Monday, July 6, 2009

Wireless Carriers the Great Train Robbers of this Millenia

I generally avoid chiming in with the whole "AT&T Sucks" chorus. Over the last fifteen years, I've had five different wireless carriers, and though AT&T isn't the best, they are far from the worst (which was MCI/WorldCom if you were wondering). They all suck, but some suck more than others and it's not like we have much in the way of options. We're a captive audience (especially iPhone users), so just like how you pay more for food at a baseball stadium or in a theme park, I actually expect to get gouged some for having an iPhone. I don't like it, but there's no sense pissing in the wind. If I hate them too much, I always have the option of choosing another phone. I don't hate them nearly that much.

But, I got my first bill since upgrading to the 3Gs, though, and found a few surprises and a few things I didn't understand in my bill, so I called AT&T for clarification.

Now, it appears that there were no mistakes in my bill, and the customer support representative was very nice and really was trying to help me out, but I kept finding the explanations about what things were kind of vague and just not clear to me. I didn't want to be a jerk to the lady on the phone, but I just wanted a clear explanation of the "Other Charges/Deductions" line items and kept asking her to lay them out in plain english rather than reading the intentionally vague explanation from her script.

There were, for example, these things called "Regulatory Cost Recovery Fee" and "Federal Universal Service Charge", which prompted the question from me "why aren't these under the section for surcharges and taxes.

The response was that these aren't mandated fees. These aren't required by any state or federal body at all. These represent money that stays in AT&T's coffers.

So, what are they?

In a nutshell? They are amounts that AT&T, in their sole discretion, is allowed to tack on to the bill to defray the cost of certain things. The "Regulatory Cost Recovery Fee", for example, is a fee they tack on to defray the expense of complying with state and federal regulations. The "Federal Universal Service Charge" is one they tack on to help with the cost of maintaining cell towers and other infrastructure.

Now, there's no documentation about exactly what costs are being defrayed and, as far as I can tell, not much accountability to the consumer on these. Sure, there are regulations about what they can include in these items, but there doesn't seem to be a requirement that they itemize or explain the charge, or how they arrived at the amount, to the consumer. Basically, these line items can be used to arbitrarily and randomly increase their income. If you multiply those charges (over $5 for me this month) by the millions of customers, it comes out to a fairly substantial amount of money.

This irks me in the same way that "fuel surcharge" by an airline or package delivery service or an "airport recovery fee" from a rental car does. Complying with federal regulations, fuel, and leasing space in an airport are all fucking operating expenses. They should be factored into the price of the product or service, not tacked on after you've agreed to the purchase based on the artificially low price that doesn't include random operating costs. When you hide the true cost in "recovery fees" and "surcharges", you make it impossible for the consumer to know what their actual real bill will be and impossible to intelligently compare competing products or services.

Wouldn't it be nice if you could do this with your paycheck? "Hey, Boss? Yeah, the head gasket on my car blew this month, you have to pay me extra this month as an 'Employee Transportation Recovery Cost'."

So, let me just break from tradition and chime in with one big "Fuck You, AT&T" to make myself feel better. The second the iPhone is available from another carrier in the U.S., I am kicking their ass to the curb. The next carrier may not be any better, but maybe if there's a mass exodus from AT&T when the iPhone is no longer exclusive they will consider changing their ways. Not likely, but the power to take our money elsewhere is the only power a consumer really has.

And now that I've said that, let me take a step back and say that AT&T is not the real culprit here. If you give a corporation the option of tacking on an additional fee that doesn't have to be advertised in the cost of their product or service or explained to the customer, they will use it, and almost certainly at times abuse it. Corporations are soulless entities that exist for a single reason: to make a profit. Individuals are motivated by other intangible things, such as "pride in craftsmanship" and "common decency", but those things are meaningless to a large corporation.

The real problem is the incompetent and mostly unnecessary FCC, which has become little more than Big Business's bitch. It's certainly not responsive to the taxpayers, but it is responsive to the big media and communication corporations. Sure, they occasionally waste taxpayer money "guarding the airways" against anything that might offend small-minded people in middle America, but their real mandate seems to be to help big media corporations make more money at the expense of the people who pay taxes to fund them. If the FCC's regulations were really designed to help the consumer, wireless providers would be forced to have a pricing model without inherent surprises and without intentionally planned nooks and crannies specifically designed to let the carriers steal extra profit. If you made a contract with a wireless carrier for $50 a month, you'd pay $50 a month plus, maybe, sales tax.

But, rather than say "Fuck you, FCC" in my own crass way, I'll let the far more eloquent Eric Idle say it in a moderately dated, but still very funny way:


Mostly Torn said...

Well said, Jeff! I'm with you - I'll be eager to drop AT&T when the iPhone is available on other carriers.

warmi said...

"If you give a corporation the option of tacking on an additional fee that doesn't have to be advertised in the cost of their product or service or explained to the customer, they will use it, and almost certainly at times abuse it."

Are you suggesting a government agency should read the fine print for you ?
These companies are already required to disclose all that stuff - it is just that people don't bother reading it in the first place and then come back crying for more regulations.

The truth is no agency will be able to take over what is really your responsbility.

Stephan said...

I think the real problem is that these companies are corporations whose goal is to increase shareholder value, which is at odds with the company has to do for its customers.

We don't think of the water and electric companies trying to "monetize their value stream" but they did try for a long time. Just look at the history of the toaster, electric companies were hyping them as the "it" thing to have, and giving them to banks so they can give them away to customers for opening an account, and so on.

When it a group becomes large enough to be able to throw money around in DC it becomes too big to fail. DC likes big because they can deal with big which means less things to deal with. DC is just lazy.

There needs to be a new organizational category besides for-profit and non-profit corporation that these utilities can become. It needs not to be all about the shareholders as such but more about up-time and coverage.

Jeff LaMarche said...

Are you suggesting a government agency should read the fine print for you ?


I can't imagine any way to read my words that would say or imply this. Please don't put words into my mouth.

These particular surcharges are specifically authorized by the FCC in a heavily regulated industry. These are intentional loopholes added to the law specifically to allow the telecom companies to charge additional money not specifically covered in the contract, meaning they don't have to advertise them or disclose them in advance. These regulations also mean that they don't have to include terms in the contract about these particular charges at all, so reading the contract isn't even part of the equation.

These surcharges are essentially the same end result as a contract clause that said "you agree to pay x dollars, but we reserve the right, at our sole discretion, tack on any extra charges that we see fit and we don't have to disclose to you what we're charging you for or itemize the charges or give you advance notice of the charges or notice of changes to those charges".

Except, if there were no regulatory body and yoput something like that in a legal contract, it would be deemed illusory and make your contract completely unenforceable. Contract law is designed to create equitable situations. These regulations are designed to favor one side.

I am not suggesting that any government agency should do anything for me or for anyone. What I'm suggesting is that if they are going to regulate an industry, that they do it in a straightforward and fair manner. Nothing more.

Frankly, I'd just as soon the FCC did nothing more than dole out bandwidth in a fair way. But the fact is that they are a regulatory body that has been unduly influenced by corporate media interests and they are actively passing regulations that allow these companies to do things they couldn't do if it were left to regular common law or state contract law and that's not right.

Jeff LaMarche said...


Frankly, eliminating corporate personhood would be a good start. A corporation isn't a person, it shouldn't be treated as one for legal purposes.

But I agree with you about Corporations being the root of the problem if you trace it back far enough. Absolutely. In this specific instance, corporate lobbying is what allowed the situation to evolve like this - to take an entity that was supposed to regulate the industry and prevent abuse, and instead sanction the abuse by putting the imprimatur of the Federal government on that abuse.

Yury said...

The Freaking FCC

Jeff LaMarche said...


Hah... "trouser friendly kiss" - that's a riot. Never saw that one.

warmi said...

"Frankly, I'd just as soon the FCC did nothing more than dole out bandwidth in a fair way."

I am in complete agreement here. Heavily regulated industries always end up spending more time courting favours with various regulators rather than trying to satisfy their customers.

Unless you renounce the concept of free market altogether, there is no point trying to change the natural profit-seeking behavior of these entities.
The only thing you can do is to attempt to channel their efforts into working towards making better products, and the way to do it is not thru creating additional layers of government bureaucracies ( the way Obama seems to be going) but to remove the incentive to invest in Washington power centers in the first place.
There is nothing unnatural about corporations spending so much money in Washington … they do that because at this point this sort of investment tends to be more profitable than trying to compete in the market, and creating new layers of regulations will only make it worse because it will concentrate even more power in the hands of politicians and it will make even more profitable to spend your money in Washington.

Jeff LaMarche said...

Unless you renounce the concept of free market altogether, there is no point trying to change the natural profit-seeking behavior of these entities.

I am not. But, here's the thing: it's a regulated industry. Telecom is not a "free market" and arguing free market principles in a captive market is somewhat missing the point. Another company can't just come along and compete. It's a closed ecosystem with huge barriers to entry, and almost all of those barriers to entry are artificial. There is plenty of spectrum to allow other competitors, but it benefits the existing corporations to keep competition out, so one of the ways they've manipulated the system is to keep more competition out. It's absolutely not a free market. I'd be thrilled if it were a free market because the wireless companies would be a hell of a lot more responsive to their customers.

I'm not suggesting that we get rid of the profit motive. I suggest that we not allow regulations designed to prevent abusive practices be used to actually facilitate abusive practices. Any system should have enough checks and balances built into it that it can not be easily bought or subverted. Although the system put into place by the founders of our country wasn't perfect, it did get a lot of things right, and there's absolutely nothing in that system to account for Federal agencies that are capable of creating regulations with the full force and effect of law. That right was strictly reserved to the legislative branch, yet here we have the FCC, EPA, and other agencies. making laws completely outside of the legislative process. They can fine you and even send you to jail for breaking these regulations. And do you know who sits in judgment on those? Not members of the judicial branch in most cases. Not "judges", but "judge advocates" who are also employees of the executive branch. Judge, jury, executioner all in one branch. Somebody missed the "checks and balances memo" when they designed that clusterfuck of a system.

We've broken what was a fairly well-designed system. The FCC is completely free from any meaningful checks and balances and that has made the FCC and other agencies easily manipulated by corporate lobbying.

I don't fault corporations for being greedy, I'm just saying any system that seeks to regulate those corporations should be built in such a way that it actually serves that purpose, or it shouldn't exist at all. As we've seen from the financial sector, partial deregulation, especially letting the regulated companies have input on how deregulation should work can be a really bad idea.

jrock said...

proper use of profanity always puts a smile on my face - :).

brentdax said...

This is a perfect example of what's called regulatory capture—the people with the most interest in a regulator are the people being regulated, and sooner or later they get their people into the regulator and subvert it to their own purposes. It's why the FCC passes rules protecting phone companies, and the FDA keeps new anti-smoking products off the market, and the SEC prevents small brokerages from growing to the size of the big Wall Street firms, and the FEC makes it harder for third parties to raise as much money as the big parties.

Regulation just flat out doesn't work—except, of course, as a way of directing corporate money into politicians' coffers.

Aaron said...

I may be wrong about what i am going to say, but I want to put it out there because I remember having a conversation about these fees with my mom, who works at the AT&T corp HQ and knows a lot about the business. Unfortunately, the conversation was a couple years ago and who knows what has changed since then and even if I remember the conversation correctly.

Anyhow, apparently CLECs are regulated differently than ILECs (AT&T being an ILEC). AT&T is, if I understood my mom correctly, regulated in such a way that they can not charge CLECs enough money to maintain the copper/fiber they (AT&T) put in the ground even though the CLECs are using the lines for a significant portion of time during the lines life time.

I am not a fan of AT&T either (even though I am biased that way), but I figured I would throw that out there as a possible explanation of what the fee is. This is not an attempt to defend AT&T. Really :) I just want to develop iPhone apps and not worry about carriers. They all suck.

rctiger said...

You have an option... Apple is actually selling the iphone unlocked in Australia (yes down under) you can put any old sim you like in it (not sure how well some of the iphone features will be supported in the states)...oh and we have 5 carriers selling it if you want it locked to a carrier

lucky aussies... well until you see what they get charged for data .... criminal...