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Study: U.S. wireless subscribers overpay on service

A new study released by BillShrink suggests that American wireless subscribers are overpaying on their phone service by about $366 a year.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
3 min read

The average U.S. wireless subscriber is overpaying on his or her cell phone bill by $336 a year, according to a study by BillShrink, a search engine designed to help people find the best service deals to meet their needs.

About 80 percent of U.S. wireless subscribers miscalculate how many anytime voice minutes, text messages, and megabytes of data they need, BillShrink found. As a result, consumers are purchasing wireless plans that don't fit their needs and are actually costing them more money. Collectively, this results in the wireless industry pulling in an extra $79 million for services consumers don't actually need or use.

"It's interesting to see what people estimate their usage to be and what they actually use," said Schwark Satyavolu, co-founder and CEO of BillShrink. "Despite the best efforts from the FCC and the carriers to create transparency in wireless fees, we've found that people are becoming even more confused about how to right-size their cell phone plans."

BillShrink offers a tool on its Web site that analyzes people's cell phone bills to find the best plan to fit each customer's needs. Satyavolu says that while new tiered service offerings give consumers more choice, finding the plan that fits individual usage patterns can be tricky.

The company analyzed data from more than 230,000 individual bills that had been submitted through its service from December 2009 to December 2010. BillShrink compared actual wireless usage from these cell phone bills versus people's estimated cell phone use to reveal some key findings.

First, when it comes to voice minutes and text messaging, consumers tend to overestimate how much they need. Satyavolu said the average consumer thinks he or she needs about 711 voice minutes per month but in reality uses only about 651 minutes. The average consumer also estimates he or she needs about 2,566 text messages but actually sends only about 1,555 messages per month.

Right-sizing a voice plan is especially tricky, since anytime voice minutes don't mean the same thing to every carrier. For example, some carriers don't count calls made to other cell phone users on their same network, or they may allow subscribers to designate certain friends' or family members' numbers part of a special calling circle, which also may not count against anytime minutes. And still, many carriers don't start their free nights and weekends at the same times.

"You can't just buy the same number of minutes and text messages on one carrier and expect to have the same usage on another carrier," Satyavolu said. "They all count the anytime minutes differently."

Meanwhile, consumers tend to underestimate how much mobile data they use. The average consumer thinks he or she uses about 54MB of data per month but actually uses about 81MB of data. Even though consumers are underestimating how much data they use, they're still using far less than what they're paying for.

Today, three of the four major U.S. wireless operators offer tiered data plans. Verizon Wireless started offering a promotional data plan in October that includes 150MB of data for $15 a month. It ended the promotion last month. And now only offers smartphone customers the option of a $30 unlimited data plan.

AT&T offers a 200MB plan for $15 a month

. And T-Mobile USA just recently introduced a 200MB plan for $10 a month.

Even though data usage among U.S. wireless consumers has increased by about 94 percent from December 2009 to December 2010, according to BillShrink, the average wireless subscriber in the U.S. is still far below the cap offered in the lowest tier of cell phone service. What's ironic is that many consumers still believe they need an unlimited data plan.

"I'd say that 150MB to 200MB of data per month is plenty more than most wireless consumers actually need," Satyavolu said. "But if you read the blogs, you'd think the move toward tiered data plans is the end of the world. The reality is that it's a small fraction of people who really benefit from unlimited plans."