Sunday, November 22, 2015

Sneaky Billing Practices - Modem Rental Fees.

Should you pay a monthly fee to rent a modem that costs less than $100?

I recently was viewing my AT&T bill and noticed it was $13.30 higher than normal.   I went on the website to check what was going on.   It seems they decided to start charging me $7 a month for "equipment rental" for my UVERSE modem.   What the heck?

When I returned from vacation, both my UVERSE modem and NetTalk DUO were burned out - no doubt the victims of a power surge (either a lighting strike or a power interruption).   AT&T sent over a technician who installed the new modem (in ten seconds) and then left.   Nothing was mentioned about there being a charge for this service.

The original modem was free with the setup of the service.   There were no monthly "rental" charges.  Now, since the modem was replaced, I am told I have to pay a monthly rental fee.

No doubt, buried in the "Terms of Service" there is some boilerplate language to this effect.  I will have to check on that.

Now, a lot of people would say, "Gee, Bob, it's just $7 a month!  Why bother with this sort of thing?"   But as I have noted before, the biggest single hole in your budget is recurring subscription charges and over time, you end up with subscription creep as these charges get larger and larger, and subscription fatigue as your monthly bills start to escalate.   $7 a month is a 12% rate increase, all without having to enact a rate increase.

Under my existing contract, the modem was free.   Since I had it replaced, they now charge $7 a month.   As an Electrical Engineer who has written a number of modem Patents, I can tell you it is not that difficult for a service provider to disable a modem remotely and then tell the customer it is "broken".   This sort of thing is ripe for fraud.

I contacted the billing department and they issued a credit for $13.30 immediately ($7 for one month rental and $6.30 for a partial month).   However, they indicated they could only refund money on the issued bill and could not take this recurring charge off the bill.

The two options, I was told, was to either keep paying the $7 rental fee, or pay a one-time purchase fee for the modem.  I was transferred to a "specialist" who informed me that AT&T no longer sells the modems.  So unless I bought a third party modem, configured it myself (which I am sure AT&T would not go out of their way to help with) I am stuck with this charge.

I checked online.   It seems that AT&T will not support third party modems, although they used to sell the modems to customers.   Today, you have to use their modem, and you have to pay the rental fee.  Period.  This amounts to a rate increase, slammed to the customers.

AT&T is not alone in this practice.   Time Warner was recently sued for "slamming" a $3.95 rental fee on existing customers.   As the attorney in that case noted, people don't notice these small fees, taxes, and whatnot added to their bill, and often just pay it without thinking.  Over time, a $39.95 a month bill morphs to $49.95 to $69.95 and eventually to over $100 a month.   It is the old slow-boiling a frog trick - you raise the temperature a little bit at a time and the frog won't jump out.

Of course, as a consumer you do have choices.   You can try the competition, or you can choose simply not to consume.   At the present time, having a business (even part-time) I have to have reliable Internet service in order to be able to upload documents to the Patent Office.   It would also be nice to be able to stream Netflix, but that is not as important, nor is it like oxygen.  We lived without streaming for years, and we could learn to live without it again (and in fact, it might be an improvement to our lives!).

The competition is limited.   We have Comcast Cable (now called Xfinity - who comes up with these names?) and no one has nice things to say about Comcast, of course (1.1 stars on Google!).   They offer promotional come-ons, such as $24.99 25 Mps service (about three times faster than UVERSE).   But once again, they have a $10 a month modem rental fee - the highest I've heard of so far.   Some bright young MBA no doubt came up with this modem rental fee business.  He will be the first one up against the wall when the revolution comes.

In addition to the modem rental, there are "taxes and fees" which are not enumerated.  Plus an installation fee of $50 or so (it could go as high as $500, in some instances).   So the "promotional" rate could be as high as my current rate plan.   Once the promotion is over, the base rate goes to $66 a month, plus modem rental, "taxes and fees" etc. or close to $100 a month.  OUCH!

This takes us to another strategy, of course, and that is the constant-cancellation model.   As I noted with Sirius XM, if you sign up for a $5 a month promotional rate, you can get the service for cheap, so long as you cancel it before the rate goes to $17.95 a month.   Then you wait a month, they send you another promotional offer in the mail, and you start over again.   This has to be a staggeringly expensive way to do business, as each transaction requires a half-hour call-center call for what is in effect a loss-leader transaction on a dying business.

But some of my neighbors play this game with television and internet.  They go with UVERSE and DISH (as a package) for 12 months, and once the promotion is over, they unplug and then go to COMCAST and XFINITY for the next 12 months - each time, paying the low "promotional" rate.   By constantly cancelling their service, they get the best rates.   And as with Sirius XM, if you do cancel, they send you to a "cancellation specialist" who then makes you a low-ball offer to keep with the service.

This is a staggeringly inefficient way to do business!   Techs are shuttled back and forth to connect and disconnect and do installs and whatnot.  Equipment has to be picked up or abandoned.   Cables have to be routed, installed, and then ripped out.   It is, to say the least, idiotic.    Wouldn't it be better to offer a lower rate and retain customers?

This was my philosophy as a landlord.  Most landlords increase rents every year - to the point where the tenant decides to move out to a cheaper place, or to buy a house (by raising rents, you made this decision easier for him).  But I always kept rents flat (after all, I had positive cash-flow, why raise them?) or if I had to (due to tax increases) kept rent increases as modest as possible.   The result was, tenants who stayed for five years or more, and were maintenance-free, low-hassle, and low-cost.   The damn thing was on autopilot.

But, it is like my previous posting on scalpers.   The cable companies and AT&T are not going to change their practices in my lifetime.  So railing against them is futile.   You do have choices, however.

There are other vendors out there.  For example DishTV offers Dishnet, but the data rates are limited, the caps are low, and the service cost is pretty high.  Ditto for Hugesnet.

I do have a Verizon "hotspot" which is a cellular device.  It is a cell phone without a display, basically.  (Most cell phones can be used as hotspots, too, but there are pretty steep monthly fees and data charges).  You pay $X per month, and you get internet service (wirelessly) through the device, up to the data cap limit (based on how much you pay).   The data rate depends on signal strength.   In better areas, I found it could stream video, but whether it plays an entire movie on Netflix, I don't know.  I think, over time, perhaps the wireless carriers will expand their networks and this could be competitive with wired approaches.   But for the time being, it is only practical as a mobile solution and could put wired companies out of business.   But that is in the future.

As I noted in my Scalper posting, we always have the final option:  to consume less.   Do I really need Internet service?   No, not really.   It is handy to have a fast internet connection to upload and download data for work.   But I was able to use slower connections, including WiFi hotspots, while on the road.  And funny thing, while on the road, I was more relaxed, not being plugged into the Internet all the time.

And as I lurch toward retirement, I can see a time where maybe I will sell my PC computer and maybe once a week, ride my bicycle to the local cafe and use their WiFi to erase all my e-mails, or perhaps look on line for things I might need.   It would be a lot cheaper and a lot less stress.

You see, I find the Internet - like cable television - to be less and less enjoyable over time.   It has become a sewer for the most odious of people on the Left and Right, as well as the sort of place where all sorts of bad things happen.   Nothing good ever came of Facebook, Twitter, or whatever.  On the other hand, people have lost lives, jobs, and careers, over the nonsense that goes on there.   Unplugging from the media is always a good idea.   And the Internet has become media.

It is hard to imagine, of course.   But then again, over a decade ago, the idea of people unplugging from Cable TV was unimaginable.   When I gave away my television to my neighbor back then and told her I was unplugging from Cable, she was appalled.  I might was well have said I was joining Al Qaeda.

But maybe unplugging from the Internet will be the next big thing - in a decade or so.    And maybe the world would be a better place for it.   We are too connected today, and I am beginning to think that the Internet, far from being a savior of mankind, will be its ultimate downfall.

UPDATE:  These sneaky billing practices do have one positive aspect - they force us to look at our bills and shop around.   Since I spend the months of August and September on the road, one thing I might try is to disconnect UVERSE when I leave (saving two month's service, or over $120) and then sign up anew under Mark's name, or sign up with Comcast.   Then next year, repeat the process.  Since you are constantly getting the "introductory" pricing, you may come out ahead, playing one company off against the other.

One thing is clear:  With more cord-cutting going on, and more and more people streaming videos, the ISPs now realize they control the gateway to the home, and are pricing the service accordingly.   When I first started out here with AT&T (then Bell South) in 2008 my Internet AND Phone service was as little as $21 a month, combined.   Today, these charges are about three times as high, while inflation has remained relatively flat.

One downside to the "constantly cancel" strategy is that (1) the telcos and cablecos will catch on to what you are doing and stop making discount offers, and (2) with each new contract, you are signing on to the new ToS, which means you may lose "legacy" privileges, such as no modem rental fees, or no data caps.

Ultimately, not consuming at all, or consuming far less, is really the only weapon you have in your arsenal.  Streaming television seemed like a great, low-cost alternative to cable - until the ISPs started raising their rates!

UPDATE 2022:  Since writing this, we dumped every form of wired communication and now use a Affordable Communications Act (ACA) "hotspot" which costs $25 a month for 100GB of data.  Portable - it comes with you on vacation!  Plus no hidden fees (not $25 plus tax, or plus access charges or plus, plus, plus - just a flat $25).  And it streams Netflix and YouTube flawlessly!  Never looked back!