RonBoyd
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Oh! I see. It is all our fault.
Is There a Method in Cellphone Madness?
And of Prepaid Plans?
Is There a Method in Cellphone Madness?
“The whole pricing thing is weird,” said Barry Nalebuff, an economics professor at the Yale School of Management. “You pay $60 to make your first phone call. Your next 1,000 minutes are free. Then the minute after that costs 35 cents.”
In many ways, however, the least important factor in setting prices is the actual cost of providing cellular service. Cellphone companies resemble airlines, that other industry whose oblique prices exasperate consumers. Think of a cellphone network as one giant airplane that costs tens of billions of dollars to build. The cellphone companies don’t really know how much it costs to handle a call to Aunt Suzy in Syracuse, any more than an airline can calculate a specific cost for Seat 12B.
In 2004, Cingular Wireless (now AT&T) introduced what it called rollover minutes, with plans that allow unused minutes of talk time to be used in the following months.
An economist would see Cingular’s move as a price cut. After all, why buy a big plan as a cushion against what might be an occasional month of high use when you can accumulate your minutes from low-use months? In fact, it worked the other way around, encouraging people to buy larger plans. It turned out that people were happy to buy extra minutes if they knew they could keep them, rather than having them expire.
In May 2004, Sprint answered the growing complexity of cellphone plans with a much more straightforward approach. Its Fair and Flexible plan offered 300 minutes for $35, and each additional block of 50 minutes for $2.50. It was a plan that an economist could love.
Unfortunately for Sprint, customers hated it because their bills varied a great deal from month to month. ”Nobody thinks about getting the lowest cost per minute,...”
And of Prepaid Plans?
Lower prices that are predictable and easy to understand. Maybe an economist won’t find that weird. But will the consumer?