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Carriers Blame the iPhone For Data Caps and Increased Upgrade Fees 272

Posted by samzenpus
from the not-our-fault dept.
zacharye writes "Bruised mobile carriers such as AT&T and Verizon are 'fighting back' against Apple's iPhone, despite the fact that the device has helped them eke out consistently higher average revenue per wireless subscribers since its launch. To hear the carriers tell it, the iPhone is a major inhibitor to their profits as last year they were 'only' generating wireless service profit margins in the 38% to 42% range. But ever since these beleaguered companies started 'fighting back' by implementing data caps, increasing fees for device upgrades and implementing longer waiting periods before users can switch devices, they’ve seen their wireless service profit margins surge. AT&T reported a 45% margin in Q2 2012 and Verizon reported a record-high 49% margin."
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Carriers Blame the iPhone For Data Caps and Increased Upgrade Fees

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  • by Anonymous Coward on Monday August 06, 2012 @01:25PM (#40896567)

    Anyone who spent 10 mintues with the iPad, and iPhone would realize they are enormous bandwidth hogs. You don't have to be a telcomm. engineer to see that video chat, and Netflix are killer apps. in terms of backhaul, spectrum and popularity.

    They didn't plan properly, didn't spend appropriately and now they are punishing and blaming their users for using these devices exactly as they were designed.

    • by Anonymous Coward on Monday August 06, 2012 @01:32PM (#40896657)

      Which is why I will never upgrade and lose my unlimited data, and will try my hardest to go over the 2GB "recommended" usage every month. And since I'm on Verizon and they now need to remove the $20 per month tethering charge I will be tethering everything. For everyone saying I'm only hurting the other users, Verizon needs to upgrade their systems instead of claiming 50% profits, invest that in your damn infrastructure.

      • by KingSkippus (799657) on Monday August 06, 2012 @01:39PM (#40896709) Homepage Journal

        And since I'm on Verizon and they now need to remove the $20 per month tethering charge I will be tethering everything.

        Removing the tethering charge does not apply to people on unlimited data plans. [zdnet.com] It's either/or. Either you get on one of their bandwidth-cap plans and have free tethering, or you continue to pay the fee for tethering. I'm not passing judgment on whether that's fair or not, just pointing it out.

        • by ganjadude (952775) on Monday August 06, 2012 @01:48PM (#40896847) Homepage
          I do not believe that to be entirely true

          the 4g band cant have restrictions thanks to google, so while I can see them charging in 3g in 4g it should not be an issue from my understanding
          • by evilRhino (638506)
            The article headline is misleading. Verizon isn't allowed to restrict third party applications from tethering (open-access), but is under no obligation to provide them for free (hence the $20 fee). As far as they are concerned, they were within their rights to block Google from selling the apps on the market (though the FCC disagreed). They also were compliant by allowing customers who did have third party applications to use the network for no additional fee. Basically, you can tether away, but Verizon isn
            • by Githaron (2462596)
              Before, they were allowed to drop your service because you were in violation of the TOS.
            • by milkmage (795746)

              "but is under no obligation to provide them for free "

              http://bits.blogs.nytimes.com/2012/07/31/fcc-verizon-tethering/ [nytimes.com]
              Thanks to a government investigation, a large number of Verizon Wireless customers will be able to download apps that share a smartphone’s Internet connection with other devices, a feature known as tethering. And they won’t have to pay monthly fees to the carrier for the privilege. ..."won't have to pay monthly fees"

              "They also were compliant by allowing customers who did have thir

          • by icebike (68054) *

            I do not believe that to be entirely true

            the 4g band cant have restrictions thanks to google, so while I can see them charging in 3g in 4g it should not be an issue from my understanding

            Actually its only if the 700mhz band is used that the restrictions against tethering kickin. Other 4g bands are not thusly restricted.
            It just so happens Verizon decided to use this 700mhz spectrum for its LTE support, then tried to get the restriction removed in court.

            They lost, and therefore can't limit any device or any app from being used on their LTE network (with a paid data plan) as long as it does not
            harm the network. Specifically exempted in the FCC ruling were unlimited data plans. You have to b

        • by AaronMK (1375465)

          That depends. Verizon was recently fined for not adhering to open access provisions of their spectrum purchase. If he has a 4G LTE device ("C-Spectrum"), Verizon might be forced to allow free tethering regardless of his plan. The article to which you link reports Verizon "interpretation", which seems like they are still trying to dig their heels in, or continue to half-ass in their obligations with regard to the spectrum purchase. Whether that would survive if the FCC reviews Verizon's compliance again

    • by halltk1983 (855209) <halltk1983@yahoo.com> on Monday August 06, 2012 @01:35PM (#40896679) Homepage Journal
      Maybe they could work on deploying some more towers in high usage areas with that 49% profit?
      • by Cinder6 (894572) on Monday August 06, 2012 @01:49PM (#40896857)

        I'm all for hating on the telcos, but sometimes "just build more towers" is much, much easier said than done. For instance, it takes three years [techcrunch.com] to get one built in San Francisco. Granted, not every place is as downright insane as San Francisco is, but it's worth mentioning.

        • by Anonymous Coward on Monday August 06, 2012 @02:11PM (#40897137)

          Don't tell me about the pain, just show me the baby.

          If I'm late on my bill, does the phone company care why? Having been broke before I assure you they do not. I reciprocate by not caring at all why it is so hard for them to conduct their business, I care only for the benefits that accrue to me.

        • by Xeranar (2029624)

          Anecdotal evidence is anecdotal?

          Know why that's news? Because it's not normal. Regardless the nationwide pricing scheme is a failure as well if we're going to argue cellular placement on the regional level.

        • but sometimes "just build more towers" is much, much easier said than done.

          Kinda makes you wonder why, from the big 4, only T-Mobile (at least in the US) has embraced WiFi Calling via UMA. After all, the costs to the telcos is MUCH cheaper than new towers.

          Oh....wait. I think I understand: There's no profit in it [t-mobile.com].

        • by hawguy (1600213)

          I'm all for hating on the telcos, but sometimes "just build more towers" is much, much easier said than done. For instance, it takes three years [techcrunch.com] to get one built in San Francisco. Granted, not every place is as downright insane as San Francisco is, but it's worth mentioning.

          Then they had better get started today -- maybe they could spend less money telling me how fabulous their ultra-fast 4G network is (letting me use an entire month's data cap within 15 minutes), and more money on building out that network so I can actually use it.

          I live in a busy urban area and have no 4G coverage at all within a block of my house.

      • by alen (225700)

        will more towers work? i was at the beach last month and my iphone was SLOW. i look around and every other person has a smart phone.

        that's a lot of devices broadcasting on the same frequencies and made me think. wireless is like the old Layer 1 hubs. even if you factor in slightly different frequencies you phone is still filtering out the ones its not supposed to be listening on. you can add more towers in higher density locations but it won't do much good since everyone will still be broadcasting on the sa

        • For really large events (like South by Southwest), the phone companies often bring in microcells - those REALLY work, simply by moving devices on to more towers.

          Phones are not all on the exact same frequency at the same time... there is a range they communicate over.

          • But that depends on having a backbone that isn't saturated. Given the not-so-stellar penetration of fiber everywhere (along with DSLAMs and the other expensive bits of wired Internet service) that technique doesn't always work.

        • by fahrbot-bot (874524) on Monday August 06, 2012 @02:41PM (#40897577)

          i was at the beach last month and my iphone was SLOW. i look around and every other person has a smart phone.

          Hmm... Seems you and the others were using the beach wrong. Not trying to judge, but put down the phone and enjoy the surf, sand and sun.

          • by Nadaka (224565)

            They were obviously using their smartphones to take and upload pics of the skimpy bikini's.

    • by DrgnDancer (137700) on Monday August 06, 2012 @02:14PM (#40897195) Homepage

      Well ya see, it's like this. The carriers had been selling smartphones with data plans for years before the iPhone, and it was a great deal. People spent $20-30 extra every month, but rarely went out the of 10s of megabytes for traffic. Because those phones pretty much sucked for everything other than e-mail, contacts and calendaring. The browsers were terrible, and network aware apps were a rarity or so hard to use that no one did (I remember trying to do ssh on my Treo, it was awful). Then those damned iPhones came out, and shortly thereafter those stupid Android phones. Suddenly networking on phones actually worked. The browsers could deal intelligently with websites, networked apps actually worked, people were using smartphones to actually access the data plans they had paid for. The nerve! They actually used what they bought instead of just paying for it and passively consuming a small part of their purchase.

      So you can totally see how it's all the iPhone's fault. Those assholes at Apple and Google made tools that people actually wanted to use. Why couldn't they just follow the status quo and network aware crap that allows the carrier to charge more, but not spend anything?

      • by Hillgiant (916436)

        Oh, it's worse than that. The iPhone relies on ubiquitous data for many, if not nearly all of its marque applications. Maps, music, app updates, games, video, etc.

        It was one of the most striking things about moving from a dumb phone to an iPhone "back in the day". Everything you needed, as much as you needed, as fast as that little pipe to the cloud could carry it. People used it. People liked it. People got used to it. People expected it. Then, as you say, AT&T and Verison realized that their pr

  • by Pieroxy (222434) on Monday August 06, 2012 @01:27PM (#40896581) Homepage

    In other news, in other parts of the world, some carriers just do manage their infrastructure correctly and the prices are actually going down instead of going up.

    So please, stop blaming the customers and start rethinking your now-stinking strategy.

    • by nashv (1479253)

      They're discouraging the iPhone?

      I'd have never thought corporate greed for profit could actually do a good thing in the long run. Darn it, I sound like a capitalism-apologist right there.

      • Re:Hmm...Huh...? (Score:4, Insightful)

        by girlintraining (1395911) on Monday August 06, 2012 @02:48PM (#40897653)

        I'd have never thought corporate greed for profit could actually do a good thing in the long run. Darn it, I sound like a capitalism-apologist right there.

        Capitalism isn't the problem; In a competitive market with many agents, there's market pressure to innovate; lower prices, more features, better reliability, etc. When you get a market like ours with only about 3 major players, that pressure goes away, and this is the result. The problem, is monopoly. And the solution is government-mandated breakup. But time and time again, it's been proven that the government here screws up telecommunications; they create the monopoly, then they break it up, then it reforms and becomes stronger. The problem is the government's laws, which create the conditions not only to create a monopoly, but also sustain and reinforce it. It's the same with all our utilities; Our electric grid is ailing... Electric plants aren't being built, and you can only buy from one provider in any given area. Hey look, costs are rising there. Sewers, water service, every last thing that creates a government monopoly goes to shit.

        The message here is that infrastructure services simply can't be owned by private business. Capitalism is not a perfect solution to all economic situations.

        • by medcalf (68293)
          Wait, what? Government legally mandates services and prices, granting monopolies to companies within those terms, and you think that's a failure of capitalism?
          • Wait, what? Government legally mandates services and prices, granting monopolies to companies within those terms, and you think that's a failure of capitalism?

            Yes. The government either needs to take it over, or lower the cost of entry so more economic agents can participate in it. But that would require an overhaul of current FCC regulations, new bandwidth allocation, and taking away the authority to lay new lines, etc., from municipalities and concentrating it at the state and federal level, to simplify the approvals process. It would also require invalidating exclusive contracts that municipalities, counties, and even states sign for service. This half-assed r

    • by wierd_w (1375923) on Monday August 06, 2012 @01:41PM (#40896739)

      (sarcasm)

      There is NOTHING wrong with the strategy! It will make us BILLIONS! You stinking customers just aren't responding to our offerings IN THE CORRECT WAY!

      Simply because we provide a bandwidth hungry digital communication platform, that basically embodies excess, wealth, and high standards of living-- then turn around and shamelessly state that you CAN watch streaming video over our BLAZING FAST network, does NOT IN ANY WAY imply that we actually WANT you little wage slaves to actually USE the devices in that fashion!

      Is it so hard for you to consume THE WAY WE WANT you to!? Really, we have a lot of money on the line here! Dont you care about the economy!?

      (/sarcasm)

  • Who'd a thunk it? (Score:5, Insightful)

    by 93 Escort Wagon (326346) on Monday August 06, 2012 @01:32PM (#40896645)

    With the iPhone and Android devices, people find them useful enough to - gasp! - actually USE mobile data allotments!

    I can see why AT&T and the other carriers were caught off guard there.

  • by kilodelta (843627) on Monday August 06, 2012 @01:32PM (#40896653) Homepage
    That's just obscene!
  • by Kozar_The_Malignant (738483) on Monday August 06, 2012 @01:39PM (#40896717)

    The carriers went to great pains to advertise all of the bandwidth-hogging things you can do with their phones, such as video chat, streaming movies etc. Now that their ad campaigns have proven successful and people are actually doing all those things, the carriers find that they cannot hold up their end of the bargain. Their solution to this problem is to blame their customers for using what they were sold.

    They need to put some of those profits into improving their infrastructure so they can deliver what they sold. An awful lot of businesses would be very happy with profit margins half of what these guys are getting.

    • by JWW (79176) on Monday August 06, 2012 @01:52PM (#40896887)

      Yeah, I still watch all the "get blazingly fast 4G" adds thinking that they should be forced to include disclosures like are required on drug adds.

      "using AT&T's 4G service at full speed for 30 minutes will surpass the subscriber's bandwidth cap."

      "Watching a movie over 4G is not recommended as none of our data plans cover that amount of data."

  • by Chas (5144) on Monday August 06, 2012 @01:40PM (#40896735) Homepage Journal

    These ass clowns could have money shooting from every available orifice, on-demand and in any denomination they desire (Including Berkshire-Hathaway Class A stock), and STILL they'd complain that their revenues were impacted.

    Basically they're using the following formula:

    100% profit is:

    * Not actually having a service to keep running/support/etc.
    * Having no employees.
    * Having people give them money for nothing.

    Anything beyond that is some horrific imposition on them that fatally impacts their fiscal stability...

  • by wbr1 (2538558) on Monday August 06, 2012 @01:41PM (#40896741)
    I run two small businesses, both in tech, not telecom, and I would shit myself with happiness if I made a 40 to 50 percent margin. I am content, competing, and making do with half that or less.
    Next you'll be crying because you eat steak every day. GTFO and STFU.
    • by afidel (530433)

      Yep, my dad's small business absolutely LOVES his accounts with a gross 40% margin. Like you his average is probably half that.

    • No shit. If life's so hard maintaining service for these phones, why don't they drop them? Don't give me any, "It's what our customer's want," bullshit because the customers want data without ridiculous caps and outrageous fees but I don't see any progress towards that (no, the latest shared data plans do not meet that end).
  • by GeXX (449863) on Monday August 06, 2012 @01:45PM (#40896803)

    If this is actually true, and carriers are not just being greedy then charge apple users more, don't sell a phone at $199, sell it at $399. That way apple makes their money and the carrier doesn't take the hit. Please stop asking android users to do not want a iphone to subsidize apple purchases. If they don't sell as well at $399 then apple can always come down on their price, but that is their hit, not the carriers, or the users. Done. That's call capitalism.

    If Samsung can make a phone and sell it to a carrier at $300 bucks, and apple charges $600 for their phone, then charge the user the difference. Don't raise upgrade fees or data plans, since your markup is the same. Now if apple is trying to strong arm you into charging their user charging the same, while they still reap their profits, then tell them to go pound sand, and if apple lost lets say Verizon & at&t as carriers, then that will hurt them, and they will drop the price. Stop letting apple be a bully.

    • by Mitreya (579078)

      If Samsung can make a phone and sell it to a carrier at $300 bucks, and apple charges $600 for their phone

      This might be a little offtopic, but how about offering cheaper plans when I bring my own phone? I can buy an unlocked iPhone and then I'll pay the same monthly amount at Verizon/AT&T. So I get the "subsidized" plan whether I buy the subsidized phone or not.
      That must be helpful for the profit margin - the phone is always subsidized by the plan, even if it was cheap or free (for the carrier).

  • I always figured termination fees would come in at close to 100% profit, as it takes less than 10 minutes of an employee's time to cancel a contract (and the employee is paid terribly so those 10 minutes are trivial in comparison to the fee itself). Considering Verizon and - to a lesser extent - AT&T are masters of the termination fees, I would think their profit margins would actually be higher than what was stated in the summary.
  • Proof! (Score:5, Insightful)

    by Archangel Michael (180766) on Monday August 06, 2012 @01:51PM (#40896877) Journal

    This is proof that there is no competition in Wireless. They are in Collusion.

    AND to get me off my Grandfather Plan, they are going to have to offer something better than "higher prices and lower service". The problem is, I can't shop, as they all have about the same pricing now and it seems that nobody wants my business.

    Oh, VZ just offered me $50 "loyalty" on upgrading. Um, hey VZ nice try. Here is a nice warm FUCK YOU

    • by Creepy (93888)

      They were a collusion to begin with, but people seem to miss that and call it Verizon and not by the joint venture name of Verizon Wireless. Verizon Wireless is a joint venture between Vodafone (45%) and Verizon (55%) corporations, and its legal name is Cellco Partnership d.b.a. Verizon Wireless (d.b.a=doing business as), but essentially they are two giant telecoms that agreed to work together so they could dominate the bidding wars for best bandwidth and then reap the profits (which IMO is collusion). If y

    • by Mitreya (579078)

      to get me off my Grandfather Plan, they are going to have to offer something better

      I am sure they will eventually force-upgrade you. The only real cost for them is your lock-in. Once your 2-year contract runs out, there will be little to stop them
      I had left AT&T many years ago, after they offered me to "upgrade" me to one of the new crappier plans early as a "courtesy". I was told that within a year upgrade will be forced anyway.
      T-Mobile is still the lesser evil, particularly as they do not charge you for running over their bandwidth cap (they do throttle you quite a bit after yo

  • Since they can't hide their crappy data service with a handset that makes the consumer not want to use it, they are forced to create artificial barriers to act as a facade for their crappy connectivity.

  • by MobileTatsu-NJG (946591) on Monday August 06, 2012 @02:02PM (#40897011)

    But ever since these beleaguered companies started 'fighting back' by implementing data caps, increasing fees for device upgrades and implementing longer waiting periods before users can switch devices, theyâ(TM)ve seen their wireless service profit margins surge

    When AT&T started arbitrarily throttling unlimited data users I immediately dropped the 2 gig data plan I had for my iPad. When they decided to enact the 3 gigabyte throttling standard for unlimited users, but would not state the minimum speed these users will get, I decided I will not renew my contract on the unlimited data plan I have with my phone. Unfortunately I still have an expensive ETF, so I will wait until the contract is up.

    I'm curious if this profit margin will still be this high in the next two years when people's contracts run out. I'm willing to bet that in the next five years AT&T and Verizon will be running Sprint'esque ads with the CEO saying "we want you back! *sniffle*". (It is an amazing coincidence that Sprint is the one still offering properly unlimited data right now...)

  • Commericals (Score:5, Insightful)

    by slapout (93640) on Monday August 06, 2012 @02:06PM (#40897057)

    So they have tv commercials advertising all the things you can do with the data and then they complain when you do.

  • Fawlty Towers (Score:5, Insightful)

    by scorp1us (235526) on Monday August 06, 2012 @02:06PM (#40897063) Journal

    The company would be so much better if there weren't so many users!

    As a AT&T customer I'm accustomed to being at any event - from stadium games and music festivals, having 4 bars and not being able to use the network. I guess I can understand because you never know where a stadium will pop up and when people might go there.

    I remember Virgin Fest added capacity for Virgin Mobile, but everyone else was SOL.

  • by zarmanto (884704) on Monday August 06, 2012 @02:11PM (#40897133) Journal

    Having complained bitterly about cellular prices for years myself, it actually pains me greatly to say this... but here's the thing: AT&T and Verizon are just applying standard economic principles; continue to raise prices until you can make the profit you want while expending the least amount of resources (money, time, effort, etc.). The side effect of this is obviously that many people who want lower prices will go to the less "greedy" carriers, like Sprint or T-Mobile, (which I will most likely be doing myself, not too long after the next iPhone becomes available) but the profit loss from those customers departing the greedy carriers offset by the profit increase from the remaining customers... and the greedy carriers' network performance improves in the process. Then, if their net numbers fall too much, they still have the option to dial the crazy back down a bit. (Not that I think they will necessarily... but they could. In theory.)

    It may be increasingly annoying to us consumers to have to deal with the ever-changing business models of these greedy-no-good-predatory-profiteering-duopolistic-carriers... but the unfortunate reality is: it really is "just business," and not greed, per se.

    (And yes... I almost pressed delete on this whole blasted message when I started to think about how much some Slashdotters are going to hate this point-of-view... but the heck with my Karma. Sometimes, ya just gotta say it like it is.)

    • by jdavidb (449077)

      You are right, but the thing is, nobody can start up a competitor and do it differently. It's true there are plenty of natural barriers to entry that would make doing so difficult, but the main hassles involved would be regulatory. People like you and I should be able to start a company that provides this service in a way people like better. The result would be that these carriers would act differently. They don't have to do that now, because they are artificially protected from competition.

      I am all in

    • Reminds me a bit of playing VGA planets. You had two strategies when taking over a planet - suck the inhabitants dry as quickly as possible and take what you could (essentially make the place unusable for another player), or keep them just barely happy enough not to riot in order to maximize the resources. Of course, there was the option of keeping everybody super-happy and then using that good will to generate butt-loads of resources for a short period, but that wasn't nearly as useful as the other two st

  • by swb (14022) on Monday August 06, 2012 @02:21PM (#40897285)

    The current political and business climate would never allow for this, but would it ever make sense to run the infrastructure side of wireless as a highly regulated public utility, in the manner of electric utilities (ie, basically give them a fixed, 15% pricing margin, regulated by a board with public meetings and documentation).

    But have these entities only sell wireless "service" to the actual resellers, which would act as the carriers generally do now in terms of selling wireless services to users.

    The infrastructure side would simply be a fixed-profit business, with maintenance, network costs, tower expansion, etc all built into the business model up front, along with regulatory requirements that would require that wireless and backhaul capacity be mandated to maintain X% overhead. Actual technologies could then be regulated as well, so that all towers used the same wireless technology so that any phone from any "wireless reseller" would work, with no network lockout.

    The wireless retail sellers would then be competing on actual customer service and business efficiency, since wireless data volumes/minutes would be sold at a regulated price at the wholesale level and there would be no technology lock-in (eg, CDMA vs. GSM vs. HSPA+ vs. LTE, etc).

    You would still have innovation in the industry in terms of handset hardware and the resellers would not have any way to manipulate pricing (ie, starve capital investment for short-term profit, then jack up prices to complain about infrastructure overuse). Back-end network innovation is limited anyway, since I don't think carriers actually develop wireless technologies in-house, and the debate over those kinds of upgrades would be done in public before the utility commissions versus the bogus marketingspeak of carriers ("Now!!! We had 3G, now we're offering the new 4H, and soon the 5K speeds!!!!111).

What this country needs is a dime that will buy a good five-cent bagel.

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