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Wireless service costs too much, and all but the carriers agree

Sharp criticism of wireless industry mounts over pricing, exclusivity

August 21, 2009 06:00 AM ET

Computerworld - Criticism of U.S. wireless carriers has reached a peak during the dog days of summer, with cries that carriers are charging too much for wireless voice, data and texting even as consumers have benefited lately from cheaper smartphones.

The outcry against wireless carriers follows recent plans by government agencies, including the Federal Communications Commission and Congress, to investigate exclusive smartphone deals by the carriers, including AT&T Inc.'s sale of Apple Inc.'s iPhone.

Consumer groups, such as the nonprofit Free Press in Washington, have linked exclusive smartphone deals to helping carriers justify higher wireless prices to customers. Higher prices are charged even at the same time that network technology investments by carriers have decreased overall, Free Press argued.

"We have a lot of concerns over voice and data plan costs, not just that they are too high, but there is demonstrated evidence that as the wireless carriers' revenues are rising, their wireless capital investments are decreasing," Free Press Policy Counsel Chris Riley said in an interview. "Wireless carriers are charging more, but not improving the quality of network service with network buildouts and coverage."

While rural areas clearly need better wireless coverage, Riley said there are some "pretty glaring limits on coverage" in major cities. Government needs to inject more competition into the wireless industry to improve things, he said.

The anti-carrier rhetoric got more strident this week with an opinion piece in the Wall Street Journal by Andy Kessler, a former hedge fund manager, who accused AT&T of overcharging for voice calls and stifling innovation. Kessler also called for radical reforms in the cell phone industry, such as ending device exclusivity and stopping carrier licensing of the airwaves.

New York Times columnist David Pogue also launched a broadside in July against what he called the "irksome cell phone industry," condemning wireless double billing by the carriers, (where both calling parties pay for a call instead of one party, as with wired calls), a doubling of text message costs by all the major carriers to 20 cents per text in two years, dead coverage zones and exclusive device deals.

Computerworld columnist Mike Elgan also entered the fray, with a recent column, "Wireless carriers: 10 things I hate about you," in which he argued that wireless carriers overcharge customers and are "laggards" in adopting new technologies, among other criticisms.

Elgan noted that while surveys consistently show that the top concern of wireless customers is a lower price for wireless service, the U.S. is one of the top three most expensive countries for wireless service globally, along with Canada and Spain. That high U.S. ranking, from a survey by the Organization for Economic Cooperation and Development, was roundly criticized by the main wireless industry association in the U.S., the CTIA, which noted that the U.S. still has the lowest per-minute wireless calling rate globally.

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