Tuesday, June 10, 2008

The Empire Strikes Back: complexity, mobile phone plans, and Apple defeated

I tried to parse my AT&T non-iPhone cell phone bill this morning.

I needed more coffee. I couldn’t do it.

Yes, the bill was confounded by switching the primary phone, but there’s a very definite pattern here.

Since we switched from Sprint to AT&T for the love of the iPhone we’ve seen our bills go up by about 25% for comparable coverage – and lower quality.

We’re not the only folks to notice this …

iPhone Plan Compared » a gthing science project

The breakdown:
Voice Plan - $40/mo for 450 voice minutes
Data Plan - $30/mo for unlimited 3G Data

So at minimum, you’re paying $70/mo. This probably won’t even satisfy most users who use more than 450 minutes a month. The next plan up is a $20 jump so you’re now paying $90/mo.

Yes, while every other piece of technology gets cheaper every day, somehow cell phone plans just keep getting more and more expensive.

Let’s compare this to Sprint’s offering:

The Sprint SERO plan (which anyone can get by going to a Sprint store and retrieving an employee’s phone number from their business card) is like this:

Voice Plan - $30/mo for 500 Minutes
Data Plan - included/ Unlimited
Text Messaging - included/Unlimited

So $30 on Sprint or $70 on AT&T (and keep in mind AT&T isn’t even throwing in unlimited free texting).

Ok, so this SERO plan scam involves a wee bit of fraud, but we noticed something similar with no ethical dodges.

But that’s not what I find intriguing here.

The interesting bit is using complexity as a weapon. It’s a legal dodge, brilliantly executed by cellular companies and perfected by AT&T. Plan comparison is pretty much impossible, and you won’t know the real price until the 3rd or 4th statement. The scheme worked for AT&T; despite lower costs and better, though not great, service, Sprint is bleeding customers and AT&T shares are rising.

Sprint is no angel of course. They’ve been sued for their deceptive contract swap practices. They haven’t been as clever as AT&T, however, at using the complexity weapon.

It’s not just Sprint that has fallen to the Empire.

Apple’s original iPhone plan was a blessed ray of light in the darkness. Crystal clear pricing, flat data services – water to a thirsty man.

No more. Now plans are through AT&T. The Empire has struck back. Apple has been, for now, defeated.

Ahh, but Apple is no angel either! They increase the cost of the iPhone, while advertising "price cuts". They use the complexity of cell phone pricing plans to deceive the naive and the overwhelmed.

Our society has to figure out how manage the complexity demon. It will take one heck of a consumer revolt to put it down.

Maybe an Obama victory will give us the energy to fight back …

Update 5/10/08: There is a precedent, though it's only partially encouraging. At one time home sales were encumbered with similarly incomprehensible contracts. This led to requirements to provide total cost estimates. So the contracts are still complex, but at least there are fewer shocks.

Update 6/11/08: In comments Sam points out that Sprint is "in" on the SERO gimmick, so it's not as shady as I made it sound. He also recommends 2600 The Hacker Quarterly as a weapon against the vile trickery of the Empire. I believe he's referring to Gaming AT&T Mobility. The journal is paper only (interesting topic worthy of comment) so I'll have to see if a local library has a copy.

Update 6/11/08b: Return of the Jedi? Don Reisinger speculates that this is stage of one AT&T/Apple divorce proceedings. Now that would be sweet ...

Update 6/12/08: Great comment here - complexity as a strategic tool in other settings.

Update 6/15/08: Ars tries to compare the iPhone cost to other 3G phones. Superficially it's comparable, but read the comments. Sprint (SERO, as above) and others offer many complex and "secret" options with deep discounts. So the iPhone list price is comparable to other 3G phones and services, but their prices may be deeply discounted.

2 comments:

sam said...

I wouldn't call using the SERO plan fraud, exactly - since any employee you ask about it will give you their email address. It's more like Sprint's way of giving fed up users who realize what a rip off cell plans are a way to get something more reasonable, while still milking every sucker for the regular priced plans.

I totally agree with you on the AT&T complexity thing, though. I have tried several times to understand my bill, and I can't for the life of me figure it out. Seriously, and I'm not a dumb guy.

Somehow my $45 plan always comes to just under $70 - and looking at the bill or calling AT&T only makes things more confusing. I admit that I have just accepted my fate of paying more because I don't want to face the fact that I'm too dumb to understand the bill.

I will tell you this - for some great tips on how to deal with AT&T, I highly recommend the latest issue of 2600 quarterly (Spring 2008 I believe). The article on AT&T in there already saved me $50.

John Gordon said...

I suppose since both Sprint and savvy customers understand the gimmick, it's more like a wink-wink side-arrangement than fraud.

I'll look for 2600 quarterly!