Sprint Passes Along Tax Increases To Customers, But Conveniently Ignores Tax Cuts

from the today's-lesson-in-economics dept

Fri, Jan 26th 2007 11:41am — Carlo Longino

Like a lot of things, the price of telephone service displays "stickiness", a term used by economists to describe something that's resistant to change in a particular direction. Phone bills are "sticky downwards", meaning they rise much more easily than they fall. Verizon and BellSouth illustrated an example of this last fall, when they replaced a no-longer-required USF fee on customer's bills with various sketchy surcharges that went right into their pockets. After an uproar, the new charges got rescinded, but the general idea is one that remains in telcos' playbooks. Now, in Texas, Sprint is passing along a new business tax to customers, adding a 1 percent "Texas margin fee reimbursement" surcharge onto cell phone bills, in order to pay for an increase in state taxes the company must pay. While the state has enacted a 1 percent tax on business' gross receipts, they must only pay it on a maximum of 70 percent of those receipts, lowering the effective tax rate -- and this has attracted the attention of state officials, who are looking into how Sprint's passing the charge along to consumers. Of course, there's nothing preventing companies from charging customers more to pay for the higher taxes, but as an editorial in the Austin newspaper points out, while the business tax increased, a cut in school property taxes enacted by the legislature also applied to businesses, but Sprint doesn't seem to be passing that decrease along to consumers. And there, dear readers, is stickiness in action.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

24 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

Jumboloan, 26 Jan 2007 @ 11:39am

So what
So what? Last time I checked we live in a capitalistic system. If you want the price you pay to be the cost of the good plus x% versus what the market will bear in fair competition than move to Russia, oh sorry, that won't work anymore as Socialism FAILED!
[ link to this | view in chronology ]
Mark, 26 Jan 2007 @ 11:39am

You're right, Jumboloan! We shouldn't question companies ripping off the public, because we live in a capitalistic society! Quick, someone let Jeff Skilling out of jail!
[ link to this | view in chronology ]
WRM, 26 Jan 2007 @ 12:33pm

Shocking!!
Sprint is ripping off customers.... I am shocked...
[ link to this | view in chronology ]
Ambo, 26 Jan 2007 @ 12:52pm

I also am Shocked!
After 4 months of begging Sprint to take my $200 and let me out of my contract, I have been promised my next bill will reflect the contract buy out and I will be through with them. Of course, this is not the first time they have told me that. Their plans are disappointing and their prices are ridiculous. What's really sad is that for the past 4 months I've been paying two phone bills. One at my new provider for the phone I'm using and one to Sprint for a phone that was disconnected 4 months ago and can't even be used.
[ link to this | view in chronology ]
- Anonymous Coward, 26 Jan 2007 @ 12:55pm
  
  Re: I also am Shocked!
  go to a Sprint Store, and don't leave until it is taken care of.
  [ link to this | view in chronology ]
  - Ambo, 26 Jan 2007 @ 1:18pm
    
    Re: Re: I also am Shocked!
    I did go to the Sprint store last month. They told me they couldn't help me that I had to talk to the main people. So, they called the number for me and let me use their phone. I was told that my next bill would be for the $200 disconnect. For some reason they wouldn't let me pay it right then. But my next bill was a regular usage bill. So I had to called yet again and get more apologies and promises.
    
    I did finally get them to agree to credit me one month's payment. Which should show up on my next bill. I guess I just donated the other 3 months to them. So, hopefully my next bill will truly be my last.
    [ link to this | view in chronology ]
Squall, 26 Jan 2007 @ 12:53pm

Shocking!!
[INSERT RANDOM TELCO CARRIER] is ripping off customers.... I am shocked...
[ link to this | view in chronology ]
Anonymous Coward, 26 Jan 2007 @ 12:57pm

Sprint must be using that oil company pricing software...
[ link to this | view in chronology ]
shocked you are paying, 26 Jan 2007 @ 1:17pm

Re: I also am Shocked!
I am shocked you are paying to get out of the contract. Here in the state of IA they have ruled that those contracts that telco makes you sign are not enforcable.
It is funny how we get stuck in a contract that rips us off and somehow feel obliged to pay to get out of it.
[ link to this | view in chronology ]
Aus, 26 Jan 2007 @ 1:18pm

Hmm. Good thing I'm using all the hacks for picture mail and tethering
[ link to this | view in chronology ]
the shaft, 26 Jan 2007 @ 1:28pm

Hows about this
You just don't pay the bill ( and also stop using the phone) then when they call you to ask about the unpaid bill tell them you already closed your account and make sure they make the change on their records or you will take it up with the BBB ( better business bureau....probably mispelled)
[ link to this | view in chronology ]
- Ambo, 26 Jan 2007 @ 1:42pm
  
  Re: Hows about this
  I thought about that, but I have automatic payments set up through Sprint. Stupid I know. The phone isn't usable. I had it turned off 4 months ago. I already have a new plan at a different company for two phones with unlimited minutes for the same price as the one Sprint phone with limited minutes.
  [ link to this | view in chronology ]
- angryparrot, 31 Jan 2007 @ 8:37am
  
  Re: Hows about this
  The only problem with that is that all wireless carriers notify each other of customers with an unpaid balance. This means that any other carrier will automatically list you in their highest deposit tier, making it very difficult to get service without a huge deposit
  [ link to this | view in chronology ]
  - Methinksnot, 5 Feb 2007 @ 2:35pm
    
    Re: Re: Hows about this
    Nah dont think thats the case. They might get it on a credit report after a while, but report to each other?????? Verizon and I are still fighting an $800 bill and I had no deposit with current carrier. And my credit has some problems.
    [ link to this | view in chronology ]
Sanguine Dream, 26 Jan 2007 @ 2:05pm

A paper trail
Shady businesses like this are the only reason I still carry a check book. A phone carrier may argue that you didn't make an electronic payment. But I dare one to argue with the paper check that has their stamp on it and the monthly bank statement that shows the deduction.

And automatic debiting is a bad idea. My dad has had to changed accounts twice in one year because services (one being AOL) were still trying to charge him after he cancelled.
[ link to this | view in chronology ]
- Ambo, 26 Jan 2007 @ 2:22pm
  
  Re: A paper trail
  My mom had a similar problem getting rid of AOL about 1994. After she finally got them to stop deducting the monthly payments from her joint account with my dad, they started deducting the money from her personal account. And she had never even given them that account number. She threatened to sue for taking money from an account without her permission. She told AOL and the bank she was getting a lawyer unless her money was redeposited the next day. AOL put her money back in her account and quit billing her. You'd think I would have learned from that. But no, I had to go for the “convenience” of automatic payments.
  [ link to this | view in chronology ]
Bob, 26 Jan 2007 @ 2:26pm

Never had a problem
I've been using Sprint as my cell carrier for nearly a year now and have yet to take issue with them. My bills are exactly what I expect them to be and my service has never been a problem. I broke my phone once, bought the insurance the next day, and walked out of the store with a new refurb the day after. My conversations with cust service have all been hitchless too.
[ link to this | view in chronology ]
- Ambo, 26 Jan 2007 @ 2:44pm
  
  Re: Never had a problem
  You sound like me a few years ago. I use to sing Sprints praises. And I have to say that after the Hurricane they were back up in only a few days, which was amazing considering the damage and that there was no power to the towers that were left. Their service was never as good in my area after that though. And I found another provider with better coverage and better plans. I was with Sprint for about 4 years before I changed. Hopefully, you will never have problems with them. And if you do decide to change, I hope you can get rid of them easily.
  [ link to this | view in chronology ]
Adrian, 26 Jan 2007 @ 4:02pm

I hope you didn't go to Cingular
I hope you didn't go to Cingular. Their reps randomly, and without your knowledge, change the features on your plan so they can get commissions. If you don't believe me, go to Howard Forums and read up....or just wait 'till it happens to you. Once it happens, you have to argue with Cingular for months to put your plan back to where it was and take the extra charges off. They almost always claim that you must have called and had them change your account and that there's no way their reps just changed it without your knowledge.

The worst part is that Cingular Coorporate is aware of this problem and, as far as anybody can tell, they are encouraging it.

This has not happened to me (I'm on Sprint) but it has happened to my parents on both of their phones. My brother also got fed up with Cingular and finally ended up switching to Sprint.
[ link to this | view in chronology ]
- Anonymous Coward, 27 Jan 2007 @ 10:45am
  
  Re: I hope you didn't go to Cingular
  I hope you don't work for Sprint.
  
  Why would you even bring Cingular into a thread about Sprint unless you had some motive?
  [ link to this | view in chronology ]
Ex-Sprint customer, 28 Jan 2007 @ 12:39pm

I used to love Sprint also, and now I really, really hate it. I found a google bomb once by Sprint. In summary, I'm guessing Sprint linked to a personal blog who praised Sprint. As it turns out, they also gave the blogger a free Sprint phone and (surprise surprise) GREAT customer service. But then I ranted on the blog, so my rant was also showing on the top search result. Then, one day, the blog was nowhere near the top search result. hm.... wonder what happened.

Anyway, if you want to read the blog, it's here http://sscornelius.wordpress.com/2006/07/13/sprint-customer-service-experience/
[ link to this | view in chronology ]
Thanatos, 29 Jan 2007 @ 7:52am

You let the company your going to for new service cancel your previous. what are they going to say, "Are you sure your new customer wants to leave us? Well, can you at least ask?" I hated every minute I used my sprint phone. I'm on verizon now, bunghole expensive, nothing compared to the european or japanese market, but do we have a choice?

Oh yeah, cingular problem is real. The boss here got his plan lowered some how, his next bill was $700, almost all overage charges. 1.5 hours of arguing on the phone got him out of $500 of it
[ link to this | view in chronology ]
Business Prof, 29 Jan 2007 @ 8:29am

Don't criticize their pricing
In an industry with multiple players offering substitutable goods/services, there's no legitimate reason to criticize one player's rationale for raising its prices. Whether it's due to an increase in tax or just because it wants to generate higher dividends for shareholders, who cares? Consumers/customers who don't like the increase can go to a competitor...that's the magic of a competitive market.

Now, if Sprint was a monopoly or it was abusing federal assistance in some way (i.e., misusing public monies to generate added profit at the expense of consumers), that'd be a different story. But telling Sprint it has no right to set its price, regardless of its reason, is silly -- if Sprint misreads customers' willingness to pay, it will either drop its prices or go out of business.
[ link to this | view in chronology ]
|333173|3|_||3, 29 Jan 2007 @ 4:35pm

Everyone does it
Petrol is the worst for this. IF someone in any oil shiekdom snezes, the price goes up, but it takes months to go back down. A Telco just doesn't have much chance of beating them yet, since the cost of a 'phone connection can be far easier to prove than the oil prices.
[ link to this | view in chronology ]