Customers often lack a decision-relevant understanding of service bills. How much and in what ways a customer uses a service usually affects the size of the customer’s bill. In such circumstances, customers’ access to data on their own use of a service is an important aspect of market structure.
Customers choices of wireless calling plans differ significantly from the least cost plan for their actual calling use. In a sample of customer data from a U.S. wireless phone provider between 2001 and 2003, 65% of customers on a service plan for at least 10 months choose a service plan that cost them more than an alternative plan. Choosing the wrong plan cost these customers on average 13% more per month. Customers chose plans so that under-allowance use was relatively common: on average 81% of customer-months had minutes less than the plan allowance, with the mean usage ratio being only 47% of the plan allowance. Customers’ misguided fear of incurring overage charges may have prompted their economically sub-optimal choices among usage plans.[1]
Wireless users currently have some means to access some of their wireless use data. U.S. Cellular offers free overage alerts to all customers who sign up for the alerts. T-Mobile currently offers free overage alerts on its Even More Plus Plan, but not on its Even More Plan. AT&T offers a free iPhone app that provides usage data. The independent service overmyminutes.com provides an alerting service that works with all major national wireless providers. These services seemed to have developed since the early 2000s.[2]
Government-mandated information disclosures of product use complement mandated disclosure of product attributes. Disclosure regulations currently concern product attributes. However, for consumer choice among usage-sensitive service plans:
a truly informed choice cannot be based on product attributes along. To fully appreciate the benefits and costs of a cellular service contract, consumers must combine product-attribute information with use-pattern information. … The disclosure regime should be redesigned to ensure that consumers have both categories of information.[3]
Unfortunately, decision-relevant use data is likely to be voluminous and complex. Mandating service provider disclosure of use information to customers would also require defining an informative reporting structure for the data. That would be a difficult regulatory task for a rapidly evolving service market.[4]
Requiring an application programming interface (API) that exposes to an authorized customer agent all of the customer’s billing-relevant use data is an alternative to direct information disclosure requirements. An billing-information API requirement could represent the principle of a customer’s right to billing-relevant data while avoiding administratively specifying information-reporting forms. Markets for automated bill auditing and consulting agents would be good means for fostering innovative, effective information reporting to customers. Such markets could respond rapidly to service and pricing-structure changes. Moreover, anticipating the development of agent markets would also dynamically discipline service providers’ communications directly with their customers.
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Data: U.S. wireless customers’ service use under different service plans (Excel version)
Notes:
[1] Statistics based on bill sample in the Telecom Dataset at the Center for Customer Relationship Management, Duke University, as summarized in Oren Bar-Gill and Rebecca Stone, “Mobile Misperceptions,” Harvard Journal of Law & Technology v. 23, n. 1 (Fall 2009), Tables 1-3b. Id. estimates that the “total [U.S.] annual reduction in consumer surplus” from consumers’ wrong choice of plans is about $12 billion. That estimate does not account for consumer welfare gains from changes in minutes use in moving to the optimal plan. Hence it represent an estimate of cost savings, not consumer surplus in the technical economic sense.
[2] A rudimentary journalistic investigation of five U.S. national cellphone providers in 2002 found major difficulties in getting answers to a simple question: “how many minutes are left on my monthly plan?” See Sherrie Nachman “Trying to tally cellphone minutes rings up frustration,” The Times Union (Albany, NY) June 22, 2002 p. D1. A 2007 Working Paper stated:
Developers report that carriers have often forced them to remove or limit “call timers” from their phones. Call timers can keep track of the length of individual phone calls, and can also keep track by month, year, or in total. The carriers, reportedly, are concerned that consumers might easily develop an independent and possibly different record of their mobile phone usage.
See Tim Wu (2007), Wireless Net Neutrality: Cellular Carterfone and Consumer Choice in Mobile Broadband, p. 9. This paper did not provide documentation for these reports. CTIA (2010), UPDATING ASSUMPTIONS: Reviewing Tim Wu’s Wireless Net Neutrality Working Paper Three Years Later, noted this claim (p. 8), but did not present specific evidence to the contrary (p. 9). Whether billing-relevant information is available directly from the device or from the service provider network is likely to be of secondary importance for mobile phones that offer standard web access. Bar-Gill and Stone (2009) p. 87; p. 114, n. 244; and p. 116, n. 247 provides a somewhat uneven view of this evidence.
[3] Bar-Gill and Stone (2009) p. 113.
[4] Apart from reporting use information, service bills often contain obscure line items.
