AT&T Contracts, Terms of Service and Plan Terms – observations of interest

I visited my local AT&T store today to confirm that AT&T iPhone pre-ordering is done. They’ll have some phones in store 6/24 for those keen to wait in line and be disappointed. You can still pre-order via Apple, but I’ll be on the road 7/14 so I’ll wait until late July to get my iPhone 4.

I took advantage of my AT&T visit to ask some staff questions. One of the odder things about AT&T is that, despite being evil even by publicly traded company standards, their staff are remarkably personable and fairly knowledgeable.

I had 4 questions. The last two are interesting.

1. Why did my bill jump $30?
   Answer: I added unlimited family texting at the start of a billing cycle, so “pay ahead” meant I paid for most of 2 months. Most mobile phone services are added with a 1 month pay ahead.
2. If I buy an iPhone 4 for my son, can I give my wife the iPhone 4 and give him her 3GS?
   Answer: They’re fine with that switch. He’ll get a new contract of course.
3. Can you validate that as of Nov 2009 a contract-free non-iPhone “smartphone” connected to AT&T network will trigger data plan enrollment?
   Answer: No – they disagreed. A non-contract smartphone added to the network will not trigger an automatic data plan enrollment [1]. The Nov 2009 contract change only brought non-iPhone smartphones in line with iPhone policy. If you buy one under contract your “service agreement” will mandate one of the new data plans ($15, $25, etc). This directly contradicts what I was told over the phone, but see the next question.
4. I’d like to see my current contract, terms of service etc and the new one I’ll get with my new phone.
   Answer: Duck, dodge, weave, cough, deer in the headlights, “it’s on the web site” ….

Asking to see a contract brought the manager over in a hurry. He acted like I’d asked to see his porn collection.

After a bit of work I ended up with an outdated (7/31/2009) Terms of Service document and a generic “Service Agreement” that seems to be a current “Terms of Service” document. He couldn’t come up with anything reflecting the 11/09 policy changes.

Here’s what I ended up thinking:

1. For AT&T a “contract” is an agreement to pay them money for services for a fixed duration. A multi-phone family plan has a single contract.
2. Customer obligations and fees are some kind of sum of 2-3 different agreements. Some are tied to a phone number, some to a “class” of subsidized phone, and some to the iPhone alone.
   • Terms of Service: Lays out the basic terms on how you can use the service. I think it’s determined by “class of phone” such as “dumb phone” and “smartphone”.
   • Service Agreement: Seems identical to the “Terms of Service” booklet – same headings and language. Google found the current copy of this Service Agreement.
   • Plan terms: At one time the iPhone had different Plan terms from other smartphones, but now I think they may be aligned. I think Plan terms are more or less under user control; that’s what you get when you add or remove things from the web site.
   • iPhone other: “If buying an iPhone, you agree that use of the iPhone acts as an acceptance of the Apple and third party terms and conditions included with the iPhone.”
3. The AT&T staff really do have trouble verbalizing how this all works. I used to think AT&T was treating their service agreements as corporate secrets, but they really are public. I now think it’s more a complexity problem -- especially due to the now passing iPhone exemptions (Note you still can’t unlock an iPhone when a contract ends [2] – it is the only AT&T phone that cannot ever be unlocked.) There are a lot of moving and changing parts that sum to the net user and phone specific agreement.
4. The confusion about what happens when you put “Standard” phone GSM in a “smartphone” is understandable. I don’t think either of the AT&T reps I spoke with really know what will happen. I tend to think this crew is more correct, but I wouldn’t bet on it.

There are a few noteworthy clauses in AT&T’s current generic service agreement:

Your Service Commitment begins on the day we activate your service. You have received certain benefits from us in exchange for any Service Commitment greater than one month. … If your Service Commitment includes the purchase of certain specified Equipment on or after June 1, 2010, the Early Termination Fee will be $325 minus $10 for each full month of your Service Commitment that you complete. (For a complete list of the specified Equipment, check www.att.com/equipmentETF). Otherwise, your Early Termination Fee will be $150 minus $4 for each full month of your Service Commitment that you complete...

The enhanced ETF is not iPhone specific, it also applies to the iPAQ Glisten (lord, that would burn!) and the Samsung “Jack”. Imagine the horror of paying that fee on an iPAQ Glisten.

I didn’t realize my non-AT&T roaming was potentially limited ….

… If your minutes of use (including unlimited services) on other carrier networks ("off-net usage") during any two consecutive months exceed your off-net usage allowance, AT&T may, at its option, terminate your service, deny your continued use of other carriers' coverage or change your plan to one imposing usage charges for off-net usage. Your off-net usage allowance is equal to the lesser of 750 minutes or 40% of the Anytime Minutes included with your plan. AT&T will provide notice that it intends to take any of the above actions, and you may terminate the agreement…

and I bet this clause means AT&T can cut off my Google Voice calls to Canada at any time [3] …

… Unlimited voice services are provided solely for live dialog between two individuals. Unlimited voice services may not be used for conference calling, call forwarding, monitoring services, data transmissions, transmission of broadcasts, transmission of recorded material, or other connections which do not consist of uninterrupted live dialog between two individuals. If AT&T finds that you are using an unlimited voice service offering for other than live dialog between two individuals, AT&T may, at its option terminate your service or change your plan to one with no unlimited usage components. AT&T will provide notice that it intends to take any of the above actions, and you may terminate the agreement.

Of course several phones do support conference calling, so they can’t enforce this one too often. They also have to give notice.

The bottom line is that mobile phone contracting is hideously complex. Apple tried to change that with iPhone 1.0, but they failed (I give them full credit for trying). I’d love to see an ambitious Attorney General take this topic on.

See also:

• Gordon's scale of corporate evil (AT&T is up there)
• John's head explodes: AT&T rebate paid with an AT&T debit card
• Head still exploding: The AT&T mobile phone rebate card scam
• Google good, AT&T and old FCC evil
• Mobile phone fraud - The accidental data charge and other scams (includes 10 mobile phone scams)
• AT&T is a partner to phone scams that target the vulnerable elderly
• AT&T sends more SMS Spam, locusts infest exec underwear
• Annals of idiocy - AT&T spams customers about a TV show
• A deal with the Devil: We move from Sprint to AT&T and towards an iPhone (I didn't realize HOW devilish!)

[1] Of course if data services are used it will incur massive charges, but that’s another matter. My son’s number is enrolled in a $5/month AT&T service that allows me to disable his AT&T network data access. There are also relatively painless hacks that do the same thing.

[2] I’d like to see the contract/agreement where this is documented. I wonder if that’s agreed to as part of the iPhone agreement: “If buying an iPhone, you agree that use of the iPhone acts as an acceptance of the Apple and third party terms and conditions included with the iPhone.”

[3] Actually, they can’t. With the original Google Voice service I called a number, which then rang my mother’s number in Montreal. Now I use their (crummy) iPhone web app, and they call me first. So I think the current arrangements skirts the current contract. Also, does this mean a Robocall to my mobile phone is a violation of my contract?

Update 7/25/10: Astoundingly, when I picked up my new iPhone I asked the question again -- and was told my son would definitely be enrolled in a data plan even though his phone is not under contract and has no subsidy and he'd be using a contract-free iPhone. In other words, exactly the opposite of what I was told a few weeks ago. I have a post pending with contract excerpts. I'll be filing a complaint with the MN state attorney general and with the offices of our federal Senators.

Barack Obama – better appreciate him while you can

The inestimable Gail Collins says it best (emphases mine):

…. We are frustrated, too, and it’s possible that Obama may never be able to give the speech that will make us feel better. He may never really lace into the oil companies or issue the kind of call to arms on energy that the environmentalists are yearning for.

That’s because it won’t get him anywhere. Unlike Bush, he has no national consensus to build upon. He’d barely finished his muted remarks on Tuesday before the House minority leader, John Boehner, accused him of exploiting the crisis “to impose a job-killing national energy tax** on struggling families and small business.” Michael Steele, the Republican Party chairman, claimed that the president was “manipulating this tragic national crisis for selfish political gain.” And the ever-popular Representative Michele Bachmann denounced the BP restitution fund as “redistribution of wealth” and “one more gateway for government control.”

As a political leader, Barack Obama seems to know what he’s doing. His unsatisfying call for a new energy policy sounded very much like the rhetoric on health care reform that used to drive Democrats nuts: open to all ideas, can’t afford inaction, if we can put a man on the moon. ... But at the end of that health care slog, he wound up with the groundbreaking law that had eluded his predecessors for decades. The process of wringing it out of Congress was so slow and oblique that even when it was over it was hard to appreciate what he’d won. But win he did.

Ironic. The man we elected because we hoped his feel-good campaign speeches might translate into achievement is actually a guy who is going to achieve, even if his presidential speeches leave us feeling blah.

We live in whitewater times (see Stross - 2008). There’s going to be crisis after crisis for years and decades to come. We can’t freak out every time we have a historic ecological, economic, social, climatic or geological catastrophe*. We need to deal with them, learn from them, try to prevent each class of catastrophe from recurring too soon.

America is entering the rapids in a GOP-vandalized kayak, and much of the nation has tuned out. There’s too much bad news, too much uncertainty. Some are so far gone they’re signing on to whacko political movements. As Collins writes, Obama “has no national consensus to build upon”. He has to find what’s possible.

Today Obama has extracted $20 billion of possible, a Ninja move that has left the GOP stunned and gasping. That counts for a lot more than a speech. Meanwhile the prospect of BP’s annihilation has concentrated minds in in the oil industry more than any amount of words and easily manipulated laws (not that we don’t need the rules and regs, but financial collapse impresses capitalists more).

We’ll never get another President this good. Better appreciate him while you can.

Oh, and the guy needs a vacation. We need to tell him to take a good one.

* Incidentally, I despised Bush and wanted him fired – but not for Katrina. There he showed only average incompetence.

** This is “cap and trade” aka “carbon tax in drag”. The GOP does well in southern states, maybe they figure it’s the temperature that helps.

Email domains in the non-geek world

There are 14 non-employer email addresses in my son's baseball team roster:

• AOL: 2
• Yahoo: 4
• Comcast: 4
• Hotmail/MSN: 3
• Gmail: 1 (me)

Not the domains geeks tend to think about!

Strongest sign of economic recovery

The mass flow "investor" is buying gold ... Worried About Their Dollars, More Are Turning to Gold - NYTimes.com.

Forget every other indicator. This one rules. The recovery is on.

Why dog haters should love prosecution of animal cruelty

Unsurprisingly, people who abuse animals are also dangerous to humans ...

The Animal-Cruelty Syndrome - NYTimes.com:

... significant reason for the increased attention to animal cruelty is a mounting body of evidence about the link between such acts and serious crimes of more narrowly human concern, including illegal firearms possession, drug trafficking, gambling, spousal and child abuse, rape and homicide...

... In his famous series of 1751 engravings, “The Four Stages of Cruelty,” William Hogarth traced the life path of the fictional Tom Nero: Stage 1 depicts Tom as a boy, torturing a dog; Stage 4 shows Tom’s body, fresh from the gallows where he was hanged for murder, being dissected in an anatomical theater. And animal cruelty has long been recognized as a signature pathology of the most serious violent offenders. As a boy, Jeffrey Dahmer impaled the heads of cats and dogs on sticks; Theodore Bundy, implicated in the murders of some three dozen people, told of watching his grandfather torture animals; David Berkowitz, the “Son of Sam,” poisoned his mother’s parakeet....

I am surprised this hasn't gotten more formal research attention attention in the past. Perhaps scholars assumed it was self-evident? Formal investigations are now confirming long held beliefs. That's good research -- not all long held beliefs are empirically supported.

Not everyone loves dogs and cats. Maybe they have something against brood parasites. Even so, these dog-dislikers have good reason to favor aggressive investigation and prosecution of animal cruelty. My dog is their canary.

Low vision iPad: Make the iPhone UI an option

I've been configuring an iPad for my low vision 80yo mother. It's not all it could be, but it's conceivable that it might work. One significant annoyance is that not all web UIs can be pinch-zoomed.

Ironically, unoptimized iPhone apps are an improvement over native iPad apps. Their UI is simple, and with a tap of a button they double size to fill the larger screen. Low vision users may wish to install an iPhone app version rather than the richer iPad app version.

Some vendors may bundle both iPhone and iPad UIs into a single package. If they do, it would be rather nice if they provided a settings option to use the iPhone version on the iPad...

What would make Krugman wrong about spending?

A few weeks ago I submitted a comment on Krugman's blog. I'm a fan, so it was intended to be a gracious question. I don't believe it ever appeared, but I suspect a technical problem more than rejection (lots of seriously obnoxious comments get routinely posted).

I asked Professor Krugman to invent a rational reason for reducing government spending and/or increasing interest rates.

Ok, so that is a bit of weird request. Krugman, after all, has been shredding the feeble arguments of economists (Sachs, etc) calling for deficit management in the teeth of the Great Recession and the zero-bound. He makes a persuasive case, based on the best of modern economics, that this is a time to spend for future growth.

And yet there is an emergent global consensus to reduce spending. How could that make sense?

That's the challenge. How could it make sense? Under what extraordinary conditions would it be right to be wrong?

Maybe there is no plausible rationale. Maybe it's all human nuttiness. Certainly we're prone to it. Maybe, but I've seen this sort of thing before. Sometimes mass movements are batty, but sometimes there is an emergent understanding -- even if it's only dimly sensed and not articulated. Sometimes all the raging arguments skirt that rationale -- because it's one that nobody dares express.

I wanted Paul Krugman to try to imagine what that rationale might be. Reading him today, I wonder if he's beginning to try... (Perhaps due to the influence of Brad DeLong, who I think is also trying this exercise. Emphasis mine.)

Strange Arguments For Higher Rates - Paul Krugman Blog - NYTimes.com

... My take on the current economic situation is quite simple, and I would have thought corresponds to standard economics. Right now, we clearly don’t have enough demand to make full use of the economy’s productive capacity. This means that the real interest rate is too high. And so the “natural” thing is for the real rate to fall. Yes, that would mean a negative real rate. So?

The trouble is that getting that negative real rate isn’t easy, because the nominal rate can’t go below zero [jg: zero bound], and there’s no easy way to create expected inflation. If you ask what would happen if prices were completely flexible, the answer, as I figured out long ago, is that prices would fall so far now that people would expect them to rise in the future, creating expected inflation. But prices aren’t that flexible, which is why we turn to quantitative easing, fiscal policy, and more.

Surely, though, we want to get rates as close to their appropriate level as possible — which means a zero nominal rate. There’s nothing “unnatural” about it. On the contrary, the “natural rate of interest”, as Wicksell defined it, is clearly negative right now.

So why does Rajan feel that there must be something wrong with low rates (and he’s not alone)? I think his language, with its odd moral tone, is the giveaway: it’s the sense that economic policy is supposed to involve being tough on people, not giving money away cheap.

I actually understand the seductiveness of that posture; I can sort of understand how economists succumb to it. But right now, with the world desperately in need of clear thinking, is no time to give in to the subtle allure of inflicting economic pain.

Well, I didn't say he was trying hard. Maybe he's just warming up.

So I'll give it a go. Maybe Brad can refine my speculations (I think they are his as well) and then ease Paul into thinking about this differently.

If classical economics works at all, then there may not be a rational reason to worry about deficits or raise interest rates. What if, however, we're in a world where classical economics doesn't work any more? Maybe in a normal laminar flow world we can use models and make predictions that don't work in a whitewater world where crazy things are everyday events that go almost unnoticed.

Maybe we've truly moved outside the bounds where the models work -- and we're going to stay there for a while.

Just consider the short list of possible disaster we need to dodge over the next decade. Iran could nuke Israel, and the Middle East would go down forever - along with the world's oil supplies. North Korea could go bonkers tomorrow. Pakistan is always on a precipice. China's bubble is going to blow -- maybe this month, maybe this year. Maybe we've run the American economic engine too hard, too fast, too long -- and the economy is really going to melt down. Maybe 'Peak Oil' really is five years away. Maybe the Atlantic warm currents really are unstable, or that Kurzweil was right and Aaronson and I are wrong.

It's quite a list really. I don't think we'll dodge them all, not to mention those I haven't listed (terrorist bioweapons etc). I'd bet money on China's bubble blowing for example, and, despite the current price and the impact of a crashing world economy, I'm still a Peak Oiler. (Though if China really fell hard Peak Oil would move out at least 5 years.)

These aren't the sorts of things scholars and leaders can come out and talk about. Obama can't go on Fox News and say -- "We need to keep our powder dry because we expect unemployment and US based terrorism to get worse, then China's economy will crater and we're going to have fight a really big war in Pakistan and we need to get ready for $8/gallon gasoline and ..."

Yeah, you see what I mean. That would not fly.

Let's assume that there's a lot of bad news ahead. News every bit as bad as the collapse of the US real estate market. If we assume that kind of trouble lies ahead, does it make sense to prepare for the worst now? Is that what people are unconsciously reacting to?

Update 6/14/2010: Here's a better example of why Krugman might be wrong. It's not a matter of economics, it's a matter of craziness. The US has lots of money, and lots of powerful whackos. (I do love the word "whacko" by the way -- it doesn't have the association with either mental illness or cognitive disability. Whackos are perfectly smart people with extraordinarily poor judgment.)

Update 6/15/2010: Another example. There are a lot of poorly understood constraint and linkages in our new financial world. It's somewhat remote from the world of actual work, and it demonstrates hysteresis -- it doesn't adjust quickly. What works in the world of logical economics may not work in this world. Also, my comment on Krugmans June 14 post has still not been published - there are only 19 comments posted. I don' think I've been blacklisted, but I do think it's pointless to comment on his blog.

The Afghan war - year 10

Kudos to Bob Herbert for actually paying attention to our soldiers in Afghanistan.

Bob Herbert - The Courage to Leave Afghanistan - NYTimes.com

.... What’s happening in Afghanistan is not only tragic, it’s embarrassing. The American troops will fight, but the Afghan troops who are supposed to be their allies are a lost cause. The government of President Hamid Karzai is breathtakingly corrupt and incompetent — and widely unpopular to boot. And now, as The Times’s Dexter Filkins is reporting, the erratic Mr. Karzai seems to be giving up hope that the U.S. can prevail in the war and is making nice with the Taliban.

There is no overall game plan, no real strategy or coherent goals, to guide the fighting of U.S. forces. It’s just a mind-numbing, soul-chilling, body-destroying slog, month after month, year after pointless year. The 18-year-olds fighting (and, increasingly, dying) in Afghanistan now were just 9 or 10 when the World Trade Center and Pentagon were attacked in 2001...

We may be in the all too common situation where, if there is any game plan, it's not one that can be spoken. For example, our game plan might be to divide Afghanistan into feudal baronies, and make each Baron responsible for their domain. Keep things quiet, or get a missile through the castle window. Not necessarily a bad idea, but not one that Obama can verbalize.

AT&T’s secret Nov 2009 mobile contract change – Elegant Evil

[Note - see the updates on this one. AT&T is falling victim to its own complexity.]

The Devil is usually an elegant gentleman. Makes sense, doesn’t it? There’s a certain elegance to the best devilishness. Tobacco industries once had that knack, but today AT&T excels.

I just learned of a small contract change AT&T made in November 2009 – eight months ago. It doesn’t impact us yet, but it will when we get our new phones and new contracts. It’s a beauty.

Before I explain what changed, let me describe what was once possible. I’ll use my son as an example – call him “John”.

John is on our family plan. We pay $10 a month for that. He had my old Nokia (out of contract), so he’s not on a subsidized phone contract. A neighbor gave him an old Samsung Blackjack (Windows Mobile); he likes the keypad so we switched SIM cards. No contract, no data plan.

Of course if he fired up a browser, on the old Nokia or the old WinMobile Blackjack the data would flow. Sprint allows customers to disable data flow on a browser-equipped phone, but AT&T does not. In this case John is enrolled in a “smart wireless” plan where I’ve set his data flow to zero (costs $5/month).

What we’d like, of course, is for him to have a phone with WiFi services – like my old iPhone. Similar to the the Blackjack, but data when WiFi is available. That’s what we were planning on.

Ok, now here’s where things get really evil.

If you have a post 11/09 contract, there’s fine print that says that if AT&T considers your phone a “smart phone”, it must have a data plan even if the phone is fully paid for and has no ongoing subsidy. If you put your SIM card in one of those phones, AT&T will detect it and automatically enroll the subscriber in a data plan. (Supposedly the least costly plan.)

A data plan, by the way, that’s pure profit for AT&T. The money is not being used to pay off a subsidized phone, and it’s not going to, say, Apple. It’s pure AT&T profit.

Old WiFi equipped smart phones (RIM, iPhone, some Samsung) etc just got a lot less valuable. If a customer is going to get dinged for data services anyway, why not get a new phone and a contract?

Wow. Philip Morris would be proud of AT&T. This is high grade evil. AT&T is still a master of the complexity attack.

See also:

• Gordon's scale of corporate evil (AT&T is up there)
• John's head explodes: AT&T rebate paid with an AT&T debit card
• Head still exploding: The AT&T mobile phone rebate card scam
• Google good, AT&T and old FCC evil
• Mobile phone fraud - The accidental data charge and other scams (includes 10 mobile phone scams)
• AT&T is a partner to phone scams that target the vulnerable elderly
• AT&T sends more SMS Spam, locusts infest exec underwear
• Annals of idiocy - AT&T spams customers about a TV show
• A deal with the Devil: We move from Sprint to AT&T and towards an iPhone (I didn't realize HOW devilish!)

Update: As noted in comments AT&T is catching up with Verizon, just as when they recently doubled or tripled the penalty for early contract termination. Those two are Scylla and Charybdis.

Update 6/11/10: It occurs to me that one of my state Senators is Al Franken, and that in Obama administration consumer protection isn’t a joke. I’ll write his office. Who knows, maybe he’s ready to take on the mobile phone companies (though he does have his hands full these days)…

Update 6/17/10: I ask the same question at an AT&T retail store and get a quite different answer (new contracts only).

Deepwater Horizon - what Obama should understand

I didn't think I had much to say about the Deepwater Horizon oil spill. My one insight was that Google could, as a public service, assemble a team to deploy disaster-specific search engines. Google librarians and researchers are well suited to continuously enhance a custom search engine that will facilitate research and discovery at the time of catastrophe. These future disaster search tools would be paired with custom Google Maps services.

I'm surprised Google hasn't done this yet. I hope they'll do it for all our many disasters to come.

That was my one insight -- until tonight. Now I have something to say to my (much appreciated) President.

I got the idea when Emily compared my personal stories of corporate euphemisms to BP's spin. In a forehead smacking moment I realized BP is probably no more or less clever than the vast publicly traded company I work for. That means that Obama's team is dealing with EVPs -- people whose great skill is the ability to thrive in the bowels of a typically dysfunctional publicly traded company. They can tell a good story, but they really don't know what's going on and they don't know they don't know.

There are likely engineers in BP who do know what's going on, but they've been locked away in dark rooms and surrounded by corporate security. They'll never be allowed contact with the outside world. Most of them aren't comfortable in that role anyway.

Too bad. Team Obama has to track these people down. They won't be VPs or EVPs. They're probably not even managers. They're individual contributors who've been at BP for ten years or more. They know what's going on. It might take the NSA and the CIA to track these people down, but it has to be done. They have to be dragged kicking and screaming from the bowels of BP. In softly lit rooms they can be slipped a few million dollars -- since once they talk they'll never work in the industry again. Then ply them with beer until they open up.

Take notes.

Safari Reader is sweet - my brain on computers

I visited this breathless NYT business article and clicked the Safari 5 "Reader" button ...

Your Brain on Computers - Attached to Technology and Paying a Price - NYTimes.com

Sweet. Great font, highly readable, multiple pages in one place. Much faster to read. No ads.

My brain on computers is faster than ever. (No comment on the article, it's not worth the bother.)

Update 6/9/10: Tyler Cowen has expressed my opinions on the NYT computer-brain article.

To be sure, I expect our tools (books, clocks, measurement devices) alter our brains and minds. Brains are what allow long lived organisms to adapt to rapidly changing environments, and computation is increasingly our environment. So we expect our brains to be altered. We also expect that in a new environment formerly maladaptive traits may become adaptive, and adaptive traits may become maladaptive. That's 2nd tier natural selection in action.

I'm unimpressed, however, with the quality of the research and even less impressed with the quality of the discussions.

I, Robot. The alternative to Foxconn.

Foxconn, a Taiwanese corporation, is giving its Chinese (mainland) workers 30% pay raises and it wants governments to take over its company towns (presumably they'll pay the rent?).

Sounds good. Some device prices will rise, some margins will be squeezed, Foxconn employees will have more disposable income.

Or maybe not ...

... The chairman of Foxconn, Terry Gou, told the Taipei shareholders’ meeting that the company was looking to shift some unspecified production from China to automated plants in Taiwan, Reuters reported..

The alternative to the Foxconn employee is the robot. Every year the robot gets cheaper. Every year Foxconn employees become more expensive.

Long ago, when China was still emerging from Emperor Mao, a Chinese-Canadian friend and I debated the future of China. He argued all manufacturing would go to China (where he lives now). I agreed, but then I said it would go to the robots.

It's going to go to the robots.

We are in the world of white water economics. In ten years the Great Recession may be remembered largely as the time we went over the waterfall ...

AT&T's new data plan - the bright side

As expected, AT&T has dropped their unlimited data plan. I love the Orwellian spin - "to Make Mobile Internet More Affordable to More People".

This appears to apply to all phones, not just the iPad/iPhone. They have also, as expected, introduced a tethering option. The tethering option is very limited however; it appears to have a 2GB limit.

So in the old days $30 got you unlimited data, but now $45 gets you data, tethering and a 2GB limit. Forget watching YouTube on the AT&T network.

There's no word yet on whether Apple will introduce some smart metering features to help track usage with OS 4. I hope they will. AT&T will send out text message notifications.

Everything about this announcement is exactly as expected -- including the fairly onerous pricing with tethering (I'd have been very impressed if they'd gone to tiered data plans and made the tethering free -- it's just data. This is AT&T however.)

So what's the bright side?

AT&T has been selling capacity they didn't have. I'd love to see a zillion dollar fraud prosecution. Now, finally, that stops. They will be aligning their pricing with their network capacity. There's now hope, for the first time, that we'll get reasonable voice service on the iPhone.

It's also good that we have more price transparency -- we are more likely to get what we pay for, and see what it costs. If we don't like the price we can .... ummm ..... uhhhh .. stop watching videos on the AT&T network. (Note VOIP services use far less bandwidth than video. I wonder about dropping our family plan to the rock bottom minimum and using Skype to call Canada. I tried their online usage calculator, and, as expected, with no video use, I still need the $25 plan.)

Overall, this is good. Painful, but good. Now about my share of the class action lawsuit for AT&T's fraudulent overselling of their capacity ...

Update: AT&T's tethering pricing is pretty nasty, but there's some good news on pricing details that resemble the iPad 3G plan:

... AT&T has also overhauled their data overage structure, giving DataPlus subscribers and additional 200MB as needed for $15, while DataPro users get extra data at $10 a gigabyte... if you’re either over-using or under-using your plan, AT&T’s going to be extremely flexible about letting switch back and forth between DataPlus and DataPro. You can call and have your plan changed at the next billing cycle, have it prorated immediately, or - hold on to your seats - have the plan retroactively applied to the entire current billing cycle...

The $10/GB rate makes the tethering more practical. Definitely more complex, but I wouldn't be surprised if AT&T's accounting system can't support a finer grained process. If Apple bundles a good metering app with OS 4 this new plan would be an improvement for my family. (I wonder if Apple/AT&T will consider selling an iPhone without a data plan ...)

Also, there's rumor that AT&T has said that current users can keep unlimited data when they get a new phone and new contract. I find that hard to believe.

Update 6/10/2010: The new contracts come with a secret 8 month old catch. Ohhhh, AT&T is evil-incarnate.

Memphis mortgages, complexity attacks and long term consequences

Times are bad in the subprime mortgage neighborhoods of Memphis, home to recession wracked FedEx...

The black men and women interviewed by the NYT seem remarkably stoic about it all. Two aspects of one story caught my attention ...

... To turn into Tyrone Banks’s subdivision in Hickory Ridge is to find his dream in seeming bloom. Stone lions guard his door, the bushes are trimmed and a freshly waxed sport utility vehicle sits in his driveway.

For years, Mr. Banks was assiduous about paying down his debt: he stayed two months ahead on his mortgage, and he helped pay off his mother’s mortgage.

Two years ago, his doorbell rang, and two men from Wells Fargo offered to consolidate his consumer loans into a low-cost mortgage.

“I thought, ‘This is great! ’ ” Mr. Banks says. “When you have four kids, college expenses, you look for any savings.”

What those men did not tell Mr. Banks, he says (and Ms. Thomas, who studied his case, confirms), is that his new mortgage had an adjustable rate. When it reset last year, his payment jumped to $1,700 from $1,200.

Months later, he ruptured his Achilles tendon playing basketball*, hindering his work as a janitor. And he lost his job at FedEx. Now foreclosure looms....

Mr. Banks leveraged the real estate bubble to pay off the costs of the the higher education bubble. The real estate bubble burst, leaving him underwater. Now the higher education bubble is bursting, leaving him with high tuition loans for a product of declining value.

Harsh.

We might ask, however, how the heck Mr. Banks didn't realize he'd changed to an adjustable rate mortgage. I can't tell from the brief story, but I suspect that minor detail was omitted from the phone sales spiel. Later, when he signed the papers, he might have spotted it -- but by then he was well along the commitment path. It can be hard to back out then.

I'm betting he fell victim to a form of complexity attack, the same form of emergent fraud that defeated my family when assessing our health insurance options [2]. The resources of banks, mobile service providers and insurance companies ensure information asymmetry -- they can play the game much better than we can.

Complexity attacks have obvious direct costs to the "Marks" (which, in the GR, was most everyone). They also have less obvious long term effects that may be underappreciated.

Once buyers become aware of complexity attacks, they become far less trusting. Modern markets run on trust; when trust is lost markets suffer. Our bank recently hounded us to sign up for a lower fixed rate mortgage that should save us tens of thousands of dollars. As best we can tell this is motivated by a federal program; they need us in a bundle they can sell to the feds (we're "low risk"). It seems a no-brainer, but we delayed our decision because of deep distrust. Finally, when the Euro crisis dropped rates even further, we signed up [3]. We still wonder what the catch is.

The Great Recession will linger for a very long time. That is ... assuming it's really over ...

[1] If he was taking a quinolone at the time he might want to sign up with one of the class action suits.
[2] My brightness might be debatable, but I know some brilliant folk. None of the very smartest claim to understand our coprorate health insurance options.
[3] The bank wanted us to commit over the phone lest we lose the "incredibly low rates". We refused of course, which was easy since we know Greece isn't getting better any time soon. When we got the paper work it was remarkably clear and simple -- far more straightforward than the near-market-peak paperwork we completed when our home was rather more expensive than it is now.

Update 6/30/10: I wrote about our "no-brainer" refinance option. Even though it seemed simple, we were suspicious. Justifiably as it turned out. After our initial paperwork we received much more, then they bungled a prepayment of ours, then they stopped returning calls. Based on their recent share price, I'm guessing their coming apart. So we may still refinance, but probably with a different bank.

From the archives - Sanford Weill before and after the crash

Before the Great Recession, times were good for some. No, not like Clinton's glory days of 1995 or so -- those times were good for most everyone. From Bush's 2004 to 2007 the times were good for the very rich.

Back then The Economist was launching a "lifestyle magazine" (it failed) and William McGuire of UnitedHealth Group had just received a $125 million paycheck. In those days the NYT wrote a paeon to Citigroup's Sanford Weill (which I just found in my archives, hence this post). It makes quite interesting reading now (emphases mine). In those days Citi traded for $55 a share. In Jan 2010 it was $3 a share ...

The Richest of the Rich, Proud of a New Gilded Age - New York Times July 15, 2007

By LOUIS UCHITELLE

The tributes to Sanford I. Weill line the walls of the carpeted hallway that leads to his skyscraper office, with its panoramic view of Central Park. A dozen framed magazine covers, their colors as vivid as an Andy Warhol painting, are the most arresting. Each heralds Mr. Weill’s genius in assembling Citigroup into the most powerful financial institution since the House of Morgan a century ago.

His achievement required political clout, and that, too, is on display. Soon after he formed Citigroup, Congress repealed a Depression-era law that prohibited goliaths like the one Mr. Weill had just put together anyway, combining commercial and investment banking, insurance and stock brokerage operations. A trophy from the victory — a pen that President Bill Clinton used to sign the repeal — hangs, framed, near the magazine covers...

That repealed Depression-era law was Glass-Steagall. The law designed to prevent the crash of 2007 and the subsequent the Great Recession. To continue ...

These days, Mr. Weill and many of the nation’s very wealthy chief executives, entrepreneurs and financiers echo an earlier era — the Gilded Age before World War I — when powerful enterprises, dominated by men who grew immensely rich, ushered in the industrialization of the United States. The new titans often see themselves as pillars of a similarly prosperous and expansive age, one in which their successes and their philanthropy have made government less important than it once was.

“People can look at the last 25 years and say this is an incredibly unique period of time,” Mr. Weill said. “We didn’t rely on somebody else to build what we built, and we shouldn’t rely on somebody else to provide all the services our society needs.”

Cough. Yes, we bailed out Citigroup.

... Only twice before over the last century has 5 percent of the national income gone to families in the upper one-one-hundredth of a percent of the income distribution — currently, the almost 15,000 families with incomes of $9.5 million or more a year, according to an analysis of tax returns by the economists Emmanuel Saez at the University of California, Berkeley and Thomas Piketty at the Paris School of Economics.

Such concentration at the very top occurred in 1915 and 1916, as the Gilded Age was ending, and again briefly in the late 1920s, before the stock market crash. Now it is back, and Mr. Weill is prominent among the new titans. His net worth exceeds $1 billion, not counting the $500 million he says he has already given away, in the open-handed style of Andrew Carnegie and the other great philanthropists of the earlier age...

The NYT returned to Mr Weill after the Crash ...

Citi’s Creator, Sandy Weill, Alone With His Regrets - NYTimes.com Jan 2010

THIS is my final annual meeting as chairman,” says Sandy Weill, standing near the window of his office, peering at a grainy photograph of him and his wife on stage at Carnegie Hall more than three years ago. They are smiling broadly, and behind them is a packed house of cheering Citigroup shareholders. A huge banner dangling from the balcony reads “Thank You Sandy.”

On that day, April 18, 2006, Citi’s share price was $48.48. After studying the photo for a few moments, Mr. Weill says quietly, “I thought the company was impregnable.”...

... Over the last two years, Mr. Weill has watched Citi — a company he built brick by brick during the final act of a 50-year career — nearly fall apart. Although every taxpayer in the country has paid for Citi’s outsize mistakes, for Mr. Weill the bank’s myriad woes are a commentary on his life’s work.

.... Mr. Weill’s legacy has taken on a darker hue. Though he was once viewed as a brilliant dealmaker, some critics now cast him as the architect of a shoddily constructed, unmanageable financial supermarket whose troubles have sideswiped investors, employees and average citizens nationwide.

“The dream, the mirage has always been the global supermarket, but the reality is that it was a shopping mall,” says Chris Whalen, editor of The Institutional Risk Analyst, of Citi’s evolution over the last decade. “You can talk about synergies all day long. It never happened.”

Citi’s troubles are well chronicled: a failure to integrate its disparate parts worldwide or to keep tabs on risky investments and free-wheeling operations. These lapses led to billions of dollars in losses and multiple bailouts, and the government now owns a quarter of the company. Citi’s shares fell from a high of $55.12 in 2007 to about a dollar early last spring, and now trade at $3.31....

... Sitting in his office on the 46th floor of the General Motors building in Manhattan, he is surrounded by reminders of a lifetime on Wall Street. The space is breathtaking with floor-to-ceiling windows and views stretching out over Central Park. One wall is devoted to framed magazine and newspaper articles chronicling his career. A Fortune magazine clipping from 2001 declares Citi one of its “10 Most Admired Companies.”

On another wall hangs a hunk of wood — at least 4 feet wide — etched with his portrait and the words “The Shatterer of Glass-Steagall.” The memento is a reference to the repeal in 1999 of Depression-era legislation; the repeal overturned core financial regulations, allowed for the creation of Citi and helped feed the Wall Street boom...

Remember this story next time you read the praises of the Captains of Industry.