If Other Businesses Billed The Way Telcos Bill

from the fees,-huh? dept

Wed, Mar 29th 2006 4:07pm — Mike Masnick

The fact that telcos like to add in all sorts of official-looking (but certainly not official by law) "fees" as a way of increasing revenue while still being able to claim lower service rates in their advertising is nothing new at all. However, with Broadband Reports pointing out AT&T's latest "local connectivity charge," which appears to be a totally made up fee that allows them to raise rates up to $4 a month without actually saying they're raising rates, we're reminded of a past discussion on this topic. The problem isn't that these companies need to recover their costs, but that they do so in such a sneaky way. Every company selling stuff hopes to cover their costs, but they usually bake those costs into the price they advertise, rather than tacking on the fees. As we noted a few years ago, imagine how a pizza would be priced, if using the same system: "It's just $3, but there's a $3.50 "crust fee," a $9.38 "oven fee," a $4.50 "service fee," and a $2.18 "cleanup fee." Plus tax." Of course, we didn't bother to mention that all of those extra fees are hidden in the fine print and you don't find out about them until it's too late and you can't change your mind.

So why not expand this to other industries as well? Want that pair of jeans? Only $10. However, once you've given your credit card to the person at the counter you discover there's also a $1.36 "zipper fee," a $2.25 "hanging fee," a $4.89 "service fee" and the always popular "inventory cost recovery fee" of $7.26. Plus tax. Magazine subscriptions? Well, it's $25 for a year-long subscription, but don't be surprised when you get the bill for the $4.33 "paper price adjustment" along with the $6.26 "postal service delivery charge." Maybe someone can start breaking down the fees to make sure they include all related parts. That chair? Why it's only $35, plus $20 for the parts, $45 for the labor and another $15 for the profit. Won't that be fun? Any other ideas on how others might try to use such a system? I won't even bother to guess how the entertainment industry would take advantage of this.

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30 Comments

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ChronoFish, 29 Mar 2006 @ 4:32pm

Why not say "no"
Sure they rake you over coals.... But you do have the power to say no.

I have. I've said no to my long distance carrier (I now use skype) cable TV (I only watch what comes over the free air-waves) - and *gasp* I've ditched the Cell Phone.

Anything that starts to incur fees I'm getting rid of - Whether it's Quicken software or magazine subscriptions.

I don't mind paying for a product. I do mind paying out the wazoo for services that I don't need.

-CF
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Al, 29 Mar 2006 @ 5:31pm

they just steal you money
Have you ever use a prepay calling. If you have you have been rip off. Telecom company charge all this because they can. Just also want to let people know on your cell there something call rounding. if you make a 30 sec call the cell company charge you a full min. and cell company love voice mail. Do you know why? They bill once for the call to leave the message and once for you to listen to the message. How great is that. Telecom Company a hair lower then the gas company and a hair over from crook
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Anonymous Coward, 29 Mar 2006 @ 6:11pm

Just called to cancel my Vonage account. They told that there was a $42 cancellation fee. Not an early termination fee, it's a cancellation fee. Everybody has to pay no matter how long you stay on the system. Now THAT is a rip-off.
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Matt Johnson, 29 Mar 2006 @ 6:23pm

Vonage Cancellation Fee
Yeah, I got hit with that, too. Nice little way to say "fuck you" to the customer. Plus, it MORE than offsets that free month that they "give" to you in the beginning. I can't understand why they charge that, unless it's a punative measure designed to keep people from cancelling the service. Bastards... I will NEVER use their service again, and what's more, I'll tell everyone that I know not to, either. I'm realistic enough to know that this won't really affect their bottom line, but if I can keep my friends/colleauges/etc from getting hosed by the mystery fee, then I will.

I hope that they choke on it.
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Stu, 29 Mar 2006 @ 6:36pm

If Other Businesses Billed The Way Telcos Bill
Other businesses do bill that way.

My favorite example is "shipping and handling". They'll charge you $7.95 to shove something into a padded envelope and stick on 50 cents worth of stamps - plus the price of the item.

I just saw a tv ad for a credit card sized piece of useless crap. $9.95 each but if you order TODAY they'll give you two of them - BUT you have to pay S&H on both.

I didn't inquire but I bet the total is way over $20.
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Blake, 29 Mar 2006 @ 6:56pm

Not in my country
In Australia we put in rules to stop that. The price you advertise has to be the price you charge. No plus taxes, no plus fees.

Of course there are small ways around it, but for the most part companies do the right thing and the price advertised is what you pay.

The main offenders were airlines (who liked to add fees and taxes on anyway) and their excuse was the other airline was doing it... They were forced to clean up their act though.

And online stores still charge extra for shipping and handline, which is fair enough as that can change depending on whats ordered. Some stores are very clear on shipping others are much more ambiguous.

Finally the phone companies, we arent as locked in as the USA but their contracts arent good at all. Oh well what do you expect.
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Anonymous Coward, 29 Mar 2006 @ 8:09pm

Re: Not in my country
HMM... what-do-I-expect?

A hell of a lot more than "here is your f'n service our way, now you better be happy and don't complain because we can take it away."

Well, telcos and all of that crap, you can have your business your way, but be careful... some of us customers are forming lobby groups that just may get large enough to put your business in jepardy. This along with getting a few well placed telco friendly political puppets knocked out of office. Unfortunately, the telcos have already contacted us via Guido and Bubba too bad they went home in cuffs for intimidation and assalt. So please keep it up ma bell... I'll be glad to sue you out of existance.
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Jake, 29 Mar 2006 @ 8:49pm

Re: If Other Businesses Billed The Way Telcos Bill
I used to think that too, until I began a new career in which one of the many things I manage includes our company's shipping department. Sure, we may charge 7.50 to ship something out when UPS only charges US 3.95 - BUT, I have to include in that cost the price of paying 100 + employees to manufacture, assemble, pick orders, quality check, load pallets, arrange deliveries, manage inventory. I also have to maintain my equipment, purchase supplies, replace parts, maintain the facilities, etc. etc.

There's a LOT more involved in any decent sized operation that one random guy stuffing something in a padded envelope.

Now granted, a lot of companies do screw you over and charge you ten dollars or more, then turn around and "ship" your item via media mail, and that is uncalled for. Other companies simply up the price of the item, and claim to have free shipping. In our case, we use reliable, trackable carriers, premium shipping supplies (no padded envelopes), and our shipping fees are easily found on our website and literature, so it's no hidden cost.

Disreputable companies are everywhere, but in many cases, S&H charges are perfectly reasonable, once you realize that warehouses are not cheap, and workers that will work for free are not readily available.
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Anonymous Coward, 29 Mar 2006 @ 9:20pm

Re: Vonage Cancellation Fee
From their terms of service

3.6 Termination Fee (Does Not Apply to Business Plus Customers). You will be charged a termination fee of $39.99 per voice line if your Service is terminated for any reason after the Money Back Guarantee period and within the first year following the activation of your Service.

While I'm not agreeing that this fee should exist, it is only applicable for the first year. Most cellular companies make you sign a 2 year contract, and have outrageous early termination fees.
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Anonymous Coward, 30 Mar 2006 @ 12:28am

Why Vonage anyway?
when if you already have a cell phone you can usually get another added on for an extra $10 bucks a month for the service, or if you INSIST on using a hard-line for a home phone, I think Cox has a phone service for about $20 bucks a month
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ccc, 30 Mar 2006 @ 5:12am

"I used to think that too, until I began a new career in which one of the many things I manage includes our company's shipping department. Sure, we may charge 7.50 to ship something out when UPS only charges US 3.95 - BUT, I have to include in that cost the price of paying 100 + employees to manufacture, assemble, pick orders, quality check, load pallets, arrange deliveries, manage inventory. I also have to maintain my equipment, purchase supplies, replace parts, maintain the facilities, etc. etc.'
Yes, and a car manufacturer has to pay people to build the cars. Should they charge an assembly fee? A "factory lighting and heating cost" fee?
You have just essentially stated "I found out that it actually costs money to run a business." Well, no shit, sherlock.
That's why you CHARGE MORE for a product than it actually costs you to make/purchase and supply it to the buyer for.
I had a mail-order business, and we never charged a handling fee - exact shipping costs only. The cost of running the business (which includes paying salaries and buying supplies) is figured into the cost of the ITEM.
There is only ONE reason to charge seperate fees, and that is to make the price of the item SEEM lower to the consumer.
We didn't do that - we treated our customers with respect and didn't insult their intelligence, and gave them excellent service with a no-questions-asked guarantee. We may not have been able to quote the "cheapest" price by using these deceptive practices, but we did have very loyal and appreciative customers.
You can take the high road and be successful.
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tedo, 30 Mar 2006 @ 6:12am

Re: Why Vonage anyway?
whats all this "hard line" talk when you mention Cox? arn't they a cable provider? and the last i checked Cable providors dont provide POTS service.

Regarding the fee's: you can thank the FCC for ALLOWING charges like that. I work for a small CLEC and we charge a $6 line fee that is "FCC Authorized" we dont have to pay it, but the fcc allows us to charge it if we see fit.

I can also tell you that my 2 years with a start up phone company has shown my just how much the larger Telco's just dont give a f*ck. it can take weeks, sometimes months, to get something done that is mearly a matter of someone sitting and typing in information.

"oh you need 10 business days to correct this persons record to spell thier last name right? yea that sounds fine. in fact why dont you just mess it up when you 'fix' it so you can take longer? yea that sounds nice. F*UK YOU VERIZON."

i hate my job. thanks to the bigger companies i have to deal with.
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Stoolio, 30 Mar 2006 @ 6:37am

Re: Why Vonage anyway?
Cable companies offer phone service now. And it interfaces with your internal cat3.

It's not the same as Vonage either.
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Wizard Prang, 30 Mar 2006 @ 8:36am

Two words...
"Shop Supplies"
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mark, 30 Mar 2006 @ 9:32am

After years of hassles involving innaccurate charges for everything besides local calls, dumping calls I didnt make on my account, and trying for months to get DSL, I signed up for Broadband Phone through the local Cable TV provider and told QWORST I was finished with them. Billing has been correct ever since, and as long as the UPS at home holds out, it works with the power out. Long Live Fiber!
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Anonymous Coward, 30 Mar 2006 @ 9:39am

Add the "Federal Rural Pizza Recover Fund" fee, too, to ensure that rural people far away from pizza stores have access to pizzas at "fair" prices, too.
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Chris Maresca, 30 Mar 2006 @ 9:43am

Re: Why Vonage anyway?
I use Sage Telecom at home. It's a regular POTS line roughly the same price as Vonage.

For work, we use a VoIP hosted PBX from Zivva Office. Works quite well, although their service is pretty new, so there are still a few kinks in it. We looked at a bunch of others, but this was the best price/performance.

Chris.
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Chris Maresca, 30 Mar 2006 @ 9:47am

Re:
There are a LOT (most?) of mail order business models that make their money from 'shipping and handling'. The price of the products are close to zero margin for the business. Why do you think the prices are so cheap? Same is true for big online retailers like Buy.com...

However, you often don't notice it as they get a huge discount on shipping charges (often up to 50%), so the shipping and handling charges look fairly reasonable.

Chris.
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Anonymous Coward, 30 Mar 2006 @ 10:18am

I haed two lines on Vonage. They wanted to charge me the termination fee on one line that I didn't need any longer. I told them that if they charged me termination on that line, they could cancel both. So instead of making $25 month indefinitely from a happy customer they got $80 from a pissed off one. With that attitude, they'll be out of business soon .
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george, 30 Mar 2006 @ 10:31am

Re: Re: buy.com shipping charges?
Just like Amazon, Buy.com has free shipping if you spend over $25 on most items. How do you make money on that?
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jdw242, 30 Mar 2006 @ 11:47am

lap dance?
could you please delineate what a lap dance at the local tt club will cost me; the full break down, please...
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qkslvrwolf, 30 Mar 2006 @ 1:07pm

Re: Why not say "no"
Yes, but what do you do for internet? I can basically live without everything, but internet is required for work, for school, and, frankly, for most of my entertainment.

I mean, I plan to go with speakeasy soon, and hopefully that'll take care of things...but still.
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Henry Havelock Ellis 1929, 30 Mar 2006 @ 4:38pm

Its just a game of smoke and mirrors psychology
You make a great argument and I can't help but want to agree but...Taking your examples into practice, lets say instead of tacking on charges we just broke them down for the customer like MCI did. They received more illegitemate billing complaints versus other major phone carriers because the other carries incorporated the charges into their operating costs. One company says we only charge you $60 for phone service, the other says we will charge you a better price of $40, but have to tack on $20 in all the other legitemate telecomm charges.

Another example: Take a pair of Tommy Jeans. Rather than ask for $80, ask $20 for the jean material, 50 cents for the Mexicans who cut and sewed it all together, and the remaining $59.50 for the tiny 2x4 inch Tommy Label! We would be outraged and no one would buy them. But just give us the total only and we'll gladly pay the ridiculous price.
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Tom, 30 Mar 2006 @ 5:34pm

I'm charging everyone here a $3.99 "Reading-my-comment fee." Plus $0.70 for every comment you read before reading mine, since you delayed my enjoyment of the original fee. Thank you for your time. The bill is in the mail.
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Jake, 30 Mar 2006 @ 8:31pm

Re:
You're ignorant and rude.

I am taking the high road. I offer another option, known as Freight Collect.

I will ship it for you, at a cost, or you can arrange shipping yourself (at my loss), and do it for free.

Hiding your shipping costs in the cost of the item is not the high road, asshole, it's lying and pretending you offer free shipping while inflating the value of the product. If you enjoy being lied to, continue to order your shit off of eBay.

It's attidtudes like yours that dumb down the American consumer. YOu imply it is more honest for me to lie about the value of my product and imply the service of fulfillment is free, rather than expect my customers to understnad reasonable charges when they are clearly and honestly presented upfront. I hate to have to explain theis to an educated adult, but 19.95 for a product is 19 freaking 95, whether it is broken down into price and shipping and handling, or whether it is the upfront price with "free" shipping.

There is ahuge difference between Telco crap fees and honest S&H. Get a clue. Oh, and have your clue shipped freight collect, and tell me wheter or not YOU get a better deal from FedEx than I do.
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Henry Havelock Ellis 1929, 31 Mar 2006 @ 2:53pm

Ignorant and rude
Were you refering to me? Maybe I just have a guilty conscience - heh heh. It certainly wasnt MY intention.

I understand your rage about the charges. Youve probably been screwed over a lot. But dont let that give you a cynnical attitude about every companies business practices. They are not all out to get you. And just because they charge you in the manner that you like doesnt necessarily mean they are honest either.

Lets take another example: I cut some trees for someone and charge $200 all inclusive. Now why would I reasonably want to tell them, "Ok, I need $170, plus $20 for gas, and $10 for lunch. To some customers, that might not only seem annoying but also unprofessional. "Just charge me $200, I don't care about all the miscellaneous crap thats your problem," I believe many would say. In other words, just because a cost is hidden doesnt mean that thats bad.

So just take it easy on everyone. If they charge too high dont pay it, but just because they dont charge for something doesnt mean you dont pay it anyways. As a rule you should consider there is no free lunches so assume that you are paying for products and services somehow, and thats just the basics of business worldwide. Take care and good luck.
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Laura, 27 Apr 2006 @ 5:44am

Re: Why not say "no"
Good For you! = Well Done!
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