You probably don’t notice the small “Administrative fee” on your cell phone bill. AT&T is banking on that. Literally. By quietly tripling that small fee, the carrier is set to rake in hundreds of millions.
AT&T just spent $85 billion to acquire Time-Warner. Anyone who’s ever had to shell out a ton of cash at once knows the first thing you want to do when your savings take that big of a hit is to start looking for ways to tighten your belt. One way AT&T can start making a bit of money back is apparently to slide into your bill and tweak a fee that you probably weren’t going to notice anyway.
As BTIG Research analyst Walter Piecyk first noted, your AT&T wireless bill has a line item vaguely called an “administrative fee” that normally costs $0.76 per month. That’s small enough that most people don’t even notice it’s there to begin with. Now, however, AT&T is upping that fee to $1.99 per month. Previously, you would’ve paid a little over $18 over the course of a two-year contract. Now, the fee will amount to nearly $50. Easily almost two monthly payments on your smartphone. Even if that sounds like a small change for you, it’s a massive change for the company.
With 64.5 million wireless subscribers in the US, AT&T stands to make over $800 million every year with this subtle change. After dropping $85 billion to buy another company, an extra billion a year in essentially free money must sound attractive to the company. In a statement to The Verge, the company explained the fee by, well, not really explaining it at all:
This is a standard administrative fee across the wireless industry, which helps cover costs we incur for items like cell site maintenance and interconnection between carriers.
That explains the existence of the fee at all, but not why the company needs an extra $800 million ever year to accomplish the same tasks. This isn’t the first time AT&T has increased its fees with little warning—and indeed, AT&T is far from the only company to increase its prices without changing its services—but it is worth being aware of the change (and speaking up if you choose) when big companies hike up their fees without giving you a good explanation as to why.