The New York Times ran a story today that helps explain why the American cellular industry is so screwy. In short: it’s our fault.
There are two main problems: We like bills to be consistent, and we’re risk-averse consumers.
To the first point, Sprint tried to offer a plan in 2004 where 300 minutes cost $US35, and $US2.50 for each additional 50 minutes. Seems great to me, no outrageous overage charges. But customers didn’t like it because their bills would vary so much from month-to-month, so Sprint switched back to age-old tiered minutes plans.
Because we like consistent billing, the carriers institute ridiculous overage charges to convince us to spend up. That way we don’t have to worry about any unforeseen costs, even if the fixed price plan ends up costing more than a variable pricing structure would.
The article also goes into how stupid expensive text message rates are subsidising falling voice revenues, how wireless carriers would love to stop subsidising phones, and more.
I know the average Gizmodo reader would like nothing more than to pay as little per minute as possible, but the average consumer thinks differently.
What’s interesting is that this wholesale mentality does work, at least in terms of raw pricing. One minute of talk time costs 5c, and the average text message costs 1c. According to the article, that’s the lowest average pricing in the developed world. The minutes do come at a bulk discount, it’s just a matter of whether or not you use all of them.
I’ll leave it to you commenters to discuss, but it’s a good read into how wireless pricing in America got so complicated. [New York Times]