Overage Fees Are Good For You, Says the Wireless Industry

By  |  Tuesday, March 8, 2011 at 12:40 pm

Call me crazy, but I almost believed a study on “bill shock” that landed in my inbox today, despite being commissioned by the Wireless Communications Association International trade group.

Bill shock refers to the high charges that occur when you use more cell phone minutes than your plan allows. According to the study, conducted by Recon Analytics and based on a Nielsen Company survey, only 0.3 percent of U.S. wireless customers would be better off moving to a bigger bundle of minutes — totaling $120 or $240 per year depending on carrier — instead of paying occasional overage charges.

I agree that most people who pay an occasional overage are better off that way, but here’s where things get silly: The study concludes that because overage charges are beneficial to most people, the FCC shouldn’t enact safeguards against bill shock, such as notifying customers when they’re about to exceed their monthly limit of minutes. If you read the actual study, this is a logical leap based on conjecture.

The study says that customers who typically exceed their allotment of minutes do so of their own volition:

“For accounts that repeatedly go into overage, it is reasonable to infer that it is a matter of consumer choice. These customers are either indifferent to overages or are making the deliberate decision to incur overages because it is the most cost-efficient solution for their usage patterns.”

Well, no. There’s also the possibility that the consumer would like to curtail usage but lacks the appropriate tools, such as a text message notification when minutes are running out. After all, the average customer who pays a 45-cent per minute overage every month has only talked for 55 minutes beyond his or her monthly limit (based on a $24.80 median monthly charge). That could be a single conversation, so is the study assuming that customers are cognizant of their remaining minutes every time the phone rings?

In any case, this argument distracts from the main issue, that some people are shocked to see overage charges of $100 or more on their monthly bills. The study tries to explain this away by saying it’s a rare occurrence, and that carriers will often credit customers back when the charges are excessive, but the study offers no clear argument for why notifying customers of overages is an outright bad idea.

Instead, it concludes with this vague premonition:

“It would be an unfortunate unintended consequence if FCC policy actually reduced the amount of consumer choice and flexibility in rate plans and overage notifications by prescribing a one-size fits all approach”

Consequence for whom? Unfortunately, the study doesn’t spell out how bill shock safeguards would hurt customers or take away their choices. It only falls back on the argument that most customers already make smart decisions, and therefore don’t need any additional assistance. That’s a weak argument to begin with — more knowledge is always better — and one that I hope the FCC doesn’t spend much time entertaining.

 
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10 Comments For This Post

  1. Cathy Says:

    My niece recently ran up an $800 phone bill. I think that her mother would have appreciated some notice. She might have avoided the cardiac incident when she opened the bill!

  2. Paul Says:

    I've always found that strange: paying for an incoming call. Here in Europe you only pay for outgoing calls (when you are in the country where you have your contract, that is). I only realized the difference when I read "…so is the study assuming that customers are cognizant of their remaining minutes every time the phone rings…".

  3. Bouke Timbermont Says:

    @Paul Is it everywhere in Europe? I know it's like that in Belgium, but I thought we were an exception… Anyway: here it is indeed forbidden to be charged for any incoming text messages or calls.

    It always baffles me how operators publicly make this kind of stupid arguments for their own money-grabbing tactics. Netneutrality would be limiting freedom of speech, warning consumers would be bad for them, and opening networks would be bad for competition (that last one was a reference to the Belgian owner of the cable-network refusing to open up their network to other ISPs).
    Is anyone actually ever really falling for these venomous, money-grabbing thieves with their worst arguments of all time?

  4. Paul Says:

    [quote]Is anyone actually ever really falling for these venomous, money-grabbing thieves with their worst arguments of all time? [/quote]
    Sadly, yes.

  5. @mggardner Says:

    All you need in order to understand such logic is to realize the amount of money flowing UNDER the conference table.

  6. Brandon Backlin Says:

    So fees are good for us and good for them? Well then I'm satisfied! Everyone's getting what they want…

    [/sarcasm]

  7. Rob Says:

    “There’s also the possibility that the consumer would like to curtail usage but lacks the appropriate tools, such as a text message notification when minutes are running out.”

    That assumes the consumer has text messaging and would read such a text during the long call that is accruing overage charges. However, the assumption in the study quote preceding the above was respecting consumers that consistently exceeded their minutes. Clearly, such consumers are blindly paying large bills, can’t be bothered or are unable to make an educated decision about upgrading their plan, or have consciously accepted the situation.

    The ideal would be a continuous display of minutes available and used, or at least access to such a display from the phone’s menu. Furthermore, a phone should have an option to alert the owner, through some selectable tone, when overage charges have begun. For some companies, that information is available online, but that requires a computer or web-enabled smartphone, and still only helps when checked proactively.

  8. pantospanto Says:

    lol, OK if they say so it must be so.
    http://www.privacy-tools.cz.tc

  9. The_Heraclitus Says:

    It is irrelevant what it costs them. They don't exist to give you stuff at cost. Now, if you think you can do better, get with like minded people and start your own wireless carrier.

    Well?

  10. GirlyApple Says:

    Yes, wireless fees are good for me. HUH????? I actually use straight talk now because I was sick of the high bills every month and these lovely "surprises" so I pay $45 a month for unlimited talk text and data that's it ever. No more overages and no contract either. I hope more people switch to prepaid and send these big cell phone carriers a strong message.