On walkabout in life and technology

Adjusting the Cap

Alex Knight, writing in his own blog Zero Distraction in The Disparity between Smartphones And Mobile Carriers sets the scene exactly as I see it:

There’s a massive disparity between data sucking smartphones and data plans offered by carriers. Customers know this, and the carriers are fully cognizant of it. The problem is they make a ton of money from you already, and since you probably don’t have a lot of choice as far as competition is concerned, they can charge whatever they see fit.

Then, in my opinion, he gets too optimistic:

The larger, and perhaps more onerous question is this: when will carriers come around and open up their data caps to a reasonable degree? I’m not one to argue that carriers need offer truly unlimited data plans, however, I posit that if they were to offer dramatically higher monthly caps, they might be able to attract new customers — not to mention keep existing ones happier, all whilst charging them a more reasonable rate.

I humbly disagree and this is why.

The utter lack of competition on the US mobile market means that all mobile providers generally offer the same ridiculous plans, even for fast LTE coverage. They are not willing to start a price-war with each other, because they are all making mountains of cash where they are.

The second issue is that the average mobile user is locked into a 2-year plan, and has to burn hundreds of dollars in penalty fees if they try to exit it. So even if the price-war happens, if another carrier does decide to raise their cap or offer a better deal, only the few smartphone users who are at the end of their contracts can take advantage of the offer.

Thirdly, carriers change their plans and caps regularly. The subscriber contract and massive ‘donations’ to the FCC ensure that consumers have no say when this happens, they are forcibly moved to the new plan. Since the carriers have traditionally raised prices, changed contract terms and lowered caps (or added them in the case of unlimited plans), consumers do not trust what they say or advertise. If another carrier offers a better deal, and a consumer signs up, what’s to say that that carrier will keep the deal. It’s not in the carrier’s interest to do so as the new consumer is now locked in for 2 years. In short, consumers do not trust the carriers at their word, and carriers keep changing the game.

Finally, when it comes to consumer satisfaction, the carriers don’t give a hoot. Every year they rank at the bottom of customer satisfaction surveys, and have done nothing so far to change this. They are not in the business of selling satisfaction, they are in the business to make money. They have a huge number of locked in customers (no need to spend a penny making them happier), and the percentage that can leave, have nowhere to go, so they stay. No need to spend a penny trying to hold on to them either.

I believe that the carriers will maintain their caps as long as they can in order to generate more mountains of cash. They have no incentive to do otherwise. And I don’t expect the consumer or the government to have the ability to change this in the near future.