Unconscious Consumption: Why do Americans pay more for less?


Unconscious Consumption: Why do Americans pay more for less?

Earlier this week, Apple unveiled a new pricing structure for its App Store that is nothing short highway robbery and no one’s going to bat an eye. In fact, I bet most of the people reading this either don’t know or don’t care about the change, but I’m going to tell you about it because it makes me unhappy and I like to complain. Apple will be changing its app pricing system so that any app with premium content not in the App Store has to also offer that content within Apple’s official in-app purchasing system and then hook Apple up with a 30 percent cut of all subscriptions, provided the subscription came from Apple. The change is aimed at newspapers, but could extend to video subscription services like Netflix and Hulu.

Here’s the real problem. Apple has mandated that applications can no longer provide links to premium content outside the App Store, and any premium content offered outside the system has to also be offered inside at the exact same price. That’s right, developers and content providers can’t modify the price to account for the house cut. Does that sound like a line out of “Goodfellas” to anyone else?

There’s a simple solution, though. Just stop buying content from Apple, right? Well, that decision isn’t so simple any more. For starters, I’ve paid for a slew of apps for my iPhone, apps that won’t transfer to Android should I decide to jump ship. Also, I don’t know Android. Despite the fact that many people talk about how similar the platforms are, they’re actually quite different. It wouldn’t be a huge deal for me to switch, but the less tech-savvy among us are going to be highly resistant to change. It’s also important to remember what I said earlier – most people don’t know about this change or don’t care. The content is the same price to the end user so who’s getting hurt?

The content provider, that’s who, and if it’s important to keep the user happy in this relationship, it’s just as important to keep the people generating the content happy. Apple is banking on the fact that it’s millions of users will strong arm developers and publishers into eating that 30 percent fee. Those that don’t will leave the App Store, in which case everyone loses. If you’re thinking this won’t really affect you, think again. High profile apps like the Kindle app probably can’t survive with a 30 percent skim. No more Kindle app means no more ebook competition, and frankly, we need that competition. Apple’s iBooks just isn’t as good as the Kindle, but it might be our only option if this goes through.

This isn’t the first time the whole “vote with your wallets” will have failed us. American consumers are becoming notorious for willingness to choke down crappy service while paying the people that are choking us. Part of the problem is our lust for new technology. We’re always after the next big, bright screen, even if we only get to use a quarter of its potential. The iPhone is a perfect example of that. Sure, it’s a great phone, but people were willing to put up with some of the worst service in the world just to have it. Some users were dropping 50 percent of calls more than a year after the phone had launched and paying $100 a month to do so.

While we’re talking about cellular service, why not talk about our cellular plans? You’ve no doubt heard that texting fees are a total ripoff, but let me remind just how bad things are. SMS messages are nothing more than data – tiny bits of data at that – sent along their own control channel in the wireless spectrum. That same control is used, on many networks, to tell your phone that it has service. Do you see where this is going? Let me use a simple analogy. Let’s say my friend Joe sends me a letter every day to let me know he is still alive. One day, he starts writing personal messages at the bottom of the letter, things like “lol y u so funny,” but for adding that personal message, an insignificant amount of ink on a letter he was sending anyway, the post office charges him 20 cents for sending it and charges me 10 cents for receiving it. SMS transmission costs the carriers almost nothing, but they’ll charge me $20 a month for unlimited nothing. That little tirade of mine doesn’t even address the fact that I’m paying for an unlimited data plan, yet I’m getting charged again for sending miniscule amounts of data in a text.

If you think it’s like this everywhere, think again. A 2009 study by Organization for Economic Cooperation and Development showed that Americans pay more for cellular service than any of the 30 member countries it surveyed. For an average, medium-use package – 780 voice minutes, 600 text messages, 8 multimedia messages – Americans paid an average of $53 a month. Consumers in the Netherlands paid $11.

This problem extends past the mobile world. Take a look at the cringe-worthy state of American broadband service. Right now, I pay $75 a month for the best residential service Time Warner offers. I get 15 Mbps download and 512 kbps upload speeds, though as I write this, I’m testing at something closer to 450 kbps. In short, those numbers are atrocious. As someone who writes about video games and technology for a living, I spend my days downloading and uploading a lot of data. That 512 upload speed is near crippling when I need to send large files or if I want to livestream my desktop. The basic Time Warner plan is 1.5 Mbps down, 256 kbps up. This past April, a Hong Kong provider rolled out a 1 Gbps symmetrical (same speed for upload and download) service plan at $26 a month. That’s right, a connection more than 600 times faster than your average US plan for half the cost.

Community broadband initiatives are popping up all over the country to combat the high price/low service model of US broadband. Wilson, North Carolina has a community-owned fiber optic network with packages ranging from 10 Mbps to 100 Mbps, all symmetrical. The $55 package is 20 Mbps both ways, again, leaps and bounds above the best package from a national provider. It sounds great, but the reality is that there are far too few of these communities, and every time one pops up, Time Warner or Embarq or Comcast steps in to try to legislate against it. Yes, your internet provider is trying to get laws passed that would block you from receiving better internet service for less money.

So why are Americans willing to eat huge service fees for subpar service? Frankly, we’re ignorant, completely unconscious of the tech decisions we make every day. Most Americans wouldn’t know the difference between 1 Mbps and 10. Hell, most of us don’t know what Mbps means. A study this past August showed that 53 percent of Americans said the federal government should not pursue plans to provide affordable broadband access to everyone in the country or that it was “not too important” a priority. Unfortunately, those priorities won’t change until we educate ourselves, a problem compounded by the fact that the internet is one of the best tools for that kind of education. In the meantime, send this article to your friends. Remind them what they support when they pay for subscriptions through Apple, when they buy unlimited texting plans, when they upgrade to “Power Boost Technology” (please, read the quotes as sarcastic, not referential) with Time Warner. Personally, I’m going to seriously consider getting rid of my iPhone, becuase I love quality content and I want the money I spend on that content to go to the provider instead of lining the walls at 1 Infinite Loop.

By Jeff Morgan


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