that.
Thanks for checking out this week’s Worst of the Week column. And now for some extras:
• Just in case you went a week without thinking the government wasn’t listening in on all of your boring phone calls, it appears a new National Security Agency program has been revealed as a reminder.
At least this one has a sort of cool James Bond movie-like name.
• The Federal Communications Commission’s Auction 97 proceedings sped up this week as the FCC moved to more, and shorter, bidding rounds per day. Pushing north of round 50, the auction has approached $41 billion in total potential winning bids, or a whole lot more than anyone ever expected.
Now the trick becomes trying to figure out when this cash cow will come to an end. Past auctions have often gone beyond 150 rounds, and some in excess of 200 rounds. If the current pace of six rounds-per-day sticks around for two weeks, we will be sitting at round 121 leading into the week of Christmas. There is no word yet from the FCC on bidding plans around the holidays, but it’s assumed that the process will at least take off the week of Dec. 22. That of course leads into the following week which houses New Year’s Eve and New Year’s Day, also known as the day when everything is too loud. Should the FCC also take that week off, this auction is set to become a 2015 problem.
• Speaking of Auction 97, the big-money licenses up for grabs appear to have been settled with the five highest-priced licenses this week all having failed to garner new bids over five consecutive rounds, thus taking them off the table.
The priciest license is set to the 20-megahertz J-Block license centered on New York City, which is sitting on a potential winning bid of nearly $2.7 billion, just ahead of the nearly $2.1 billion bid for J-Block centered on Los Angeles. If you throw in the rest of the top five ($1.3B for NYC I-Block; $1.3B for NYC H-Block; and $1.2B for Chicago J-Block) you are looking at nearly $9 billion for just five licenses, or more than two-thirds the total amount bid on the oft-compared Auction 66 (AWS-1) back in 2006.
I’m just saying it’s a lot of money.
• Finally, gotta love the heading on this FCC document: “Order partially rejecting objections.”
Not sure what it’s referring to, but I am going to guess it does not end well for someone.
I welcome your comments. Please send me an e-mail at dmeyer@rcrwireless.com.
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