Worst of the Week: I signed what?
August 7 2008 - 2:54 pm ET | Dan Meyer | RCR Wireless News
Hello!
And welcome to our Thursday column, Worst of the Week. There's a lot of nutty stuff that goes on in this industry, so this column is a chance for us at RCRWireless.com to rant and rave about whatever rubs us the wrong way. We hope you enjoy it!
And without further ado:
So, I hate to come down on wireless consumers, seeing as they kinda contribute to my paycheck and I am one of them, but the news last week that Sprint Nextel was fined more than $70 million in a California court for its early termination fee policy is the most asinine thing I have seen for some time. (And remember, I work with one Dano, Mike.)
Other carriers have also been targeted by such lawsuits in California, but the Sprint Nextel decision is expected to be a template for other resolutions.
For those not aware, wireless carriers ask consumers to sign contracts for up to two years in length (and up to three years in Canada, though I think that is just because of some sort of weird conversion where two American years are equal to three Canadian years) in exchange for a discount on the price of a wireless handset.
Now, in most cases consumers enter into these contracts willingly and are not forced to sign them, but if you were to believe rants on certain message boards (my favorite is isignedwhat.com) you would think these people had been hit with mind-altering gases the moment they entered their carrier’s store — and could not possible be held responsible for their actions.
I think it’s more of a case that these people are so captivated by the blinking lights and caress-ability of the latest wireless phones that they would give up a spare spleen or an ear to get one.
So, back to Sprint Nextel being hit with a $70 million fine. Apparently some of Sprint Nextel’s customers were not happy that they were being forced to pay back via an early termination fee the subsidy that Sprint Nextel provided for that super-cool new handset. So, instead of being adults and adhering to the terms of those contracts, a great number of people were herded into a class-action lawsuit against Sprint Nextel that claimed the carrier was being a big bully for requiring people to adhere to those contracts.
A part of me takes some pleasure in seeing a huge company get hit with a fine, but in this case I just can’t seem to stomach such a move. I, like more than 200 million Americans, own a wireless phone and have signed my name to a contract in return for a cheaper price on that phone. But I also had a choice, as did those 200 million Americans, to not sign a contract. I could have gone the prepaid route. A quick scan of prepaid offerings shows that most are probably a better financial deal for consumers, and prices for no-contract handsets are not much more than what you would pay for a contract offering.
Also, with Sprint Nextel in such bad shape, does anyone really benefit from that company now having to shell out $70 million in fines? I know Sprint Nextel does not think twice about requiring its customers to pay a $200 fee if they want to cancel their service even one day before their contract is up — though who really would cancel their contract with only one day left on their contract? (Oh, yeah, most Americans.) But I think we can be better than that. I say we give Sprint Nextel a break and allow the company to straighten out its current financial mess (or at least give its accountants some time to find the company check book) before paying the fines.
Or better yet, let’s revoke the fine altogether and require that those people that willingly signed contracts and accepted the subsidized handsets either pay back the subsidy or agree to uphold to the terms of the contract.
I now cede the soapbox to whoever has a rant to air.
OK! Enough of that.
Thanks for checking out this Worst of the Week column. And now, some extras:
--A mobile game company with the creepy name of Artificial Life said this week that it has launched a new game for Apple’s iPhone and iPod Touch. Not much news there, but the company claims it’s a provider of 3D/3G+ gaming technology. Now, I know a number of gaming companies claim to make “3D” games, but unless I have to wear funny glasses or images on the screen actually appear to come off of the screen there are no such things as 3D games. So can we quit this mislabeling or at least go way overboard and call them 8D games that include smell, feelings and the ability to do my shopping?
--Word from published reports seem to indicate that recently installed Moto co-CEO Sanjay Jha could take home compensation of more than $90 million if the company hits certain financial incentives. Nice gig if you can get it. Word from most RCR Wireless News reporters was that they would have taken the position for half of that incentive package. See Motorola, it does pay to shop around.
I welcome your comments. Please send me an e-mail at dmeyer@crain.com. Or, if you prefer, leave a comment in the space below.
August 21, 2008 06:12 am
I just wanted to reply to the person who was talking about contract's extending for changing services or plan minutes. (Sprint Nextel since last year, no longer extends contracts for price plan, or service changes.) Sprint might just surprise us all and overcome all the negative bashing they have received. I firmly believe that the company is moving in a better direction and cares for their customers! Stick with the facts and if you are adult enough to enter into a contract, own up to it, pay your dues. :)
August 19, 2008 02:02 pm
Ok there are just too many stupid people out there but I HAVE to point out for ridicule their stupidity. While it is true that all the major carriers have some serious flaws, I believe in this case they are getting a bad rap and having to pay because some people don't know how to be responcible, productive and smart members of society and want the courts to clean up the mess they made.But first- a few kind words:1) Dave- RIGHT ON MAN!!!!! 2) To my fellow sales comrads who have written responces: AMEN! The majority of customers who have come to me griping about ETF's and "sneaky" contracts are actually missing their true complaint: they want to be able to subscribe to what seems to have become as American as apple pie now; "it's everyone's fault but mine" If you don't know not to sign anything before understanding it then you are too stupid to own a cellphone (or live for that matter). More on this will follow.Now to all the stupid people out there: LISTEN UP!!!!1) To those claiming sales people/carriers mislead and shim sham people to sign a contract: You all are SO full of it. While I will admit that there are a few crooked sales people out there, they are not as prevelant as people claim. Having worked for 2 different indirect retailers and having gone through the training for every major service provider, I will tell you that both entities overstate the consequences that will befall the sales person attempting to mislead someone. It is considered the #1 cardinal rule that b/c the signing of a contract is involved (not to mention a persons credit rating) anything less than complete transparency is unacceptable. Yes for years the standard was that terms & conditions were in small print, but those terms were made completely known to all subscribers prior to signing: ESPECIALLY THOSE INVOLVING ETF'S. Every carriers activation system has the prompts to explain thoroughly what is being agreed upon before submitting any order: "X carrier is giving XY&Z service for $39.99/month. By signing a 2-year agreement with us, we are going to take away $X off the price of your phone. You get X days to try this out. If you don't like it then cancel the contract and return your phone. After those X days you can still cancel if you want, but you will then owe us the money we paid toward the purchase of your phone." 2) Stark Ravin in particular ticked me off: In the last 7 years that I have worked in the industry, any store I have been to (indirect or carrier) has always displayed the retail price & the contract price of any device. Yes the contract price is always the bolder, easier to see price, but that's the way retail & marketing has operated since the dawn of time be it a car dealership, Walmart, Best Buy, etc. Get the customer in the door is the goal. But on every price tag under the contract price it tells you what the actual retail price of that phone is. At my current employer we go a step further and actually break it all down: We sell this phone at $350 retail price. If you sign up with X carrier you will get $200 of the price of the phone instantly making it $150. No price is larger or more prominent or anything. No deception or pushing off non-contract phones. And before anyone tries saying oh that's just an exception: as a supervisor I am required to shop my competition and with the exception of the little cellphone outlet stores-- I mean among the major retailers and carrier stores-- that pricing verbage is pretty much an industry standard. So Stark, quit belly-aching about being "tricked" into a subsidized phone blah blah blah blah. I don't buy it. It has been common knowledge now that ETF's were devised as a means for a carrier to recover subsidies it gave out on behalf of the customer for them agreeing to stay on for 2 years. The bottom line is- if you don't want to worry about an ETF then don't accept a carriers gift under false pretences, because that's what it boils down to. Pay full price for the phone you want and get your service. But if you sign a contract then you are obviously 18 years old and therefore should have the common sense enough to understand what you are signing up for and then the personal reponsibility to accept the consequences of not holding up your end of the deal.
August 12, 2008 06:08 am
Reducing the price of the monthly recurring charge after the contract is up is also silly. The MRC has nothing to do with the contract. If instead of a contract they just charged an extra fee monthly to offset the subsidy, then maybe there would be logic there, but US carriers do not do that. So why would the MRC come down after the end of the contract. The contract expiration just means you are once again eligible for the sale price on a new phone. That's it. Furthermore, why prorate and ETF? The customer is in a contract for a reason. The only reason a prorated ETF would make any kind of sense is if the customer were upgrading to a new phone within the same company, perhaps from a regular phone to a smartphone of some sort like the iphone or the Touch. That would be the only incentive. A contract is a contract, no matter how much someone whines about it.
August 11, 2008 04:13 pm
There's a bigger picture here than ETF. So, the ETF is there to stop someone from running off with a free phone without paying off the subsidy. Fine. But why doesn't my monthly fee drop after I've done that? I think this is now the law in Japan because they correctly identified this scam. Where's the US?
August 11, 2008 06:03 am
I have worked in the wireless industry for over 5 years and when I hear people talk about how the fee is gonna be gone soon hopefully. I love explaining how they are gonna have to pay over $100 for that free phone they got from me...lol
August 10, 2008 04:02 pm
Stark, having worked at a AT&T/Cingular store for 3 years now, I know for a fact that our pricing cards have stated the non-subsidized price the entire 3 years. However, you probably didn't notice it because they call it the "no commitment price" on the card. I can see how you can get confused between the two terms. Granted, I can't speak for other carriers and am not sure what their pricing cards say. Go ahead consumers...keep on suing the carriers. The more the carriers are ordered to pay up, the higher the prices (even subsidized prices) will be jacked up to cover the costs of the legal fees. Or get rid of contracts completely. Then all of you who want a free phone with service will be greatly disappointed when the cheapest phone available is $100 or higher.I will say this, though -- things have become much better now with pro-rated ETF's. I personally think that is the most fair way of doing contracts. Flat rates are completely asinine. I also agree that carriers should NOT be allowed to renew contracts when the customer just wants to change their rate plan. That practice is completely immoral and should be stopped.I do find offense in being called tricky. There may be some sales reps that give the rest of us a bad name, but I am completely straight up with all of my customers. Before they sign new contracts, I tell them the terms and the fees involved. That way they have a choice. Nobody is forced to sign. And if you are whining because you got "pushed" into signing, then you are also the kind of person that gets pushed into buying a used car from a guy in a plaid suit.
August 10, 2008 04:02 pm
I have worked in the industry over 10 years. I have lost count over how many times customers have tried to tell me that the carriers get the phones for free or discounted prices from the manufacturers. I have gone through the entire process...if I start a cell phone manufacturing plant, I have to 1. Hire people, 2. Rent or purchase a plant, 3. R&D, 4. purchase raw materials, 5. Construct the phones, 6. Market and advertise; 7. Ship to the carriers, 8. Back with a warranty, 9. Refurbish returns. If the manufacturer's give the phones away for free, how do they make money? Volume. There is a cost of doing business. There are some, a small percentage, mostly indirect dealers, that mislead customers. Most direct, corporate stores do a very good job of explaining charges. As others have mentioned, customers hear what they want to hear and will out and out lie about things. I have seen it many times. But carriers take a significant hit on the prices of the phones in order to complete. In Europe, the prices of the phones is considerably more because by-and-by they do not offer contracts. There is an exchange of one thing (price of equipment) for another thing (agreement to do a specified length.) California has take several steps against wireless carriers that do not make a lot of realistic sense. For example, if I live in California and my phone is stolen, and it takes me a week to call the carrier to report it stolen, I am not responsible for usaging during the time after it was stolen. How can I not be held accountable for these charges? I can see a day, or a couple of hours, particularly if it's in the middle of the night, but, people need to be accountable for their own actions.
August 10, 2008 05:59 am
Generally speaking, if a customer signs a contract, they are responsible for that agreement.However, in many cases, reps do pull the wool over customers' eyes. Salesmen are trained to convince the customer to sign a contract, and most customers aren't accustomed to the aggressiveness that some salesmen have. I suppose that it doesn't make it illegal... just immoral... to blindside a customer into agreeing to something they don't understand.Still. $70 million is excessive for a company that's stumbling. But that's not the court's concern, I'm sure.
August 9, 2008 02:13 am
The real reason Sprint got sued, was because Sprint kept resetting the contract end date, everytime any change was made to the calling plan. Most people like myself, are willing to be in a contract for a subsidized phone. What I don't like is if a carrier is gonna reset my contract for making a change to my calling plan, such as adding or removing a feature, or upping or lowering my minutes. That's where I say Sprint deserved to be sued. But otherwise, suing just to get out of your contract for any other reason, then that's wrong.Now with the people who sued over carriers charging a flat ETF, or over a pro-rated ETF that didn't go down enough have screwed us over. The government will eventually get involved, and have the ETF, based on the retail value of the phone, and goes down a percentage of the price a month. So, if the phone you get is $419, under the governement imposed ETF, you now have a $419 pro-rated ETF, and not a $175 or a $200 pro-rated ETF, or a flat ETF.
August 8, 2008 04:08 pm
Sprint got the short end of the stick (or the painfull end of the stick) on this one. When making any decision that will put me into any contract for any amount of time I ask questions about it and how it will affect me. I believe those customers are just trying to get away from their responsabilities. Remember nothing is free in this retail world; there is always fine print. Usually what happens is consumers have selective hearing. A sales rep could explain everything needed prior to activation and the customer only remembers what is convinient to them. If car dealerships where giving away cars at discount prices you bet there is a catch. Oh and car dealers don't BS around they repo your car; maybe wireless providers should follow suit. You don't complete your commitment then return your phone in the condition that is was given to you or pay the full retail price. Simple!!Those customers need to own up to their contract agreements that no one twisted their arms to sign.!!!