Don’t let AT&T mislead you about its $29 “privacy fee”

This week AT&T got a lot of media attention for its expansion of its GigaPower service to Kansas City announced on Monday. The news wasn’t so much about the expansion, but about the ISP’s plans to to offer a $29 per month discount for customers who let Ma Bell scan their web searches in exchange for targeted advertising. The pricing isn’t new, but Ars Technica noted it as did the Wall Street Journal, and even our own Jeff Roberts wrote a post explaining that he thought it was a good idea that the company was putting an explicit price on privacy.

But $29 isn’t actually the price that AT&T charges per month for privacy. As I discussed back in May last year after I tried to sign up for AT&T’s GigaPower service to find out more about the pricing and the disclosures associated with the plan, the actual costs were closer to $44 or even $62 per month. This time around the price differentials are $44 for gigabit internet and $66 for HD TV and HBO Go plus gigabit internet.

Fact checking Ma Bell

To arrive at those prices I looked at the cost of the Internet Preference Plan (that’s the plan that monitors your web surfing) versus the Standard Plan for gigabit service and gigabit service plus TV. Gigabit service costs $99 per month under the Standard Plan plus a $7 monthly fee modem rental fee and a $99 one-time activation fee, that nets out to a monthly cost of $114. The Internet Preference Plan waives the one-time activation and monthly modem fee which means you pay only $70 a month, giving you a true cost of $44 a month if you choose the privacy-preserving option.

attinternetcompfeb

On the video side numbers are similar as seen below. The Standard Plan has a higher cost of $149 per month plus the $7 monthly fee and a one-time $49 activation fee. Only you also add in a $10 monthly service fee for HD TV and a $16 monthly fee for HBO Go which are included in the Internet Preference Plan. So the comparable plan nets out to $186, which costs $66 more than the $120 you’d pay for letting AT&T sneak a peek at your home broadband web surfing habits.

mabellfeb15

AT&T also makes it tough to find the alternative to its Internet Preferences plan. You have to read the fine print and click to search for options that don’t include the AT&T Internet Preferences plan (they don’t call it something straightforward like the “Ma Bell’s Watching You Plan”). See underlined item below for where to click.

mabellprivacy

AT&T doesn’t make this easy

So it’s tough to avoid the spying plan, but it’s even tougher to actually fact check AT&T to discover the associated fees that make the cost of privacy so much higher than the advertised $29 a month. As part of looking for the pricing this morning to see if anything had changed, I ran into another issue that’s almost as frustrating as AT&T’s misleading number and the media’s acceptance of it.

Uncovering AT&T’s actual pricing requires you to have a legitimate address in Ma Bell’s service area that currently doesn’t have AT&T service. For me, this meant finding a friend who had GigaPower service, getting their address and then using Google Maps to plug in addresses until I found one that worked with the ordering system so I could check pricing.

That’s a significant hurdle to compare prices for the media, for activists, for regulators and really for anyone interested in understanding what broadband costs in the U.S. AT&T isn’t alone in this practice. Almost every ISP has a similar hurdle in part because they charge different rates in different markets and also because they offer different services based on addresses. At a minimum ISPs should post pricing for their services in each market on their web sites up front before then requiring an availability check.

As it stands now, pricing for broadband is so complicated and dependent on contracts, various fees and options that you must go all the way through an order before you understand what your bill will actually be. This makes it hard to compare pricing between what is often the single other competitors in the market, but the contracts often lock the consumer into the ISP for a year or two, further reducing competition.

Someone call the FCC and FTC

So in this case, the media may be lauding AT&T for putting a $29 monthly price on the value of consumer privacy. But when I look at the practice, I see a company that has little competition, manipulating consumers into choosing to give up their privacy. Consumers do this, not because they get a $29 discount, but because after going through a fairly complicated sign up process and managing to click on the right button to even see the option to protect their privacy, they suddenly realize that keeping their privacy doesn’t cost $29 but rather $44 or even $66 per month.

That’s a very different story. And it’s one that AT&T makes it really difficult to report.

Qualcomm to pay $975M to China in antitrust settlement

Qualcomm chips and intellectual property are increasingly found in smartphones around the world, but there’s been a cloud of uncertainty hanging over the San Diego silicon firm for the past 14 months: Namely, the chance that China would boot the company out of the country or severely hamper it because of issues with a 2008 Chinese anti-trust law.

Qualcomm announced Monday that it had reached an agreement with China’s National Development and Reform Commission. As Reuters reported earlier, citing China’s state-run securities trade paper, the deal includes a 6 billion RMB fine (approximately $975 million) and Qualcomm has agreed to change its licensing practices, including a promise that it will license its “essential” 3G and 4G patents separately from its other intellectual property, at what looks like a lower rate than before. Qualcomm’s summary of the key terms is below:

  • Qualcomm will offer licenses to its current 3G and 4G essential Chinese patents separately from licenses to its other patents and it will provide patent lists during the negotiation process. If Qualcomm seeks a cross license from a Chinese licensee as part of such offer, it will negotiate with the licensee in good faith and provide fair consideration for such rights.

  • For licenses of Qualcomm’s 3G and 4G essential Chinese patents for branded devices sold for use in China, Qualcomm will charge royalties of 5% for 3G devices (including multimode 3G/4G devices) and 3.5% for 4G devices (including 3-mode LTE-TDD devices) that do not implement CDMA or WCDMA, in each case using a royalty base of 65% of the net selling price of the device.

  • Qualcomm will give its existing licensees an opportunity to elect to take the new terms for sales of branded devices for use in China as of January 1, 2015.

  • Qualcomm will not condition the sale of baseband chips on the chip customer signing a license agreement with terms that the NDRC found to be unreasonable or on the chip customer not challenging unreasonable terms in its license agreement. However, this does not require Qualcomm to sell chips to any entity that is not a Qualcomm licensee, and does not apply to a chip customer that refuses to report its sales of licensed devices as required by its patent license agreement.

China is a key market for Qualcomm — nearly half of its profits come from the country, thanks to its large smartphone manufacturing industry as well as its huge smartphone market. Given that Qualcomm’s revenue last year was nearly $27 billion, the fine won’t cripple the company, but CEO Steve Mollenkopf has warned that the settlement would have a tempering effect on the company’s fiscal 2015 outlook.

The NDRC’s main allegation was that Qualcomm had a “monopoly” on modems for cell phones, particularly those using the CDMA standard, and had “abused its dominant position,” presumably by overcharging on licensing fees. Qualcomm, in defense, has alleged that Chinese licensees selling devices with Qualcomm chips have not accurately reported sales figures — meaning that it’s hard to accurately collect licensing fees.

It’s important for Qualcomm to continue to strengthen its business ties with Shenzen’s smartphone industry, or manufacturers could turn to improving 3G and 4G chips from companies like MediaTek and Samsung.

In December, President Barack Obama discussed the 2008 anti-trust law with his Chinese counterpart, Xi Jinping. A national security spokesman said that Obama had “concerns” about China’s use of its anti-trust policy to limit royalty fees from foreign countries, turning this business issue into a matter of foreign policy.

Uber’s first test of crisis surge cap went unnoticed in October

All eyes are on New York, where along with a massive incoming storm, Uber is rolling out its emergency surge pricing cap. On Monday, there was a flurry of coverage by media outlets from Bloomberg to Time, with some saying this marks, “a chance for Uber Technologies Inc. to show it has learned from past mistakes.”

But this isn’t the first time Uber has capped surge pricing during a state of emergency — it’s the second.

According to a source familiar with the testing, Uber used its new surge price capping system in October during Hurricane Ana in Hawaii, which appears to have gone unreported by media. The company didn’t make a fuss of the development, choosing to introduce the system without scrutiny. Although Hawaii declared a state of emergency during that time, Hurricane Ana didn’t cause much damage.

Here’s how Uber calculates surge pricing in states of emergency: It chooses the fourth highest surge rate in the 60 days prior and makes that the capped rate for the storm. The top three highest surge rates from the prior two months will be ignored, in hopes of keeping the fare reasonable. It’s not clear why Uber won’t just cap surge at a designated amount, like 2x. The company will donate all of its revenue, which is 20 percent of each ride, to the American Red Cross during this time.

Uber announced the new emergency surge pricing policy in July, in light of tropical storm Arthur, which hit the East Coast. But according to an SF Examiner story, the pricing cap never went into effect because a state of emergency was never declared during the storm. Hawaii’s Hurricane Ana was its first test in October, but the New York blizzard will be its biggest.

The capped fare for New York’s upcoming blizzard Juno comes after the state’s attorney general penned a New York Times op-ed shaming Uber for what he called “price gouging” in the wake of surge pricing during Hurricane Sandy. The blowback for Uber surge pricing during times of crises stretch across the globe, with the recent outcry notably occurring after a hostage situation in Sydney. During instances like these, Uber has initially repeated the company line about how surge pricing gets more drivers on the road during times they might not otherwise drive.

This is true, but it doesn’t subvert the ethical quandary of leaving those who can’t afford the surge pricing in a potentially dangerous situation. The reoccurring outcry appears to have prompted Uber to have a change of heart.

Kindle Unlimited and the ongoing commoditization of books

Authors complain that features like Amazon’s new Kindle Unlimited book-rental program are devaluing books, but it’s not Amazon that is devaluing book writing — in a very real sense, the internet is doing that, just as it’s devaluing every other form of media

Flywheel has finally figured out its secret weapon against Uber

A few weeks before New Year’s, I received a pitch from Flywheel that I’ve been waiting for since I started using the service in 2013. It said, “Flywheel Battles Uber with #FairFare.” The email inside proclaimed “Flywheel is the no-surge pricing alternative to get a ride around town.”

flywheel email to me

It looks as if Flywheel, the booking app for taxis, has finally figured out its secret weapon against the likes of Uber and Lyft: Reliable pricing. It’s not a new feature for the company. From its inception in 2009 Flywheel has never had surge pricing in the cities it operates in — now SF, LA, Seattle, Sacramento, and San Diego. But for the longest time, the company didn’t seem to understand that this was the best way to lure people back to the taxi system. Instead, it touted Flywheel’s legality, its use of regulated taxis, the number of car companies on its app. None of those were big enough draws.

At the end of the day, people vote with their wallets, and if there’s anything that will get people to move to Flywheel, it’s cost.

Is price part of reliability?

Town car ride-hailing Uber

Uber and Lyft argue that surge pricing makes their services more reliable because it gets more drivers on the road during a time they might not otherwise drive — like New Years or a hostage crisis. There’s truth to that.

But these companies miss the fact that for many non-wealthy customers, stable price is one of the factors in determining reliability. Without the assurance of a fixed fee, people will turn to other services for backup.

Although people have been complaining about surge pricing for years, this New Years showed the first sign that they are willing to stop using Uber and Lyft as a result. The SF Examiner found that on New Year’s Eve in San Francisco there was little to no surge pricing, because of either low demand or too much supply.  The lack of surge upset drivers who gave up their New Year’s to make money.

Tweets from passengers suggest that people planned ahead, deciding to walk, take public transit or flag taxis to avoid the ridesharing surge. Ironically, that resulted in little to no Uber or Lyft surge pricing because there wasn’t enough demand to drive it there. “It was an incredible sight to see all the cabs full and the rideshare cars empty,” one driver told The Examiner. “I was laughing and crying at the same time.”

Another potential reason there was no surge pricing on New Year’s Eve in San Francisco is because so many drivers took to the road in the hopes of making money. With such a flood of supply, there wasn’t enough demand to cause surge pricing.

It’s worth noting the story isn’t bulletproof — it’s based on anecdotal evidence. When I asked, neither Uber nor Lyft would confirm specific SF surge rates in 2014 compared to previous years.

In other parts of the country, where the Uber service is still relatively new, surge pricing was common, according to this CNN data.

Passengers wise up and avoid the surge

The difference between SF and other cities suggests that over time, passengers get smarter about using ridesharing services. Although they may put up with surge pricing initially, they eventually expect and avoid it. As a result, Uber and Lyft could lose customers, and the resulting profit, on some of the biggest travel nights of the year.

It’s clearly not hurting Uber at the moment — the company saw 2 million rides on New Years Eve alone. But the service is new in a lot of places, so passengers are just starting to feel the pain of unpredictable surge pricing. By New Years Eve next year, will Uber users in other places get smart about avoiding the surge, the same way San Francisco residents did?

I suspect surge-avoidance will slowly trickle down to day-to-day travel. I live near Union Square in San Francisco, so I’ve already learned I can’t rely on Uber and Lyft from a pricing perspective, because they’re nearly always operating with surge pricing here. Without that reliability, I prepare alternative options for travel and develop new habits, lessening my ridesharing addiction. That’s where a competitor like Flywheel or Sidecar could come in and do really well.

There’s been plenty written about how surge pricing is a broken system, but there hasn’t been much ado about the fact that it’s also Uber and Lyft’s biggest weakness. It’s the one area where other companies can easily beat them.

Services with Airbnb pricing data grow as the king stays quiet

Successful new companies generate new business opportunities, as other companies emerge in their wake to support them and find their own profits, and Airbnb is no different. As more and more consumers are renting their properties on Airbnb — and some are doing so full-time as their own business — a spate of companies have formed to help Airbnb renters become mini real estate agents.

Airdna is one such offering. It combs Airbnb data to give people information on average Airbnb prices in their neighborhood, as well as analytics like most popular amenities offered in your area and the effects of using Airbnb’s Instant Book feature.

Based in Santa Monica, the product is built and marketed by a father-son team. Airdna started out as an e-book written by the son, Scott Shatford. It offered directions and advice to those looking to rent Airbnb apartments full-time. Shatford soon realized that Airbnb’s wealth of data, once organized, would be its own business opportunity. He calls it the “Wild, Wild West.”

“We’re making this leap of faith that people really want to get smart and data-driven about Airbnb,” Shatford told me.

Airdna is a freemium product, and you can access basic information — such as what can you expect to make in your city based on the size of your place — for free. The more detailed report of your area costs $30.

Airdna faces some stiff competition. A few other companies have cropped up with similar offerings. Beyond Pricing is one such product, and its slick beautiful design puts Airdna’s early 2000s look to shame. Airenvy is another competitor in the field, although it’s a little different. It manages your property for a fee, using a price fixing algorithm to determine the best price for the season, market availability, and area.

These are the kinds of companies that will help the nascent apartment sharing industry mature and reach a mainstream population. But their businesses are probably at the mercy of Airbnb’s whims; Airbnb offers a rudimentary room recommendation price already for its hosts (albeit not one sophisticated enough to consider seasonal or day-to-day demand changes).

If Airbnb wanted to kill these counterpart companies by producing its own data analytics, it could at any time. We’ve seen it happen before, whether it’s Twitter killing off Twitpic by introducing its own photo upload feature or Facebook rolling out a music player to compete with iLike.

The psychology behind Netflix’s planned pricing changes

http://www.theatlantic.com/business/archive/2014/01/the-behavioral-psychology-of-netflixs-plan-to-charge-higher-prices/283367/

Netflix CEO Reed Hastings recently said that it wants to do away from the one-price-fits-all model and introduce three pricing tiers for new members. Why three? The Atlantic looks at the behavioral psychology of pricing, and explains why the Goldilocks effect is always making us go for the middle tier, regardless of how expensive it is.