New National Research Finds Average US Consumer Overpays on Wireless Plans While Under-Using Minutes WARREN, N.J., Sept. 27
In a 'catch-22' familiar to many Americans, new national consumer research finds that most US consumers on wireless contract plans are not only paying more per month than they anticipated -- but they are also under-using their actual allotment of minutes. A Spring 2004 study by NOP World of 1,000 US wireless customers found that the average consumer leaves 50% of their monthly anytime minutes unused. This averages to 375 wasted minutes per month in the "anytime" category -- typically the most valuable category of minutes in any wireless contract plan, and the most expensive for consumers to stock up on.
The study also found that while 41% of participants used fewer than 200 anytime minutes a month, only 6% of wireless consumers actually purchased a plan consistent with that usage (one with 200 or less anytime minutes available). Despite this widespread 'super-sizing' on minutes ultimately left unused, the average US wireless consumer is also paying 34% more than they anticipated for their monthly plan due to taxes, regulatory fees and charges for roaming and overages. Those on family plans pay 38% more per month than anticipated. "The industry puts a great deal of emphasis on 'free' minutes, whether they're 'anytime' or 'off-peak.' Clearly this encourages people to super-size their wireless plans even when the majority don't use all those minutes," said Dan Schulman, Virgin Mobile USA's chief executive officer. "When it comes to buckets of minutes, bigger is apparently not always better."
Wasting Minutes But Still Paying More The study found that the average wireless consumer leaves 50% of monthly anytime minutes unused. That averages out to 375 minutes a month. "On average, a postpaid contract plan translates into a $2,000 investment, constituting a major purchase for consumers with little understanding of their actual needs," said Adam Guy, a wireless analyst at Compete, Inc. "The looming threat of 'overage charges' drives consumers to over-buy buckets of minutes. Pay as you go plans offer consumers a low risk way to align their wireless costs with actual usage." In fact, when the cost of lost anytime minutes is factored-in with anytime minutes actually used, the per-minute fee for the typical contract wireless plan rises to 21-cents. Also according to the study, the average wireless consumer pays 34% more than the price they anticipated for their monthly plan, due to roaming and overage charges as well as fees and taxes. This extra percentage adds up to an additional $25 per month for the average wireless user.
Family Plans NOT Family Friendly Family plans are touted by the wireless industry as a simple way to help teens or other family members go wireless. However, the average family on a family plan is paying 38% more than they anticipated every month, due to overages, fees and taxes. A quarter of all parents with family plans who have experienced overage charges report having to pay more than $100 in a single month -- an eye-opening figure for any family. "The study results underscore just how much difficulty average consumers have in trying to optimize how they use their wireless phones," said Schulman. "It may be time for the industry to rethink how to make the pricing of wireless services more consumer-friendly." Sponsored by Virgin Mobile USA, the study was designed to evaluate how consumers actually use their wireless phones -- versus how the industry prices its contract plans. The study was also designed to better understand whether offerings like "free" minutes actually provide value to the typical wireless user.
The study conducted by NOP World in April 2004 included phone interviews with 1,000 current US wireless users. In addition, NOP analyzed the actual wireless bills of over 200 study participants. The study focused on three groups of wireless customers: teens (14-18); young adults (19-34); and parents of teens who already have wireless phones. Virgin Mobile offers one simple Pay As You Go pricing plan. Customers pay 25 cents per minute for the first ten minutes of each day, and then just 10 cents per minute thereafter. There are no long-term contracts, no hidden fees and no monthly bills. "We feel this study further validates Virgin Mobile USA's simple Pay As You Go approach to wireless, which allows consumers to know exactly how many minutes they are buying and using in real-time," said Schulman.
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