Why Are You Still Paying to Make Cell Phone Calls?

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The average iPhone user forks over $95 a month to AT&T, and more than half of that covers voice accounts. Now that AT&T has approved applications like Skype, which allow users to make calls—even international calls—for free or very cheap via the Internet, it seems like only a matter of time before customers change the way they make calls, saving themselves an easy $50 or $60 a month in the process.

Some specifics from the WSJ:

While AT&T doesn’t let iPhone customers sign up for data-only plans, customers could downshift from an unlimited voice-minute plan to the lowest tier of minutes. Then they could use Internet services for free or very cheap calls, taking advantage of the unlimited nature of AT&T’s data plans.

J.P. Morgan analyst Mike McCormack estimates that voice accounts for $50-$60 of the roughly $95 in monthly revenue generated from the average iPhone user. He estimates that if an average user drops to the cheapest $39.99 voice plan, AT&T would lose between 20% and 33% of voice revenue.

The technology required to make phone calls and send text messages is very cheap. Internet calls are virtually free. A text message costs a cell provider all of 0.3¢. (Yes, it costs your provider roughly one penny for every 3 text messages it transmits.) Yet what does your provider charge you for that text? Maybe 10¢ or 20¢. That dime or couple of dimes does not seem like a lot of money—but it represents a phenomenal markup, an easy, highly profitable revenue generator. For anyone who has a teenager who sends thousands of texts per month, it also represents a big chunk of your bill.

These are such disproportional markups that there’s no way they can last. Not in a competitive marketplace anyway. AT&T must sense that the jig is up, even if it does have an exclusive agreement with the phone everybody seems to want (for now, at least). The provider gave in to Internet calling apps for Skype and Vonage, making it possible for users to dial for next to nothing. As the quality of Internet dialing improves and free Wi-Fi continues to expand, more and more people will go this way—perhaps exclusively this way.

AT&T hasn’t given up entirely, however. On another front, it is still battling it out with Google by saying that the way its Google Voice service blocks calls is a violation of federal law. Google Voice, which lets users combine land lines, mobile lines, and messaging into one number, was also rejected by Apple‘s iPhone. Why? The argument is hard to follow and doesn’t really make sense, as the Washington Post points out.

Regardless of how AT&T and Apple deal with Google, and regardless of how all of the traditional cell phone providers deal with each other and Internet calling services, the path is cleared for much cheaper phone calls in the near future. Now, really.

Will the average cell phone bill be slashed in half accordingly? That remains to be seen.

In other news, the NY Times offers tips on making the torturous process of shopping for a cell phone—”about as much fun as buying a used car,” per the article—a bit less painful. This is no one-stop shopping procedure. A three-step strategy is required, per the Times:

There is a way to approach the task with a small measure of logic. To boil it down, the process is a three-step boogie: go online to narrow your choices, go offline to test a few, go back online to buy one. Spend a day doing this, and you can avoid two years of cellphone remorse.

Read the full story here.

Read more: The People vs Cell Phone Tyranny: A Case for Lower Monthly Bills

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