Sprint Passes Along Tax Increases To Customers, But Conveniently Ignores Tax Cuts

from the today's-lesson-in-economics dept

Like a lot of things, the price of telephone service displays “stickiness”, a term used by economists to describe something that’s resistant to change in a particular direction. Phone bills are “sticky downwards”, meaning they rise much more easily than they fall. Verizon and BellSouth illustrated an example of this last fall, when they replaced a no-longer-required USF fee on customer’s bills with various sketchy surcharges that went right into their pockets. After an uproar, the new charges got rescinded, but the general idea is one that remains in telcos’ playbooks. Now, in Texas, Sprint is passing along a new business tax to customers, adding a 1 percent “Texas margin fee reimbursement” surcharge onto cell phone bills, in order to pay for an increase in state taxes the company must pay. While the state has enacted a 1 percent tax on business’ gross receipts, they must only pay it on a maximum of 70 percent of those receipts, lowering the effective tax rate — and this has attracted the attention of state officials, who are looking into how Sprint’s passing the charge along to consumers. Of course, there’s nothing preventing companies from charging customers more to pay for the higher taxes, but as an editorial in the Austin newspaper points out, while the business tax increased, a cut in school property taxes enacted by the legislature also applied to businesses, but Sprint doesn’t seem to be passing that decrease along to consumers. And there, dear readers, is stickiness in action.

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Comments on “Sprint Passes Along Tax Increases To Customers, But Conveniently Ignores Tax Cuts”

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Ambo says:

I also am Shocked!

After 4 months of begging Sprint to take my $200 and let me out of my contract, I have been promised my next bill will reflect the contract buy out and I will be through with them. Of course, this is not the first time they have told me that. Their plans are disappointing and their prices are ridiculous. What’s really sad is that for the past 4 months I’ve been paying two phone bills. One at my new provider for the phone I’m using and one to Sprint for a phone that was disconnected 4 months ago and can’t even be used.

Ambo says:

Re: Re: I also am Shocked!

I did go to the Sprint store last month. They told me they couldn’t help me that I had to talk to the main people. So, they called the number for me and let me use their phone. I was told that my next bill would be for the $200 disconnect. For some reason they wouldn’t let me pay it right then. But my next bill was a regular usage bill. So I had to called yet again and get more apologies and promises.

I did finally get them to agree to credit me one month’s payment. Which should show up on my next bill. I guess I just donated the other 3 months to them. So, hopefully my next bill will truly be my last.

Sanguine Dream says:

A paper trail

Shady businesses like this are the only reason I still carry a check book. A phone carrier may argue that you didn’t make an electronic payment. But I dare one to argue with the paper check that has their stamp on it and the monthly bank statement that shows the deduction.

And automatic debiting is a bad idea. My dad has had to changed accounts twice in one year because services (one being AOL) were still trying to charge him after he cancelled.

Ambo says:

Re: A paper trail

My mom had a similar problem getting rid of AOL about 1994. After she finally got them to stop deducting the monthly payments from her joint account with my dad, they started deducting the money from her personal account. And she had never even given them that account number. She threatened to sue for taking money from an account without her permission. She told AOL and the bank she was getting a lawyer unless her money was redeposited the next day. AOL put her money back in her account and quit billing her. You’d think I would have learned from that. But no, I had to go for the “convenience” of automatic payments.

Bob says:

Never had a problem

I’ve been using Sprint as my cell carrier for nearly a year now and have yet to take issue with them. My bills are exactly what I expect them to be and my service has never been a problem. I broke my phone once, bought the insurance the next day, and walked out of the store with a new refurb the day after. My conversations with cust service have all been hitchless too.

Ambo says:

Re: Never had a problem

You sound like me a few years ago. I use to sing Sprints praises. And I have to say that after the Hurricane they were back up in only a few days, which was amazing considering the damage and that there was no power to the towers that were left. Their service was never as good in my area after that though. And I found another provider with better coverage and better plans. I was with Sprint for about 4 years before I changed. Hopefully, you will never have problems with them. And if you do decide to change, I hope you can get rid of them easily.

Adrian (profile) says:

I hope you didn't go to Cingular

I hope you didn’t go to Cingular. Their reps randomly, and without your knowledge, change the features on your plan so they can get commissions. If you don’t believe me, go to Howard Forums and read up….or just wait ’till it happens to you. Once it happens, you have to argue with Cingular for months to put your plan back to where it was and take the extra charges off. They almost always claim that you must have called and had them change your account and that there’s no way their reps just changed it without your knowledge.

The worst part is that Cingular Coorporate is aware of this problem and, as far as anybody can tell, they are encouraging it.

This has not happened to me (I’m on Sprint) but it has happened to my parents on both of their phones. My brother also got fed up with Cingular and finally ended up switching to Sprint.

Ex-Sprint customer says:

I used to love Sprint also, and now I really, really hate it. I found a google bomb once by Sprint. In summary, I’m guessing Sprint linked to a personal blog who praised Sprint. As it turns out, they also gave the blogger a free Sprint phone and (surprise surprise) GREAT customer service. But then I ranted on the blog, so my rant was also showing on the top search result. Then, one day, the blog was nowhere near the top search result. hm…. wonder what happened.

Anyway, if you want to read the blog, it’s here http://sscornelius.wordpress.com/2006/07/13/sprint-customer-service-experience/

Thanatos (profile) says:

You let the company your going to for new service cancel your previous. what are they going to say, “Are you sure your new customer wants to leave us? Well, can you at least ask?” I hated every minute I used my sprint phone. I’m on verizon now, bunghole expensive, nothing compared to the european or japanese market, but do we have a choice?

Oh yeah, cingular problem is real. The boss here got his plan lowered some how, his next bill was $700, almost all overage charges. 1.5 hours of arguing on the phone got him out of $500 of it

Business Prof says:

Don't criticize their pricing

In an industry with multiple players offering substitutable goods/services, there’s no legitimate reason to criticize one player’s rationale for raising its prices. Whether it’s due to an increase in tax or just because it wants to generate higher dividends for shareholders, who cares? Consumers/customers who don’t like the increase can go to a competitor…that’s the magic of a competitive market.

Now, if Sprint was a monopoly or it was abusing federal assistance in some way (i.e., misusing public monies to generate added profit at the expense of consumers), that’d be a different story. But telling Sprint it has no right to set its price, regardless of its reason, is silly — if Sprint misreads customers’ willingness to pay, it will either drop its prices or go out of business.

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