When is $48 million not $48 million? When it is a FCC fine.
T-Mobile was fined $48 million today by the FCC for misleading customers about its unlimited data plans.
As it turns out, T-Mobile’s unlimited data plan was actually a 17 GB per month plan. After that the company “de-prioritized” the customer’s traffic making it so slow as to be pretty much unusable. Most unlimited plans work this way, of course, because unlimited isn’t really feasible. The reality is that there is only so much data a “normal” user would use in the course of a month, and racking up 17 GB would require some pretty heavy effort.
This is a problem of the cell phone carriers own making. They market against each other in such a way that customers now believe that they must have unlimited data even though many of them don’t use anywhere near that much.
So now, carriers work overtime to shout UNLIMITED whenever possible, and then hide actual limits in the fine print. In this case, T-Mobile even tried to not be honest in the fine print, and that’s when the FCC struck with its huge fine, except…
It’s Not Really $48 Million
The actual cash fine is just $7.5 million. That money will be paid directly to the U.S. Government where it will be allowed up as a tiny decimal point at the U.S. Treasury. The rest of the fine comes in “customer beneifts” and a program for schools.
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The so-called customer benefit is that customers can get $20 or 20% off on an accessory. And, that is a REGULARLY priced accessory. So, basically you can get a sale price for something that the company already wants to sell you, and that they will still make a profit on. Ouch. Let go of my arm.
T-Mobile has sales like this all the time, for free, without any fines, so this hardly counts as some sort of penalty, but it makes the FCC sound tough. This phony, same as always sale, counts for $35.5 million of the fine. Plus, T-Mobile gets to write this sale off as a business expense, because paying a “fine” like this is an expense. So, T-Mobile holds a sales, makes a profit, and then deducts the cost of the sale. Brutal.
T-Mobile also has agreed to provide $5 million dollars in “free” devices to poor schools. Of course, they mean $5 million when counted at full retail, not at the price T-Mobile actually pays, so this will actually end up being a $2 million dollar expense… maybe. And, of course, those devices will require “discounted” (but still paid for) T-Mobile services to properly run, so this part of the penalty serves to get T-Mobile some new customers for its products. Um, that’s a penalty how?
No wonder T-Mobile agreed to this fine. The only cash out of pocket is $7.5 million, and the rest is smoke and mirrors on the cash flow spreadsheet that lets T-Mobile sell more phone accessories, and sign up some new school districts as customers.
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I guess a hearty “well done” is due to T-Mobile’s lawyers.
Not surprisingly, there is little worry for investors about this “big fine.”
Oh, wait! There is more. T-Mobile has agreed to be “more clear” about this practice of making your data worthless after a certain amount (currently 17GB per month). That means there will be an extra sentence or two in the disclosure book that no one ever reads.
That ought to do it 🙂