WASHINGTON, D.C. – May 28, 2009 – It’s time for cell phone companies and their poor disclosures to U.S. seniors and other consumers to get the same kind of tough going-over that Congress just gave to credit cards, according to The Seniors Coalition.
Knowing that Congress was going to take a hard look at credit card companies and their billing practices, The Seniors Coalition commissioned a March 2-5, 2009 survey by Opinion Research Corporation (ORC). The scientific poll of 1,595 Americans with cell phones found the following:
• An astonishing two out of five Americans (40 percent) do not know what penalty they would pay if they canceled their cell phone service. While this confusion extends to 60 percent of consumers aged 65 or older, it also includes 46 percent of those aged 45-54 and 49 percent of those aged 55-64.
The Seniors Coalition National Spokesperson “Grandma” Green said: “This statistic clearly shows why millions of Americans pay more for their cell phone service than they need to: They worry about getting clobbered with a penalty if they change services. The cell phone industry has been told for years that this uncertainty in the marketplace is a problem and they have done far too little to remedy it. This is just simply unconscionable in terms of the treatment of U.S. seniors and other consumers.”
• The ORC survey found that nearly half (48 percent) of cell phone consumers either already are at the end of their penalty period (7 percent) or in its last 12 months (41 percent). Depending on the cell phone company they are patronizing, many consumers can come out ahead if they switch to a better cell phone deal now and pay a small penalty for breaking a contract that has not yet expired.
• More than half of consumers (54 percent) say they use fewer minutes than they pay for every single month. Seven out of 10 Americans say they go under on their minutes every month or “nearly every month.”
Green said: “There are two reasons why these wasted minutes add up into the millions of hours and dollars every month for American consumers. First, it’s because too many cell phone plans are pegged to excessively high-minute levels, so the options consumers have for plans that actually meet their needs are limited. This threatens to get worse with the advent of ‘unlimited’ plans that are really just a way in some cases of charging more and hiding the number of wasted minutes under an ‘all you can eat’ arrangement. But the reality is that wasted minutes are money down the drain no matter how they are marketed.”
Green added: “The second factor that is fueling wasted cell phone minutes is the fact that cell phone companies scare consumers with the threat of outrageously costly ‘overage’ minutes in the 40-50 cent range – even though their actual costs for those minutes are a tiny fraction of that. The reason for the sky-high overtime charge is simple: It frightens consumers into buying more minutes than they need and allows the cell phone companies to profit handsomely as a result of the fear they manufacture in the market place.”
• Cell phone company disclosures to consumers are so bad that consumers underestimate their minutes used by about half, and are therefore much more susceptible to being charged high overages for minutes they didn’t know they had used. When consumers were asked to estimate their minutes used each month, the mean was 228 minutes, including 252.5 minutes for contract-based phone users and 117.7 minutes per month for prepaid users. According to one leading industry source, the amount of cell phone air time actually used by U.S. consumers averages a bit less than 550 minutes per month.
“Of course, consumers need to have a good handle on how many cell phone minutes they use each month. But who can really blame them for having trouble keeping track of this when they get the gobbledygook bills provided by most cell phone companies,” Green said. “Again, the industry’s agenda here seems simple: Confuse consumers by making it as hard as possible for them to get a clear handle on how many minutes they are actually using. Once again, cell phone companies are being allowed to enrich themselves at the expense of befuddled consumers.”
The ORC survey for The Seniors Coalition also found that cell phones are now nearly as ubiquitous as credit cards, with 80 percent of American adults using cell phones, including 65 percent of those aged 65 and older. Of all adults with cell phones with cell phones, 84 percent have contract-based phone service and 17 percent have prepaid phones. (The small overlap is accounted for here by people who have both types of cell phones.)
The complete survey findings are available upon request.
ABOUT THE SENIORS COALITION
The Seniors Coalition is the nation’s leading free-market senior education and advocacy organization with a membership of more than 4 million seniors. The mission of The Seniors Coalition (TSC) is to protect the quality of life and economic well-being that older Americans have earned while supporting common sense solutions to the challenges of the future. The Seniors Coalition is a non-partisan, non-profit 501(c)(4) that represents the interests and concerns of America’s senior citizens at both the state and federal levels.
CONTACT: Patrick Mitchell, for TSC, (703) 276-3266 or pmitchell@hastingsgroup.com.
