Understanding Upgrade Fees

[msherro#AC]

So there has been some scuttlebutt about upgrade fees on various news sites lately. Engadget snarkily referred to it as paying for the privilege of doing business with a carrier. Since I routinely explain the fee to my customers, it seemed pertinent to provide a little insight here as well.

Activation/Upgrade Fees are not assessed as a way of nickel and diming customers, nor are they just for the privilege of doing business with a carrier. The fee actually serves a legitimate purpose and when one actually understands why they are charged it is just good business.

Activation/Upgrade Fees are assessed to help offset Network Operational Costs. Let's be real and honest here: Device Subsidies are quite high, 4G LTE deployment isn't anywhere close to cheap, and the carriers do have to (Dare I say it?) make a profit. There has to be a balance somewhere, hence the upgrade fee. The fee provides the carriers an offset, however small, to the cost of operating the network. Otherwise pricing increases are the other option.


I'm a customer myself. I can understand why the fee seems irritating but it actually is a good business decision. There are number of worse options available.

 

[Fausty82]

So there has been some scuttlebutt about upgrade fees on various news sites lately. Engadget snarkily referred to it as paying for the privilege of doing business with a carrier. Since I routinely explain the fee to my customers, it seemed pertinent to provide a little insight here as well.

Activation/Upgrade Fees are not assessed as a way of nickel and diming customers, nor are they just for the privilege of doing business with a carrier. The fee actually serves a legitimate purpose and when one actually understands why they are charged it is just good business.

Activation/Upgrade Fees are assessed to help offset Network Operational Costs. Let's be real and honest here: Device Subsidies are quite high, 4G LTE deployment isn't anywhere close to cheap, and the carriers do have to (Dare I say it?) make a profit. There has to be a balance somewhere, hence the upgrade fee. The fee provides the carriers an offset, however small, to the cost of operating the network. Otherwise pricing increases are the other option.


I'm a customer myself. I can understand why the fee seems irritating but it actually is a good business decision. There are number of worse options available.

I understand your point about the cost of running a wireless enterprise... but that's the business that they chose to be in. Just because it costs money to run the network, upgrade the network and subsidize equipment doesn't mean that they can nickle and dime us to death... and I DO see it as nickle and diming us. And to raise the fees by 67% (VZW) or 100% (AT&T) is totally unwarranted. Are you trying to say that the providers are using the $18 to $36 "upgrade" fees to subsidize the cost of network expansion and LTE rollout? That is preposterous.

Personally, I'd love to see contracts lowered to 1 year, and to see the wireless providers STOP subsidizing the cost of equipment for the end user. Prices for the equipment would drop substantially, and the wireless carriers would actually have to compete for our business. As it currently sits, once you're locked into a contract, they have no incentive to innovate or improve their offerings.

Don't get me started on the obscene charges for text messaging... and since voice usage has dropped dramatically, they continue to jack with the cost of data, and continue to add and increase other fees.

I understand that wireless service is a competitive proposition... but let them compete with innovation and work within the structure of receiving payment for service and not jacking up bogus fees and then trying to justify them by telling us how much it costs to roll out LTE. That is simply B.S.

 

[Neutrino]

You touched on a number of good points. The real issue is one of transparency. All one has to do is look at one's bill to see how we are nickel and dimed on taxes, excise fees, and fees on taxes of fees. Most of these fees are a result of tariffs imposed by the state and federal government. Sure doesn't help the transparency issue, though.

A good analogy is gasoline and why gas prices vary so between locations. 30 cent difference between states for gas coming from the same barrel of oil raises eye brows.

What is the solution? Reading, asking questions and being proactive.


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[Just_Me_D]

...(snipped)...Activation/Upgrade Fees are assessed to help offset Network Operational Costs.

That is understandable to a point

Let's be real and honest here: Device Subsidies are quite high

okay. ,

4G LTE deployment isn't anywhere close to cheap

That maybe so, but it is something that the carriers introduced and promoted to the buyers in an attempt to sell devices and services. ,

and the carriers do have to (Dare I say it?) make a profit.

Everybody in business is in it to make a profit, but not exclusively.

There has to be a balance somewhere, hence the upgrade fee.

I disagree with having to shoulder the burden for something a carrier develops, introduces and promotes to entice customers. The customer is still the most important part of business and thus, having me as a customer should be enough & keeping me as a customer should be a top priority. Not forcing me to shoulder a burden I. Addition to trying to force me to adhere to a 2-year contract.

The fee provides the carriers an offset, however small, to the cost of operating the network.

That may be so, but if the customers rebel like many did when Bank of America attempted to charge a $5 fee, will the carriers opt to forego the fee?

Otherwise pricing increases are the other option.

I'd prefer to pay a higher price for the phone instead of being nickel and dimed to death.

I'm a customer myself. I can understand why the fee seems irritating but it actually is a good business decision. There are number of worse options available.

I'm sure it is and I'm sure there are.



Just Me, D
(Tapatalk - iPhone 4S)