It’s time for a new cell service business model

A resent consumer reports article compared cell services and Sprint ranked last among the top four services across the board. I use Sprint and have never had any real troubles. I have also found that the coverage is great whenever I travel. They also have the best price for data and their rates are reasonable.

I am not writing this in defense of Sprint though. I am pretty upset with American cell service in general.

Currently cell phone service business models are built on a foundation of using gimmicks to get a customer to buy then punishing them for long term loyalty by raising prices and excluding them from promotional deals.

The biggest gimmick of all is the free or reduced price phone. I wish that cell providers would start a new plan that would bring in the same amount of money, but would allow for current customers to benefit more.

The best solution for the customer would be an à la carte system that allowed users to leave or cancel services whenever they wanted. This would promote competition and quality. It would also be very costly to the provider and all costs in business get passed on to the consumer.

Ultimately all costs no matter what model is used get passed on to the consumer. So, the best option is to find a model that passes the costs on evenly.

Today’s model uses loyal customers to pay for free phones and services used to bring in new customers. It’s nearly a communist, or at best, socialist business model and the cell phone companies are struggling.

This week Sprint announced that they are laying off 4,000 employees. Strangely this comes about a year after a plan restructure that raised rates and divided up costs charging the customer for individual features rather than bundle pricing. They also began charging some of the highest price for overage minutes in the industry. Call this plan. Essentially, they raised taxes to pay for all the free phones and promotional offers. Now they are having a hard time keeping customers.

I think the best solution for everyone involved would be to sell the phones and include the service for free. Plans could vary with the phones – more expensive phones would include more elaborate plans. If someone wanted a simple phone with a big plan, they could pay a little more up front and vice versa.

I would be willing to pay $400 or more for a nice phone if it came with two years of service and unlimited text and Internet.

Under the current model a person can sign up for a free phone and use it until they are tired of it then switch to a different provider who will pay their cancellation fees and give them another free phone. Let’s do the math:

COMPANY A
Free phone: $150-200 or as much off of an expensive phone.
Early cancellation fee: $150 will also pay early cancellation fee if switching from other provider.

COMPANY B

Free phone: $150-200 or as much off of an expensive phone.
Early cancellation fee: $150 will also pay early cancellation fee if switching from other provider.

DISLOYAL CUSTOMER:

Switches between company A and company B in order to keep getting new phones.

LOYAL CUSTOMER:

Keeps service for years and pays for the rising costs of the free promotions game being played by the disloyal customer.