Wireless Operators Taking Pointers from Airlines?
05.16.2012 by Robert C. Chapin
I’ve yet to get a bill from Exxon Mobile asking me to pay an upgrade fee if I switch from regular to premium.
Verizon Wireless’ recent announcement that it will join the other major wireless operators in implementing upgrade fees to current subscribers got me thinking. The upgrades charged by AT&T, Sprint, T-Mobile, and now Verizon are targeted at existing subscribers who have fulfilled their contract commitments. These existing, and probably loyal, customers wish to upgrade to newer, more sophisticated phones. We’re talking smartphones that in most cases require additional data service fees that can generate significant increases in ARPU for the operators.
The operators defend these fees by pointing to the increased cost of the devices and their inability to bear the cost of additional subsidies. Yep. The devices are becoming more expensive. So is the price of gasoline at the pump. But I’ve yet to get a bill from Exxon Mobile asking me to pay an upgrade fee if I switch from regular to premium. There is no mention of how much more it costs to provide that upgraded octane, it simply adds the upgrade cost to the price per gallon.
Operators also claim there is an additional cost to provide sufficient customer support for those purchasing smartphones. Yep. There probably is, at least for some customers, but not all subscribers. The more technically savvy users can handle their own setup. In my personal experience, the only issues I’ve had with setting up my smartphones have been software related when the device was released before the vendor and network operator were in sync and the device and software were not quite ready for primetime. Covering the cost of training and support for new users has been handled quite effectively by the computer industry. It provides various levels of technical support – for an optional fee. Solutions range from short windows of free tech support to multi-year contracts. Customers pay to play.
A recently published PwC survey of trends in the North American Wireless Industry indicates “on average, 46 percent of subscribers are on family plans in 2011.” This means it is not easy, convenient, or economical for loyal customers to go elsewhere for a better deal on a new smartphone and they will most likely stay with their current network.
It is understandable that operators should charge data hogs extra for clogging their networks and causing disruptions in service to other users. It is understandable that operators should charge for enhanced applications that make users’ lives easier and more productive. But is it reasonable to charge subscribers who merely want to take advantage of the newer technologies and enhanced services being offered by the operators a fee to upgrade? Or is it reasonable to do so given the understanding that upgraded phones will result in enhanced revenue to the wireless operator? Does it make sense to initiate a revenue source that will be perceived by customers with the same distain as the irritating itemized fees the airline industry now implements? What’s next? Incremental charges for customer care phone calls? Higher rates to contact customer care over your mobile as opposed to a landline?
Wireless network operators need to meet their investors’ demands for increased stock value, and they need to grow their individual businesses in a commodity market. But they must take into consideration the opinions of their customers and manage their businesses in a customer-friendly manner. My eyeballs already roll when I see my phone bill for our family. Being hit with another “fee” will not be warmly received. Why not simply add the extra $18, $30, or $36 amortized over the normal 24-month contract? Frankly, I wouldn’t even notice an extra $1.50 in the monthly service fee given the plethora of line items currently on my 9-page bill.
U.S. operators are very successful in generating data revenue compared with many other global operators. They should package their offerings so they do not bite the hand that feeds them and avoid negative publicity such as that airline carriers have brought upon themselves.