Fighting Back Against Cell Phone Carriers’ Price Hikes
Posted on by Jon Colgan
@ATTCustomerCare thanks for the price increase! “Money is to Monopoly money as ethics is to business ethics.” – Frank Hubert
— Barry Spar (@Barryspar) April 16, 2013
Have you ever complained to your carrier about a mysterious fee increase and asked to be released from your contract? If so, you probably reasoned that, since your terms of service allow you to terminate your contract with no early termination fee when your carrier makes a unilateral change that is material adverse to you, all you had to do was specifically object to the price increase and your carrier would have to let you out ETF-free. So you picked up the phone, waited on hold for about five minutes, then stated your case to the first rep who answered.
Two minutes later, you began to question your understanding of the English language. The carrier rep likely responded to your complaint by saying that the price increase was not materially adverse and therefore not an opportunity for you to leave your contract ETF-free.
Here’s why that’s rubbish. The counterpart to materially adverse is materially enriching; and if the price increase were not materially enriching to your carrier, they would not have raised the price. They were enriched at the same time you were adversely affected. That’s how price increases work: somebody gains, somebody loses.
We all know that carriers are slippery when interpreting their own contracts. So let’s define “materially adverse.” In this context, “material” means important enough to warrant attention and of a nature that would affect your decision-making. “Adverse” means harmful. Price and provisions are classic material components of any agreement. When a carrier increases the price it charges customers, such a change would affect a reasonable person’s decision-making.
Just how enriching to the carrier was the price increase you objected to? Let’s use AT&T’s May 2013 admin fee increase as an example:
MOBILITY ADMINISTRATIVE FEE Effective May 1, 2013, the Administrative Fee will be $0.61 per line per month. 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.
Now, $0.61 might not sound like much, but some people have multiple lines. In addition, multiplied by 115.78 million customers, AT&T makes an extra $847 million a year from this unilateral price hike. The AT&T Wireless Agreement says:
If we increase the price of any of the services to which you subscribe, beyond the limits set forth in your customer service summary . . . you may terminate this agreement without paying an early termination fee or returning or paying for any promotional items.
In general, all major cell phone carriers follow the contract guidelines set forth by the wireless industry’s main lobby organization, CTIA. The CTIA Consumer Code says:
Carriers will not modify the material terms of their subscribers’ contracts in a manner that is materially adverse to subscribers without providing a reasonable advance notice of a proposed modification and allowing subscribers a time period of not less than 14 days to cancel their contracts with no early termination fee.
Here are two places that your logic is confirmed. You, the customer, have the right to cancel ETF-free when your carrier increases your price; it’s written right there in both the carrier’s terms of service and CTIA’s guidelines. The only conclusion you could draw, then, from the rep’s canned response is that carriers don’t follow their own rules. Yet they insist that you do.