May 24, 2013
AT&T is charging customers a little bit more for cell phone service. Since May 1, the second largest carrier in the U.S. began charging customers a monthly $0.61 administrative fee. The new “Mobility Administrative Fee” applies to consumer and Individual Responsibility User (IRU) lines. The fee appears with taxes and other surcharges at the bottom of a customer's phone bill, below the service charges. AT&T states that the additional fee "helps defray certain expenses AT&T incurs, including but not limited to: (a) charges AT&T or its agents pay to interconnect with other carriers to deliver calls from AT&T customers to their customers; and (b) charges associated with cell site rents and maintenance." Most likely, few of us will actually notice this new fee, let alone care about it. However, as The Wall Street Journal notes, this fee could “bring in more than a half-billion dollars in annual revenue to the telecom giant.” In other words, AT&T will benefit greatly from the fee, thank you very much. One of the best quotes regarding AT&T’s latest fee comes from Joe Hoffmann, principal analyst at ABI Research. He notes that:
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!He's completely right, don't you think? See also: AT&T's GoPhone Brand To Support iPhone, LTE/HSPA+ From Today, and AT&T To Waive All Overage Fees For Oklahoma Tornado Victims Through June 30.