Oct. 16, 2012 at 5:46 AM ET
The cellphone industry trade group issued a report last week saying the average monthly bill is $47. It included a helpful chart showing how far bills have fallen during the past 10 years.
Strange, because I don't know anyone who has a $47 bill. Or anyone who's bragging about how much less they are paying now.
Inspired by Friday’s report by the CTIA, I logged on to websites for the four major carriers in an attempt to find a $47 cellphone plan. As you'll see in a moment, I didn't have much luck. When you finish reading, I hope you'll take a moment to share with others how much you pay for cellphone service, either by leaving a Facebook comment below, or by emailing me at BobSullivan@feedback.msnbc.com.
But first, a little more about average monthly bills. You'll find a wide spectrum of figures if you go hunting, because there are so many levels of service -- old flip phones, old smartphones, 4G smartphones that can share bandwidth with tablets and PCs. That makes an “average" not terribly useful. Still, the quest for a two-digit number on the bottom of a monthly bill is real. Here's a little more data.
J.D. Power and Associates said the average monthly bill was $71 in 2010, back when smartphone penetration was far south of the 50 percent mark it hit this year.
New research the company provided to NBC News on Monday offers a more salient data point on the subject -- the average wireless bill reported by consumers, including family plans, is $111.
The Labor Department issued data this month saying Americans spent $1,226 in 2011 on smartphone plans– or more than $100 per month -- up from $1,110 four years earlier. That led to a hand-wringing article in the Wall Street Journal suggesting that consumers are cutting back on other things, like eating out, to pay for cellphones. For perspective, the Labor Department says all consumer spending rose only by $67 during that recessionary span, meaning the rise in cellphone spending accounted for that increase and then some.
The CTIA offers a good explanation for its $47 number. Vice President of Research Bob Roche said it represents “average revenue per unit,” which is quite different than an average monthly bill. For example, a family with four phones who pays a $200 bill would be paying $50 per unit. He also said the group is considering updated ways to express monthly costs. Still, the trend line produced by the CTIA showing monthly fees shrinking slightly is hard to stomach.
It's undeniable that today's phones do much more than ever before, and the service is worth more. Not that long ago, we all waited until 9 p.m. to call friends so we didn't exceed our monthly minutes. Calling prices have plummeted. Meanwhile, we watch live video of sporting events while waiting for the bus. Reliability improvements have also allowed many consumers to turn off their land lines, saving them $40 per month or more.
It's insulting, however, to suggest that wireless prices have gone down. Not only have they gone up -- and this is my main area of interest -- they've become much, much more confusing, while regressing suspiciously towards nearly identical prices.
Inspired by the CTIA report, I went to AT&T, Sprint, T-Mobile and Verizon, looking for the least expensive but useful plan I could find. It's important to note that these are just sample findings, pulled for an imaginary consumer in a Seattle suburb. But they are typical.
All these firms have adopted a frustrating new model that lowers prices on calls and raises prices on data, often loading up bills with complicated tiers for data usage. The punishment for exceeding your level of data service is severe, nudging people toward overpaying for large-consumption plans as insurance. But even basic "feature" phone plans aren't a picnic. I'll lay out the details below, but here are the CliffsNotes -- a smartphone with a data plan so small you can barely use it costs $80. A smartphone with a good-enough plan costs $110. A usable call-and-text phone costs around $70. Emergency-only phones, when you can find them, are around $40.
Verizon's plans require an A+B formula -- a line fee, then a usage fee. For basic phones, the line fee is $30 per month. The least expensive calling plan is an additional $10 monthly, with pay-as-you-go 20-cents-each text messages. Total: $40 plus taxes, texts and fees. So there's one option that's below CTIA’s average. Want unlimited talk and text? That'll cost a $40 usage fee, for a $70-plus bill.
Verizon's smartphones cost $40 for access, and another $40 for an absolutely minuscule 300 MB per month data plan that's destined for overage charges. Add a modest 4 GB plan, and you're at a $110 price point. Verizon is heavily marketing the fact that data plans can be shared among families and various devices, a "benefit" that can do more harm than good if your kid eats up all your data watching videos on an iPad.
Sprint offers a $30 monthly calling-only phone, which covers 200 minutes per month and no texts. For $50, you get 450 minutes and a generous text plan -- but only on select phones. The first flip phone I picked required at least $69 per month -- sound familiar? -- and I only found the cheaper options with a lot of clicking around. Also, in addition to the usual taxes and fees, Sprint charges an administrative fee of "up to" $1.99 per line.
Sprint's smartphone pricing comes with slightly different engineering but much the same result. For $80, you get a lot of data but a fairly crippled talking plan -- only 450 minutes, with a 45-cent-per-minute overage penalty. For $110, you get unlimited data and talk.
AT&T offers a 450-minute plan for $40 to phone-only users, and $70 for unlimited calling. It's also gone to the shared data model, and its A+B pricing is slightly more confusing. For 1 GB of data, users pay $45 for the line and $40 for data. Again, that's an overage fee waiting to happen. Users who want 4 GB per month pay only $40 for the line and $70 for the data, for a total of $110. Amazing how common that number is.
T-Mobile's pricing is a little simpler - no line charges. "Classic unlimited" phone-only plans are $60 per month. Talk-only 500-minute plans are $50. For smartphone users, T-Mobile's $95 monthly plan -- offering 5 GB at top speed, which can be shared with up to 5 devices -- might be the best deal. Getting 10 GB will set you back $125 per month.
But all these plans suffer from a fatal flaw, warns Tom Pepe, CEO of Validas, a firm that analyzes cellphone bills for consumers and corporations. Users have absolutely no idea what they are getting when they are buying 2 gigabytes of data per month. With older cellphones, consumers could roughly guess how many 100-minute conversations they might have during a month and predict usage that way. But no one knows how much bandwidth that live baseball playoff game video stream might cost you (what if it goes into extra innings?) This makes it nearly impossible to make sensible plan choices. So as an odd form of insurance, some consumers are buying data plans that far exceed what they really need.
"Here's the problem. People are getting oversubscribed. At a gas station you get 10 gallons of gasoline and you use 10 gallons of gasoline. If you don't use it by the end of the month, the gas station doesn't come and take back the gas from you," Pepe said.
On the other hand, consumers who discover new video streams or other bandwidth-hogging apps get an ugly surprise at the end of the month. That's good for no one, he said.
"There is a cost to that money," he said. "(The carriers) are getting a million calls into their call centers with people complaining."
The voice cellphone market reached a tipping point when the prepaid and discount market became a real alternative for average consumers. There are some options for discount smartphone shoppers -- MetroPCS offers a $50 plan for 2.5 GB of data, for example, but availability and phone selection are limited. And MetroPCS is in the midst of being acquired by T-Mobile, making the future of its discount plans hard to predict. Boost, Virgin and TracFone also offer plans, but they are not yet taking a serious bite out of the big four’s market share.
Meanwhile, the most exciting – and disturbing -- data from the CTIA report was this: Data usage by consumers is exploding, up 104 percent on an annual basis. Consumers uploaded and downloaded 1.16 trillion megabytes of data from July 2011 to June 2012, the report said. How much data is that? CTIA’s Roche says it’s the equivalent of sending all the books in the Library of Congress across the network eight times an hour, every day of the year.
With the most popular carriers adding new tiers of data service all the time -- Verizon offers 12! Really! -- and smartphones quickly driving call-only phones into extinction, Pepe expects the problem to get worse before it gets better.
"There's going to be growing pains," he said. "But we are consumers, and we are going to keep consuming. ... It's going to be an interesting time over next 12 months.”
What size check do you write for wireless service every month? Tell us in comments below, or write to me directly at BobSullivan@feedback.msnbc.com
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