more on Locked In a Cell: How Cell Phone Early Termination Fees Hurt Consumers

[David Farber <dave () farber net>]

Begin forwarded message:

From: Bob Frankston <Bob2-19-0501 () bobf frankston com>
Date: October 16, 2005 3:29:09 PM EDT
To: dave () farber net, 'Ip Ip' <ip () v2 listbox com>
Subject: RE: [IP] more on Locked In a Cell: How Cell Phone Early  
Termination Fees Hurt Consumers


There's another way to look at those termination fees.



First we need to get past the lie that they are just tied to the cost  
of the device when they are typically associated with the account.



Any business has a cost for acquiring a customer – if those fees are  
indeed vital then it’s an indication of something very wrong in this  
marketplace. Acquisition costs are part of doing business – if they  
are the dominant cost then we have another strong indication that  
here is something fundamentally flawed.



If the offerings are interchangeable commodities (because customers  
find no compelling difference) and there are few other costs then why  
isn’t cellular telephony just a mundane commodity. As I’ve pointed  
out – we don’t need the carriers to do handoffs as the devices  
themselves can maintain the relationships. All we need are access  
points. Instead we get a maze of twisting winding billable passages.  
Carrier 802.11 will be the same!



Coke and Pepsi also have few costs beyond acquisition and retention  
but they can’t charge termination fees to consumers (though they do  
control distribution systems). Unlike the Carriers, they haven’t  
cornered the market on the sugar and water in the same way that the  
carriers control connectivity.





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