Wednesday, January 23, 2008

Contracts Are Not Jails

About five months ago, I signed a nine-month lease with my landlord. Since that time his relatively quiet one-and-a-half-year-old has morphed into a louder two-year-old, my landlord got an additional dog, the wiring in the house is now in noticeably poor shape, and my evolving requirements have exceeded the small space I live in. These are all relatively slight annoyances, but enough to make me want to move. But I have to wait until May, when my lease runs out. No big deal. I see myself in an unfortunate situation of partly my own doing. But not according to Bob Sullivan because I'm "in jail."

For the record, jail is where you go when people take you by force and hold you there. You do not volunteer to go there. Yet Sullivan paradoxically announces that Americans are in "cell phone jail" because they face stiff penalties if they end their contract early. This phrase is utter nonsense. Contracts are not jails, but promises both parties agree to. In this case, the customer loses flexibility and gains lower prices or peace of mind (not having to keep track of your minutes is valuable to many).

Granted, some people later regret their decision. Cell phone companies change prices. Coverage wasn't what was hoped for. For people to pay for something they don't want is undesirable. But when the contract (usually two years) is up, people can switch at no charge. Most don't. Now if many people made a stink about their provider and switched en masse we'd see lower fees, better coverage, and other improvements Sullivan claims can't exist because Americans are prisoners. But people are generally happy with their service, a fact we forget in the heat of the moment because we focus on the few times it doesn't work and not how often it does.

If we were truly prisoners, why would any cell phone company try to please us at all? Why not just cut costs down to nothing, sell people toy phones, and charge them $1,000 a month? It's because we're customers who tie our own hands for a time but will refuse to do it again the moment we feel we are truly "jailed."

HT: Jason Youngberg


Anonymous said...

Why does this entry have
HT Jason Youngberg
at the end?

Anonymous said...

I (Jason Youngberg) sent him the link for Sullivan's opinion piece. Not sure what HT means though.

Sullivan's comment about jail is more metaphorical than literal. I tried to read a cell phone contract and I couldn't make any sense out of it. The clerk tried to push me to buy a phone. I was in the store with no intention of buying, just to learn. And I did learn a few things.

First, the contract seemed intentionally hard to read and understand. Is it fair to hold a person to a contract that they do not comprehend?

Second, the contract is giving the phone company more flexibility than the consumer. They could change their service area or pricing and it would not violate the terms of the contract, at least in their eyes. (And if a lone consumer tried taking them to court, who do you think would win?)

"Now if many people made a stink about their provider and switched en masse we'd see lower fees"
Do you really think that will happen? Most individuals can't fight the phone companies and if they do go en masse to fight what they see as an injustice or get federal help well guess what, there are cries about lawsuit abuse and class action nonsense, frivilous claims etc. There's no way to win. Most people feel they can't do anything but suck it up and take it. Besides, people shouldn't have to say, "don't rip me off" and not saying it is not permission to do so.

"why would any cell phone company try to please us at all?"
Keeping up appearances? Because they don't have complete control yet? Because there is still someone more powerful than them and it's NOT the consumer?

Is there a metaphorical jail for cell phone users? Yes. People do feel trapped by their cell phone providers and don't see a way out of a bad situation. They have become trapped in a contract with no easy way out. Find me a cell phone company that doesn't take advantage of its customers, and I'll show you a company that will be destroyed by its competitors.

David said...

HT stands for hat tip.

Of course Sullivan's jail is metaphorical. But it's a bad metaphor. Contracts and jails are fundamentally different. You volunteer for a contract. You don't volunteer for jail. It would be as if I compared bureaucrats to homicidal maniacs. Of course it's not literally true; it's just a metaphor. But it's not metaphorically true, either.

First, if a person signs a contract they don't understand, it seems strange to blame the contract.

Second, the contract gives the firm more flexibility fundamentally because people aren't looking for more flexibility.

Third, yes. Prices move people all the time. Wal-Mart is a success because it offers lower prices. Ditto for e-commerce. The rules don't change for cell phones.

Fourth, trade is not about "fighting" or who's more "powerful." The essential problem is that you see signing a contract as some sort of slavery. But it's the opposite of that--it's trade. And people keep renewing their contracts (suggesting they know what they are getting into). By definition, it's mutually beneficial. I think you are confusing justice with just wanting a better deal.