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T-Mobile is got a lot of bad press after sending out rate increases to people who believed they had guaranteed rates for life. For a number of years, the company promoted cellular plans that were marketed as a guaranteed price for as long as the customer kept the plans. The level to which people had a guarantee is a little fuzzy since T-Mobile has famously marketed itself as the un-carrier that didn’t require contracts. But T-Mobile marketing material from previous years backs up claims that prices on some packages were intended to be for life.
In today’s world of social media, the rate increases instantly lit up the Internet. On social media, T-Mobile was widely accused of corporate greed. This is understandable since T-Mobile is highly profitable and has enjoyed a long string of steady growth, going from 74 million total customers at the beginning of 2018 to almost 120 million by the end of 2023. In 2023, T-Mobile added 5.7 million postpaid cellular customers, 282,000 prepaid cellular customers, and over 2.1 million FWA broadband customers – an overall customer growth of 7.8%. The claim of corporate greed rings true. The company goosed profits in 2023 by inexplicably laying off 5,000 people, 7% of its workforce, while at the same time spending over $11 billion over the last year to buy back its own stock – the highest amount in the industry.
T-Mobile reacted to the public furor by saying it didn’t intend to raise rates on customers that had rates for life, although it apparently had raised rates for many of them. There is already talk of a class-action suit against the company.
It seems that carriers ultimately get into trouble when they promise rates for life. CenturyLink has been embroiled in several controversies for the practice. As an example, the company had a promotion labeled as Price for Life that promised customers would never see a rate increase on broadband products as long as they stayed in good standing and followed the terms and conditions. But in 2023, CenturyLink raised the rates on customers enrolled in this plan, which led to a class action lawsuit.
In 2016, Comcast door-to-door salespeople offered residents some price-for-life packages in Salt Lake City during a promotion that was done in anticipation of Google Fiber coming to the market. Customers were offered an attractive triple play bundle at $120 per month that included broadband, cable TV, and a telephone line. The Comcast doorknockers promised customers a lifetime price backed up in writing that their price would be good as long as the customer kept the plan. Customers were assured at each step of the process by Comcast customer service reps that they were buying a lifeline plan and that rates would never be increased.
However, in 2018, Comcast corporate folks raised the rates. A class action lawsuit alleged that as many as 20% of the 200,000 upgrades sold during the 2016 sales campaign were sold as lifetime plans. To nobody’s surprise, Comcast customer service denied any knowledge of selling a plan for life that it had supported just two years earlier. Comcast didn’t back down from the rate increases, some of which were substantial.
In today’s world, such behavior inevitably leads to a class action lawsuit from lawyers who see easy pickings from companies that break promises made to customers. I’ve always assumed that big carriers find such lawsuits to be a nuisance, and that the settlements are far smaller than the benefit of breaking the guarantee with customers.
These example should hopefully act as a warning to smaller ISPs. It’s very easy for a marketing department to try to meet sales quotas by making promises to customers that the company might come to regret in later years. There is no question that a price for life is a sales gimmick, and there are no gimmicks that marketing departments won’t try if allowed.
But there is an argument to be made for a price for life if an ISP is disciplined enough to never raise the rates on such customers. There is a huge amount of value in a customer who sticks with a company for many years. This customer will have paid for the cost of the connection many times over and generates a huge amount of bottom-line year after year. But offering prices for life today obligates management for the next several decades to keep track of such customers and never raise their rates.
