Consumers pay for loyalty to cellphone service plans

Olga Kharif

Michael McCormack has followed the wireless industry professionally for years, and he’s also a customer. Like the rest of us, he doesn’t like overpaying for a mobile-phone plan.

So when the Jefferies LLC analyst spotted a T-Mobile US Inc. promotion offering four lines for $150 a month — $40 less than he was being charged — he promptly called the company to ask to be switched to a new plan. T-Mobile agreed.

Easy enough. But McCormack has the advantage of studying price changes as part of his job. The rest of us aren’t paying that much attention, and we’re probably paying too much.

“It’s the minority of people who watch this every day and move to lower price points,” said McCormack.

As the wireless market matures and competition increases, consumers tend to be loyal to a fault: About 6 percent of 90,000 people recently surveyed by Consumer Reports switched providers in the past year. Almost half of those people saw their wireless bill decrease by $20 or more a month, the survey found.

As many as 50 percent to 70 percent of Americans overpay for mobile-phone plans, according to Michael Gikas, senior editor of electronics and technology at Consumer Reports. They should be paying no more than $50 per phone line instead of about $100, Gikas said.

“Carriers, by and large, unless you make a move, aren’t likely to inform you,” Gikas said. “They’ll never call you to tell you how to save money if you are already their customer.”

Since T-Mobile began a price war in 2013, rates can change weekly, say Roger Entner, an analyst at Recon Analytics, and it’s up to consumers to stay on top of them.

“It basically pays to check all the time and pick a better plan as operators are not automatically moving customers to the best plan,” he said. “That’s the customer’s responsibility.”

Wireless carriers have always offered special prices to customers threatening to leave, said Craig Moffett, an analyst at Moffett Nathanson LLC.

“It is the nature of the telecom industry that it is always more economical for a carrier to offer low promotional prices rather than to cut rates to existing subscribers,” Moffett said. “But that inevitably means that at any given time a very large part of America is paying something more than the best available rates.”

Some customers may be reluctant to leave because they’re happy with their service. Or they may simply be too busy to go through the hassle of calling their provider to switch to a different plan — or press for a lower rate. And some carriers may have more subscribers overpaying than others.

Verizon Communications Inc. spokesman Chuck Hamby said the New York-based carrier focuses on delivering quality service and working with customers “one-on-one.” This has led to the lowest rate of churn, or customer defections, in the industry, he said.

A spokesman for Overland Park, Kansas-based Sprint Corp. didn’t immediately respond to messages seeking comment. Spokeswomen for AT&T Inc. and T-Mobile said their customers consider the features of their wireless plans as well as the price when making buying decisions.

Among the four nationwide carriers, T-Mobile has already moved many customers to lower-cost plans while AT&T has been more responsive to industry price cuts by reducing prices and increasing data allotments. “It’s mostly Verizon and Sprint that has a base that clearly is paying more than customers just coming in,” McCormack said.