AT&T Customer? Prepare to get Nickeled and Dimed (Pennied too)

I’m usually enraged with everyone that runs the show in the mobile consumer space.

Over the years, I’ve found (as well as you’ve found I’m sure) that the major players do their level best to squeeze every copper penny out of the American consumer, trying to back up that squeeze by telling us about service enhancements and whatnot that come with that charge.   What AT&T is now doing in that spirit doesn’t even come with a veiled attempt at justification.  Soon all AT&T wireless customers will have an additional $0.61 tacked on to their monthly bill.  Now sure that doesn’t sound like too much – I mean we’re only talking about an additional hit of $7.32 to your yearly mobile expense, but that adds up.  Maybe it doesn’t add up to you personally, but add up that $7.62 per customer over their entire customer base and it adds up a little sweeter to them – to the tune of $500-600 billion added to AT&T’s yearly bottom line.

And why?  According to analysts, because they can.

Now let’s take a look at the evil genius of it all.

1. AT&T has a clause in their contracts that if there’s a price increase outside the scope of the contract, the customer has an opportunity to get out of it without having to pay a termination fee.  The fact that they call it an administrative fee means it’s not technically a rate increase, so that clause doesn’t apply.  Take a look at section 1.3 if you’re interested in their terms of service and make note of administrative fees being explicitly excluded.

2. $0.61 isn’t enough to scare customers away – no one’s going to cancel their contract and pay a huge termination fee over $7.32.  Now no one’s going to like it, but it’s jut not enough to quit.  This is half a billion dollars pretty much for free as a gift to themselves from all of you.  Joe Hoffman, principal analyst at ABI Research had the following to say:

“But why 61¢, why not $1 or $5 or $10? Because AT&T understands price elasticity of demand. When AT&T raises the price by 61¢, they know hardly anyone is going to bail on them, and so can impose this with impunity. $1 or $5 or $10 is just too much to swallow all at once, but give them time. For now, $500 – $600 Million will flow right to the bottom line. Brilliant! No fancy software tools, no focus groups, no high priced engineers and programmers, and no iPhone subsidies. Just a raw, brute force price increase. In six to 9 months, add another fee, then rinse and repeat a few more time. Marketing beats engineering every time!”

Now an AT&T spokesperson says that this is pretty in line with what other carriers do or will charge, and I totally believe it.

It’s $0.61 now, but when is that line going to be $0.90? or $1?  It’s going to creep over the years while our phone bills skyrocket, and the average consumer will barely notice.  Not exactly much we can do about it, but you should all fully understand what the mobile industry sees us as:

Cash piñatas that always pay out.

79. at&t's sleight of hand to gain political favor?

[Article first published as AT&T's Merger Sleight of Hand to Gain Political Favor? on Blogcritics.]

As the old adage goes, “there’s more than one way to skin a cat.” Why anyone would want to skin a cat to begin with is beyond me, but regardless, the concept is far reaching and used for many purposes. It could be said as encouragement in college labs to aspiring students, or delivered with a smirk and a wink in business and political offices when someone finds a legal loophole. The latter may be true regarding AT&T’s $39 billion merger with T-Mobile, and how companies can try to draw favor from politicians with pull when they can’t directly financially contribute to them. The merger is under scrutiny by the Federal Communications Commission (FCC) and the Department of Justice (DOJ).

So let’s talk about this cat. The FEC (Federal Election Commission) prohibits corporations from contributing directly to political candidates from business accounts or using business funds. The best they can do is write a check from personal accounts to candidates and political action committees (PACs), in which case there are limits imposed as outlined by the FEC. So how else can influence be, shall we say, financially suggested? They can donate to charities closely associated with said politicians. Watchdog groups like Citizens for Responsibility and Ethics in Washington have been seeing a definite uptick in this kind of activity in the last few years. "It’s another way to curry favor when you’ve maxed out in your political contributions," said Melanie Sloan, CREW’s executive director. "We’re seeing it more and more."

In the case of AT&T, they have given almost $1.25 million to charities affiliated with lawmakers from 2008 to 2010. One such contribution was made to Alzheimer’s Association and the Blanchette Neurosciences Institute, which are charities affiliated with Sen. Jay Rockefeller (D-WV), a member of the Senate Commerce, Science and Transportation Committee. The Senate Commerce, Science and Transportation Committee has direct jurisdiction over the FCC, which means that their approval is required for the merger to go through. Contributions were also made to charities associated with Sen. Thad Cochran (R-MS), a member of the Senate Appropriations Committee, and Rep. Jim Clyburn (D-SC), a high-ranking house Democrat.

All of these contributions are 100% legal and the American public is given full disclosure, so who’s really being hurt? The problem is that not many have really put the pieces together here to see the full picture. This isn’t the first time the telecom giant has acted in this manner. Around the time they needed legislative approval from Governor Bobby Jindal (R-LA) to sell cable television services, they pledged at least $250,000 to a charity run by Governor Jindal’s wife.

Sen. Rockefeller’s spokesman Vince Morris said in a statement to Politico, “The senator’s interest in supporting Alzheimer’s research is separate and long term and never touches on his evaluation of the AT&T merger.” Further, “Even the idea that donating to a charity would influence him is ridiculous.”

And that may be the case. Against everything else that says otherwise, there may not be any impropriety here. I can’t tell you with 100% certainty that these donations on the part of AT&T were driven by financial and political motives. I’m just a technology nerd. But the timing on them does seem strangely coincidental when there’s a big merger they’re trying to push through that is facing a lot of scrutiny and opposition. Arguments against it include less consumer choice, potential hikes in prices and rates, and the elimination of jobs to reduce post-merger redundancy. Then there are potential anti-trust issues - this deal would turn the mobile industry into pretty much a duopoly, with AT&T and Verizon holding a combined 80% of the market. All potential reasons to try and grease some wheels, if you're picking up what i'm putting down.

Interestingly enough, Sprint Nextel Corp and their CEO Dan Hesse, who has been the most vocal opponent of this merger, reported no donations to any charities with ties to American lawmakers.