Tuesday, June 19, 2012

Billing Line Items in Telecom and Other Industries


          In a previous blog entry, I questioned why wireless carriers allow sharing of voice minutes with no additional charge for multiple handsets, but new data sharing plans add surcharges for each additional device.  Subscribers incur no recurring fees for multiple device access to voice minutes even though carriers incur higher signaling costs when additional devices are on, even if they are not being used.  Carriers similarly incur such costs for smartphones, and I have seen no evidence that the costs are higher for data than voice.
            So why the difference?  As best I can determine the answer is that consumers have become inured to billing line item expansion.  We see it everywhere: airfares, mortgages, car purchases and even car repair.  I will not do business with auto repair facilities that tack on an additional 10% “shop fee” to the bill, but I seem to stand alone.

            What ever happened to companies having to absorb overhead?  Instead we get nickled and dimed by additional line items that make no sense: “adjusted dealer markup,” “shipping and handling,” “dealer prep,” “regulatory fee,” etc.
            Wireless carriers can charge for multiple device access, because they can praddle on about how multiple devices increase signaling and polling costs.  The carriers had to absorb such overhead for voice, perhaps because of a real or perceived need to enhance the value proposition of their service.  As the Internet diversifies and offers ever increasing options and utility, wireless carriers can capture greater profits simply by providing the essential first and last link.

            Bottom line: wireless carriers are in an increasingly better position to raise monthly subscription costs while reducing the amount of handset subsidies.

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