Saul Hansell suggests that hated U.S. cellular carrier practices such as text message markups and fee-packed contracts ultimately give American consumers what they really want: predictable bills. In pursuit of this we learn of the psychological "nuances" of pricing and the "supersized logic" of using fat overage fees to upsell customers to expensive all-you-can-eat plans. "This year," he writes, "the deals are becoming even better."His piece even claims that the industry would love to give up the adhesive contracts, early termination fees and locked-in subsidy handsets that it won't give up, even when threatened by congress.
Now all the carriers are selling heavily subsidized smartphones. They hate this state of affairs -- and wish that American consumers would just pay full price for the phones, the way people do in Europe.Hansell's evidence for this is the iPhone, which was "unsubsidized" when it was $600. It only dropped to $400 and then $200, he writes, when they moved to subsidies. He implies that the iPhone launch was initially unsuccessful and that this shows Americans won't buy contract-free phones: "Consumers balked at the high upfront cost. By the second generation of the iPhone, Apple reverted to a traditional subsidy model." For customers, however, the only practical option with the $600 U.S. iPhone was to activate it on the standard subsidy-payoff contract, with a compulsory data plan to boot. Whatever the unsubsidized payment arrangements between Apple and AT&T, the contract arrangements between AT&T and consumers always assumed a subsidy. In fact, my recollection is that AT&T itself wouldn't even sell you that "unsubsidized" iPhone without activating a 2-year contract on the spot. Buying one from the Apple store did not enforce activation, but everyday customers couldn't activate on other carriers (or on a pre-paid AT&T plan) without using warranty-busting hacks that emerged only later. In fact, AT&T didn't market a no-contract iPhone until March, 2009 -- for $600-$700 depending on model, more than the original iPhone model ever cost "full price." Throughout his piece, Hansell writes often of people's confusion. He claims that even economists find cellphone plans baffling. But they're not hard to understand except in the nickel-and-dime details. Hansell's repeated evocation of "confusion" is reminiscent of when characters in novels continually ask what's going on, or when they wake up in white rooms: it's because the writer himself doesn't know. Excepting the Yale professor whose words introduce the article, the people quoted in it are carrier flacks and cellular industry analysts: a fair sign of a piece tossed off inside a snowglobe of PR.