MONEY Airlines

JetBlue’s Surprising Upscale Gambit Is Working

JetBlue Mint suites
JetBlue

JetBlue's Mint premium seats are getting more expensive -- and they're still in high demand.

Last June, JetBlue JETBLUE AIRWAYS JBLU 4.01% began a new chapter of its history with the introduction of its Mint premium service. Instead of using its standard all-coach configuration, JetBlue added a 16-seat premium cabin with full flat-bed seats for some of its new A321s. (Four of the seats even come as private mini-suites!)

JetBlue opted to make this change in order to boost its profitability on the ultra-competitive New York-Los Angeles and New York-San Francisco routes. Less than a year in, it’s pretty clear that this move is paying off even more handsomely than originally expected.

Mint ramps up

The routes from New York’s JFK Airport to Los Angeles and San Francisco are highly contested — JetBlue competes with all three legacy carriers as well as Virgin America VIRGIN AMERICA INC VA -0.96% . Until last June, JetBlue had been the only one not offering a swanky premium section on these flights. Not surprisingly, this took it out of the running for attracting the most lucrative travelers.

JetBlue created Mint in order to narrow the revenue gap with its rivals. The idea was to offer a lie-flat seat at a much lower price than the prevailing fares in order to court the small/medium business and upscale leisure markets: i.e., people who were priced out of the premium cabin on other airlines.

JetBlue has been phasing in Mint flights since last June as the specially configured Airbus A321 planes have arrived. It is finally reaching a full schedule of eight daily round-trips to Los Angeles and five daily round-trips to San Francisco this spring.

Strong demand across the board

Ever since JetBlue launched its Mint service, company executives have noted that they were pleasantly surprised by the level of demand for its premium seats. As expected, Mint has been popular with small/medium businesses and well-to-do leisure travelers.

More surprisingly, Mint has also generated strong interest among large corporations. JetBlue had assumed that its rivals — mainly the legacy carriers, but also Virgin America to some extent — had that business locked up. Instead, JetBlue’s entry into the market has disrupted the status quo.

Virgin America CEO David Cush noted in February that JetBlue’s entry into the market had driven average premium fares down by 30%-40% on the Mint routes. This indicates competitors have had to at least meet JetBlue halfway in terms of pricing in order to prevent customers from bolting.

Fares strengthen

In the first few months of Mint’s existence, JetBlue was offering a starting non-refundable fare of $599 one-way. There were two higher fare “buckets”: $799 and $999. Depending on the level of demand for a particular flight, JetBlue’s revenue management system would determine how many seats to sell at each price point in order to maximize revenue.

Because of the strength of demand, JetBlue’s Mint cabin was frequently sold out last summer. As a result, in the fall, the company revised its Mint pricing tiers. In October, JetBlue’s then-president — and current CEO — Robin Hayes explained that JetBlue had moved the refundable fare up to $1,199 and then to $1,209. Meanwhile, it had made the $999 price point a third non-refundable fare.

More recently, JetBlue has apparently determined that the market can support even higher fares. There’s still an introductory fare of $599, but there seem to be fewer of these tickets available, especially on busy travel days.

Furthermore, on the San Francisco route, the refundable fare has moved up to $1,249, while the intermediate non-refundable fares have risen to $809 and $1,049. Fares are even higher for New York-Los Angeles flights. The refundable fare there is now set at $1,299, with the intermediate non-refundable fares at $899 and $1,149.

A big profit tailwind

JetBlue has been posting by far the best unit revenue growth in the industry recently. It would be naive to attribute this performance to a single factor, but the strong reception of its Mint premium offering is clearly having a big impact. JetBlue is regularly pulling in one-way fares of more than $800 — and, increasingly, more than $1,000 — on routes where just two years ago, its average one-way fares were less than $250.

Late last year, JetBlue told investors that for the month of September, its profit margin on the Mint route to Los Angeles had risen by 17 percentage points year over year. Given that it has raised prices several times since then, its Mint routes are surely even more profitable now.

For competitors like Virgin America, this is mixed news. In the short run, it’s better if JetBlue is commanding higher prices, because it limits the need for other airlines to discount their fares to match JetBlue. But in the long run, JetBlue’s massive success on the New York-Los Angeles and New York-San Francisco routes could encourage it to add flights, putting even more pressure on the competition.

MONEY Customer Service

Comcast’s New Customer Service Strategy: More Tweets

Comcast skyscraper in Philadelphia, Pennsylvania
Alamy Comcast skyscraper in Philadelphia, Pennsylvania

The company is adding 40 new social media experts to help it respond to customers faster.

Comcast COMCAST CORP. CMCSA -0.25% seems to be following through on promises made by its CEO Neil Smit to make fixing its customer service woes a priority for 2015.

“The way we interact with our customers — on the phone, online, in their homes — is as important to our success as the technology we provide,” Smit wrote on a company blog. “Put simply, customer service should be our best product.”

The company has already put a respected company veteran, Charlie Herrin, in charge of repairing its broken method of interacting with customers. It has also created an app which lets people know when a technician is en route to their home, ending the previous practice of subscribers having to wait around during a four-hour appointment window.

Now Comcast is taking its efforts to fix its customer relations a step further by hiring 40 workers for its social media team. These new hires will join an existing 20-person group in providing “help with everything from scheduling appointments to troubleshooting Internet problems and setting up DVRs, CNN Money reported.

Why is Comcast doing this?

“We have thousands of people answering service calls on the phone, and for many customers that’s great. But some people would rather go online, and we want to make sure to give them that choice,” Comcast spokeswoman Jennifer Khoury told CNN Money.

The company explained in a press announcement about the hiring effort that it has been using social media since 2007, but the use of platforms including Twitter TWITTER INC. TWTR -1.43% and Facebook FACEBOOK INC. FB -0.82% has increased over the years. This has shifted some customer support needs from traditional call centers to the social media team.

With a much bigger team, we’ll be able to support customers across more platforms. And we’ll be able to get to them faster. A larger team also means that we’ll be able to increase bicoastal and bilingual coverage to make sure we are available 24/7 to customers who speak either English or Spanish.

The social care team has access to all the same advanced tools and training as our call center agents do, which means they can quickly jump in to solve problems. They also have a direct line to our tech teams so they can schedule appointments.

While this effort won’t solve all of Comcast’s problems, it will bring some customers immediate help. It’s not a complete solution to a customer service culture which has been built around retention at any cost, but it’s a solid incremental step that should take pressure off the system.

Adding 40 people to the @comcastcares social media team shows that Smit’s vows to revamp customer service have actual money behind them. This isn’t a token hire or a PR move; it’s likely a multimillion-dollar commitment to delivering actual improvement.

Comcast deserves credit

The media, myself included, has spent the past year shining light on Comcast’s customer service failures. Those woes went viral when a recording made by former Engadget editor Ryan Block where a “retention specialist” essentially refused to allow him to cancel his service. That debacle led to a flood of embarrassing customer service issues being made public — everything from bad service to names on bills being changed to derogatory terms.

Comcast probably deserved the scorn it got from the legitimate media and on social media. Now, however, the company deserves praise for not just saying it’s going to fix the problem but actually doing the hard work to turn around its culture, while backing those efforts with financial resources.

This is good business for the cable and Internet giant. A company can’t treat its customers poorly when they can easily leave for other alternatives. But, aside from the long-term business gains the company should make, Comcast deserves credit for publicly tackling what is a thankless problem.

Bringing the customer service battle to social media is a smart move. Twitter and Facebook allow for quick problem resolution. That should result in happy customers and less stress on traditional phone-based customer service.

There are almost certain to be more problems and humiliating gaffes before Herrin and Smit completely change the company’s culture. Still, adding 40 social media customer care reps is a win for customers, which is ultimately a win for the company’s bottom line.

MONEY Shopping

Why Target Just Gave You a Year to Return Stuff

Exterior of Target store
Richard Clement—ZUMA Press, Inc./Alamy

Target's newly generous return policy goes against industry trends, and it's inevitable that some shoppers will go overboard and abuse it. What is the company thinking?

Last week, Target announced it was extending the return policy on a wide range of merchandise to 365 days, a huge increase compared with the old 90-day return allowance.

The new policy doesn’t apply to all goods purchased at Target. Instead, the one-year window is valid on all 32 Target “owned and exclusive brands”—the stuff you can buy only at Target—including merchandise sold under names such as Archer Foods, C9 Champion, Cherokee, Liz Lange, Mossimo, Nate Berkus, Shaun White, and Wine Cube. The return policy for all items purchased as part of a Target gift registry (for babies, weddings, and such) has also been extended from 90 days to 365 days. And the liberal return period allowance for registry items commences on the day of the event, not the date of purchase.

While certainly more generous compared with most of its competitors, Target’s new return policy is not completely unheard of. “It’s a bit reminiscent of Costco’s liberal return policy,” Edgar Dworsky, a consumer advocate and the founder of Consumerworld.org, which publishes an annual retailer return policy report, said to the Minneapolis Star Tribune. “It certainly is an unusual move.”

Unusual indeed. During the same week that Target was rolling out its easier-than-ever return policy, Bed Bath & Beyond was following industry trends by making its policy less customer-friendly. As Consumerist.com noted, in the past Bed Bath & Beyond allowed all items purchased at the store to be returned for store credit or a direct exchange indefinitely, with or without a receipt—a “policy that most customers enjoyed and a few abused.” Now, however, when customers bring back items without a receipt, they’ll still be able to get store credit, but there will be a 20% deduction on the amount they receive.

[UPDATE/CORRECTION: Bed Bath & Beyond reached out to us to clarify that its new return policy takes effect on April 20, 2015, and that it “will only affect customers whose purchase cannot be located to process a return, either because the receipt was not provided or because we could not identify the purchase through a query of our transaction records.”]

In recent years, other retailers once renowned for incredibly generous return policies have felt forced to tighten up restrictions due to the abuse by a small percentage of customers. For instance, Bloomingdale’s and REI have ratcheted up return policies, partly because of the extreme behavior of a few rotten shoppers. Some people had the gall to return counterfeit goods purchased on the black market overseas to REI, while others referred to the retailer as “Rental Equipment Inc.” because they used backpacks, tents, and other gear for years and turned them in for new models once they were worn out.

Retailers say they’ve also been compelled to tweak return policies because of a certain subspecies of “returnaholic” shoppers known for engaging in the practice of “wardrobing.” This is the name when you buy something—typically clothing or accessories—wear it to some special event while hiding the fact that the price tag is still attached, and then return it afterward.

At a discussion of Target’s new return policy over at the industry publication Retail Wire, one retail insider noted that the company was all but asking for “wardrobing” and other kinds of abuse to take place:

I expect Target will get flooded with returns as a result of this policy—especially by Millennials who want to rent rather than own. Upscale retailers have had to limit the returns of expensive dresses because women would wear them for one night and return them using the store’s liberal return policy.

So what’s behind Target’s change to a more flexible, potentially abused return policy? The short answer is that shoppers buy more stuff when they know returns are easy.

“People are more likely to purchase impulsively with the assurance of a liberal return policy,” says consumer psychologist Kit Yarrow, author of Decoding the New Consumer Mind and a frequent contributor to Money.com. “In stores like Target, impulse purchases are essential to their financial health.”

In the past, Yarrow has explained that a good return policy is critical when a retailer is trying to foster a long-lasting, trusting relationship with the customer. “Psychologically, a liberal return policy unconsciously communicates confidence in the products being sold,” she says. “With trust in businesses at abysmal levels, this is key.”

It’s been a long time since Target was known as “Tarjhay,” the “cheap chic” darling of the industry. By pushing the return policy to new levels of flexibility and generosity, Target is also pushing its reputation upscale. “Better return policies will help to elevate and classy-up the brand image–which is now more on par with Walmart whereas once it was edging up toward Macy’s,” says Yarrow.

Yarrow also points out that the retail experience today is riddled with potential headaches, so one easy way to set your company apart from the pack is by removing annoyances. “Retailers are typically focused on adding positives–what consumers really want is fewer negatives,” she says. “Hassle reduction is the new route to consumer happiness.”

MONEY Customer Service

The Insulting Names That Businesses Call You Behind Your Back

150225_EM_WhatBusinessesCallYou
Lasse Kristensen—Shutterstock

Ever wonder how casinos, car dealerships, restaurants, pay TV providers, and online marketers refer to customers in private? The answers aren't pretty.

You may think you are a living, breathing, thinking, three-dimensional human being. To online marketers, however, you might just be classified as “waste.” That’s one of the revelations in a new report from the Annenberg School for Communication at the University of Pennsylvania.

“Many online marketers use algorithmic tools which automatically cluster people into groups with names like ‘target’ and ‘waste,'” the researchers explain. Those viewed as “targets” based on their personal data and online history are deemed worthy of retailer discounts and deals. On the other hand, because the majority of bankruptcies come as a result of medical expenses, “it is possible anyone visiting medical websites may be grouped into the ‘waste’ category and denied favorable offers.”

It’s insulting enough that your worthiness as a person and potential customer is being judged by some computer algorithm. And yet the words chosen for these groups we’re lumped into make this sifting process more impersonal and insulting still.

The study got us thinking about all the other disdainful, mocking, or otherwise insulting ways that companies have been known to refer to the paying customers and clients that, you know, keep these businesses in business. Even as you essentially pay the bills for these operations, you might be thought of as little more than …

Muppets
In 2012, the very public resignation of Greg Smith from Goldman Sachs revealed that the firm’s executives sometimes referred to clients as “muppets.” Apparently, in the U.K. the slang term is applied to someone who is ignorant or clueless and easily manipulated. In certain circles, an investor might also be dubbed an ostrich, pig, or sheep depending on if he, respectively, buries his head in the sand no matter what’s happening in the market, is overly greedy, or has no strategy and does whatever someone else tells him.

Bunnies, Grapes, Squirrels
Behind the scene at car dealerships, customers who are bad negotiators and easy for salespeople to push around and talk into deals are sometimes known as “bunnies” or “grapes,” presumably because they’re just waiting to be pounced on or squeezed, respectively. A “squirrel,” on the other hand, is a hated species of customer who hops from salesperson to salesperson with no sense of loyalty or thought to who should get the commission.

Dogs, Fish, Bait, Whales
These are all terms used in the world of gambling and casinos, and they generally refer to players who are losing or are likely to lose—to the house, but also to the shark sitting across the table. A “whale,” of course, is a high roller who bets big, and who therefore will probably lose big money at one time or another. For that matter, in the restaurant industry, “whales” are super-wealthy customers with so much money they don’t blink when running up bills into the tens of thousands at overpriced eateries where, for example, a Bud Light costs $11.

Campers, Rednecks
Also in the sphere of restaurants, these are two kinds of customers that seriously annoy the employees and owners. A group of “campers” camps out at their table for hours, eliminating the opportunity for a new party to run up a tab, while a “redneck” is another term for a cheapstake or stiff who doesn’t tip—perhaps because they’re not city folk and aren’t familiar with tipping etiquette.

The N Word
Some waitstaff not only refer to their customers using racial epithets, but they’re also dumb enough to put these derogatory terms in print on diners’ receipts. Examples have popped up in Pennsylvania, Texas, and Virginia, among other places. And yes, the incidents have resulted in lawsuits and people getting fired. On the flip side, some horrible restaurant customers have been known to leave insults (including the N word) instead of tips for their waiters.

Fat
Among the other popular, not particularly creative insults left on receipts is some variation of “fat”—“Fat Girls” and “Pink Fat Lady,” to name a couple specific examples.

The C Word
Yes, some angry Time Warner Cable customer service agent apparently went there, recently renaming a customer as “C*** Martinez” in a letter after she reported a problem with her service.

Assorted Expletives and Insults
The C word episode followed on the heels of multiple reports of agents at Comcast—Time Warner Cable’s equally hated pay TV competitor and would-be partner if the much-discussed merger ever takes place—renaming subscribers things like “A**hole,” “Whore,” “Dummy,” “Super B*tch,” and such. (Only whoever did the renaming at Comcast always used letters instead of asterisks.) There’s a good argument to be made that the absurd pricing and policies installed by pay TV providers are at the heart of why “customer service” agents so often hate subscribers, and why the feeling is mutual.

A Sad Person, a Hateful Mess
You’d think that New York Knicks owner James Dolan—a no-brainer to appear on a wide variety of Worst or Most Hated Owners in Sports in Sports roundups—would have developed a thick skin after years of criticism for astounding ineptness and mismanagement at the helm of one of sport’s most valuable franchises. But Dolan’s response to the recent criticism of one New Yorker who has been a fan of the team since 1952 shows otherwise.

“I am utterly embarrassed by your dealings with the Knicks,” the fan, Irving Bierman, wrote to Dolan, pleading with him to sell the team so that “fans can at least look forward to growing them in a positive direction.” Instead of taking the criticism constructively and thanking Bierman for watching the Knicks for 60+ years, Dolan responded via email by calling him “a sad person,” “a hateful mess,” “alcoholic maybe,” and likely “a negative force in everyone who comes in contact with you.” Dolan finished up the screed by telling Bierman to “start rooting for the Nets because the Knicks dont [sic] want you.”

While certainly extreme, Dolan’s message speaks to the disdain with which some sports owners and certain league executives seem to regard fans—who are supposed to root loyally and pay up for the product as a matter of blind faith, and never to question or criticize. For Dolan’s sake, let’s hope he never listens to sports talk radio. He probably wouldn’t like the ways that people refer to him.

TIME Companies

Prank Callers Are Calling Comcast Customers to Curse At Them

Cable Giant Comcast To Acquire Time Warner Cable
Joe Raedle—Getty Images A Comcast truck is seen parked at one of their centers on February 13, 2014 in Pompano Beach, Florida.

Why you shouldn't post about your customer service grievances publicly

Prank callers masquerading as Comcast representatives have reportedly found fresh victims on the company’s Twitter feed, phoning frustrated customers simply to insult them.

Consumer advocate Chris Elliott reports that two victims received a call from self-proclaimed customer service representatives shortly after they had posted complaints to @Comcastcares, one of the cable service provider’s official Twitter feeds.

“We are Comcast, and we can charge you whatever the f*** we want’,” one customer was told. The call was recorded, and included unprintable physical and sexual threats, according to Elliott’s eponymous blog

Comcast traced the call to Ontario, Canada, where the company does not maintain a call center. A company spokesperson definitively declared it a “hoax.”

This isn’t the first time a Comcast customer has been taunted with obscenities. Some customers had previously received bills where their names were replaced by insults such as “Whore” and “Dummy,” Arstechnica reports. Comcast traced the bills to a third-party call center and terminated its contract with the company.

Our tip to avoid this? Don’t post your contact details publicly — if you’re dealing with a customer service Twitter account, slide into their DMs instead.

Read next: This Will Change the Way You Use Your Visa Card Forever

Listen to the most important stories of the day.

TIME Companies

Comcast Calls Customer a ‘Super B*tch’ on Her Bill

Just a month after they called another customer 'A**hole Brown'

The ladies and gentlemen at Comcast are at it again: this time, they named an Illinois customer “Super B*tch” and addressed her bill to that nickname.

Mary Bauer, 63, told WGN Chicago that after consistent faulty service from Comcast that required 39 technician visits, she received a bill addressed to “Super B*tch Bauer” instead of her given name. “This is a disgrace to me,” Bauer told WGN. Why are they doing this to me? I pay my bills. I do not deserve this.”

The PR gaffe comes just a month after a different Comcast Customer Service representative changed Ricardo Brown’s name to “Asshole Brown” on his bill.

Comcast has said they are actively investigating both incidents.

[WGN]

TIME

Here’s the Surprising Reason Companies Can Get Away With Bad Service

And why you're willing to take it

If you stood on a long, slow-moving line in a coffee shop, only to be handed the wrong drink when you finally did order, you’d probably express some dissatisfaction. Maybe you’d gripe to your co-worker about the experience at lunch, post a snarky Yelp review or vent on Facebook.

But new research shows businesses have a secret weapon that can diffuse customer ire over bad service. If a company practices “corporate social responsibility” — that is, donating to good causes — customers actually feel bad if they complain.

Jeff Joireman, an associate professor of marketing at Washington State University, tested how people would respond if they had to wait a long time to order at a coffee shop, and were then handed the wrong drink. As you might expect, people were annoyed — unless they had been told beforehand that the business donated 15% of its profits to environmental causes.

“Customers anticipate feeling guilty if they were to spread negative word of mouth because they know the company is doing good works that the customer values,” he explains.

Joireman says this is because the company has built up “moral capital and… a reservoir of goodwill.” Customers know that complaining could hurt the cause or causes the company supports as well as its own business.

Some companies do this better than others. Joireman finds that this effect is stronger when companies donate to a range of causes rather than a single one, because it’s more likely that people will identify with at least one of the causes. Donating a decent chunk of profits, like 15%, is much more effective than donating a tiny, token amount like just 2%. And the impact is even bigger if the company lets its customers pick which one they want their portion of the donation to benefit.

It’s also likely that companies whose customer base contains a significant number of young adults will have better luck with this tactic, since other research has shown that millennials are more interested in corporate social responsibility overall.

And, in a roundabout way, this can even benefit consumers as well, Joireman says. If you experience bad service and get disgruntled, venting might make you feel better, but it also will probably make you stay angry longer. And the more mental energy you spend thinking about how you were wronged, the more likely you are to enter into your next transaction with that business expecting something negative.

“We call this the ‘hostile attribution bias,’” Joireman says. “The hostile attribution bias makes people more likely to see nefarious motives in ambiguous situations.”

And this attitude can be a self-fulfilling prophecy, he warns. “Research shows that the expectations we bring into a situation influence our treatment of another person, and that person will often simply confirm the expectation we had,” he says. In other words, you’ll be a little snippy to the barista, and then perceive that they’re less polite towards you. If you scowl at them, you’re more likely to get a scowl in return, thanks to an unconscious tendency people have to mirror or mimic the expressions of people with whom they interact.

“On the other hand, giving people the benefit of the doubt, and cutting them slack, can promote a more positive spiral which leads to much better outcomes,” Joireman says. “A smile can go a long way to starting the interaction off right. What we do with our bodies, in turn, also influences our mood; smiling makes us happier.”

At the end of the day, that’s something you can’t put a price on.

TIME

The 1 Weird Reason You’re Tipping More

TIME.com stock photos Money Dollar Bills
Elizabeth Renstrom for TIME

These tricks businesses use could make you more likely to tip

If you buy a cup of coffee or lunch and your server pulls out an iPad, pay attention: You could wind up leaving a higher tip without even realizing it.

When software research company Software Advice surveyed consumers who use iPads or similar devices to buy food and drink, it found that the use of iPads increases the amount many people tip when they pay. More than four in 10 consumers say being in close proximity to their server at the time of the transaction can prompt them to leave a tip when they otherwise might not have.

What’s more, nearly 30% of respondents say they would be more likely to tip if they had to tap a button that says “no tip,” a feature many establishments use.

“This is especially more prevalent at places like coffee shops or at food trucks where the person taking your card is standing right in front of you,” says Justin Guinn, retail market researcher at Software Advice. “People might feel awkward pressing a ‘no tip’ button with the server or cashier looking right at them, waiting for them to make a choice. There’s an undeniable guilty feeling,” he says.

Others also have observed this phenomenon in restaurants that use digital tipping, and even in taxi fleets that have been converted to accept credit cards via touch screens in the back seat.

“I think there’s some kind of a casino effect,” Manny Pena, owner of a New York City cafe. tells Bon Appetit magazine. “You don’t comprehend that it’s real money.”

And in some cases, establishments take advantage of the addition of iPads to tweak the standard tip — rather than offer customers a range with 15% at the midpoint, 15% or even 18% might be the starting point. Reflexively hitting the center option without thinking about it could lead to paying a few percentage points more.

When coffee giant Starbucks added the ability for a customer to leave a tip to their barista using the payment function on their mobile app, they included dollar amounts up to $2 — which adds up to a whopping 50% tip even if you’re paying $4 for your caffeine fix.

It could be guilt at work, or it could be the convenience of paying with a couple of taps, according to Guinn.

“Whether or not patrons are ‘feeling the pressure’ to tip more because the server is standing next to them certainly seems to be a factor in the amount they’re leaving,” he says. “However, since the iPad is streamlining the ordering and paying process overall, it could be the convenience of the iPad itself.”

 

 

MONEY Tech

How Comcast Plans to Boost Your Internet Bill With New Fees

Comcast building
Matt Rourke—AP

"People who use more should pay more, and people who use less should pay less," Executive VP David Cohen told investors in May.

Comcast COMCAST CORP. CMCSA -0.25% has begun testing data caps in certain markets and plans to make what it prefers to call “usage-based” billing standard policy across the country within the next five years.

Previously, in nearly all cases, Internet data was an unlimited flat-rate, all-you-can-eat buffet. Under its new plan, which Comcast has already rolled out in a number of test cities, the company will sell users a flat amount of data and then charge them overages. This will take a system where customers had cost certainty and replace it with the model that has served the cell-phone industry so well — one where subscribers pay more if they go over a set limit.

“People who use more should pay more, and people who use less should pay less,” Executive VP David Cohen told investors in May, BGR reported.

That sounds correct on the surface, and charging more for data over a certain amount may be a necessity in a world where so many of us are streaming video content over our broadband connections as part of our daily lives. But the cable companies, which are also Internet service providers (along with the phone company ISPs), have a poor track record when it comes to billing. Data caps may be logical, and Comcast, which is waiting federal approval of its $45 billion merger with Time Warner Cable TIME WARNER CABLE INC. TWC -0.22% may be going about things the right way, but consumers are right to be wary about what this means for their bill.

What is Comcast doing?

Comcast has been testing two different plan pricing strategies in an expanding number of markets (there are variations and differences depending upon the market). One potential plan offers set amounts of data starting at 300 GB for a fixed price, with additional data being sold in 50 GB blocks for $10. The second plan targets low-volume users and offers them 5 GB of data at a set price, but there is a twist. Customers enrolled in this plan, called the “Flexible Data Option,” receive a $5 credit if they use less than 5 GB in a month but pay $1 per extra GB they use.

With the larger plans, Comcast appears to be making every reasonable effort to allow customers to track where they stand when it comes to data usage. People on the 300 MB or bigger plans will receive an email to their primary Comcast user email address when they reach 90% and 100% of their monthly allotment. In some markets you can also arrange to be notified when you reach 50%, 60%, 70%, 80%, 110%, and 125% of your usage. It’s possible in some markets to set up notifications via text message, and the company will also make an automated phone call to its customers when they pass 100% for the second month in a row.

The company also provides an online usage meter where customers on all tiers can track how much data they have consumed.

For subscribers to these more expensive plans, Comcast appears to be making a reasonable effort to help people avoid overages. The same can’t be said for the Flexible Data customers who are specifically not currently included in the notification system. That means that the customers choosing the cheapest plan are the ones most likely to be blasted with costly, unexpected overages.

Comcast should opt for total transparency

Under these plans, Comcast can profit by charging reasonable overage fees to its higher-data customers on 300 GB and above plans and by hitting its lower-end users with prices per GB for overages that are five times higher. Comcast may need to do this as more customers use more data and strain increases on its infrastructure. But if capping data and adding overage charges is really about maintaining network integrity, the company should warn all customers when they are getting close to their allotment and require authorization to add more data for the month.

There’s a way to do this right, if it truly needs to be done at all, and it involves putting choice in the hand of the customer and not using a data cap to inflate people’s bills without their consent. Comcast can still charge more and better control its resources — which is good for the company — while ensuring that its subscribers retain control over their expenses and avoid monthly billing surprises.

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