AT&T's Brilliant Move to Increase Customer Revenue
May 24th 2013 6:30AM
AT&T Inc. (NYSE: T) has come up with a brilliant way to increase revenue in its wireless unit. Its explanation of the new fees is almost too complicated to understand. The action is brilliant, and the charge is low enough that most customers will not notice it or will not bother to complain.
For most customers, their monthly bill will rise $0.61. Some media sources calculate this will improve AT&T's annual revenue by about $500 million.
The AT&T description of the reason the additional charges will be assessed is broken into two pieces, although the telecom does its best to comingle them. The first:
The Federal USF (Universal Service Charge), created by the federal government, is designed to help ensure first-class, affordable telecommunications service for all consumers across the country, especially residents in high cost rural communities and low-income customers. Additionally, the Federal USF provides for discounted telecommunications services for schools, libraries and rural health-care facilities. All telecommunications providers are required to pay into the Federal USF, and their contributions may be recovered from customers.
It is only good corporate citizenship to help people with low income, or those who live on farms, even if the government does not mandate it.
Additionally, AT&T tells customers it will add another charge:
The Administrative 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.
Customers get to help offset AT&T's infrastructure costs, which hardly seems fair, since they are part of the normal expenses of conducting a wireless business.
AT&T management knows that very few customers will flee to Verizon Wireless or Sprint Nextel Corp. (NYSE: S) if they feel that AT&T's charges are inappropriate. Changing carriers can be expensive and inconvenient. So the company has taken very little risk by raising billions of dollars and making an announcement that will be forgotten in a few days. The $0.61 charge is tiny enough to be missed entirely, or be too small to matter at all.
Filed under: 24/7 Wall St. Wire, Technology Companies, Wireless Tagged: featured, S, T