A cell phone is no longer a novelty item; it's practically a necessity next to food and water for most Americans.
According to independent research firm CTIA, wireless penetration in the U.S. stood at a staggering 104% as of June, with roughly 45 million Americans (close to 20% of the adult population) using their mobile phone as their primary Internet access device. Furthermore, out of the approximately 1 billion smartphones sold around the world in 2013, more than 120 million were sold in the U.S., led by Apple's iPhone and Samsung's various models, with 44% and 24% market share, respectively, based on data from NPD Group.
But just because Americans crave the latest in smartphone innovation doesn't mean they've given up their desire to get the best deal imaginable with their wireless contract. With four major wireless providers in the U.S. to choose from – AT&T (NYSE:T), Verizon (NYSE:VZ), Sprint, and T-Mobile – and 97% of Americans having the ability to choose from at least three different carriers based on their location within the U.S., it means wireless providers needs to deliver not only exceptional quality service but also a comparably attractive price point.
Five states where your cell phone bill is the highest
Of course, while mobile payment plans may seem fairly cut-and-dried on the surface (i.e., all four companies offer consistent plan pricing across the country), varying taxes in each state can dramatically affect what consumers will ultimately pay for their wireless plan. All mobile users, regardless of the state they live in, pay a federal excise tax and a federal universal service fund fee, which total a combined 5.82% on their wireless plan. However, beyond these two fees, state and local taxation can cause a wide variance in consumers' bills.
Based on data aggregated by MyWireless.org as of July, Oregon was the most favorable state in the nation when it comes to additional taxes for your wireless bill. On top of the mandated federal taxes, Oregon charges wireless consumers a minuscule 1.76% extra, for a total cell phone tax of 7.59%. A number of other states (47 to be exact), however, charge consumers well in excess of 10% in total cell phone tax for their wireless service, making your wireless plan not nearly as attractive on a price basis when all is said and done. In fact, the average tax paid on cell phone bills in the U.S. is nearly 16%.
Based on MyWireless' aggregated data, the five states where you'll pay the most for your cell phone plan are:
- Washington (24.42% total cell phone tax)
- Nebraska (24.31%)
- New York (23.56%)
- Florida (22.38%)
- Illinois (21.63%)
According to MyWireless, which used Federal Communications Commission data, as well as state tax data, my home state of Washington takes the dubious top honor as the state where you'll pay the most for your cell phone. State and local sales taxes combine for 9.15%, a business and occupation utility tax adds 7.5% more, a state and local combined 911 tax tacks on 1.94%, and the universal federal fee of 5.82% all add up to a whopping 24.42%. This means that $49.99 plan you've been eyeing could cost $62.20 when taxes are factored in within Washington state.
Two brands shine
While there's not a lot that consumers can do about avoiding wireless bill taxes, other than moving to a different state (though I do find it notable that the nation's highest- and lowest-tax states border one another), there are ways that wireless companies can take consumers' focus off their bill and instead place it on other areas of strength. In effect, focusing on building wireless brand loyalty is important across all states, but it's perhaps even more important in the aforementioned five highest-tax states.
When it comes to keeping its customers satisfied and coming back to the brand, AT&T and Verizon are by far the cream of the crop, depending on the source.
According to Brand Keys, which ranked more than 500 companies across 64 different categories, AT&T Wireless took the crown as the wireless brand customers are most loyal to. In particular, when we took a closer look at why AT&T stood atop the brand loyalty charts for wireless providers in May, AT&T offers faster network speeds than Verizon, at least according to RootMetrics, a research firm that analyzes network speed and reliability.
Additionally, AT&T is engrained in U.S. culture, landing in the top 20 when it comes to America's most patriotic brands (also a Brand Keys study). With a rich history, as well as ample plans to choose from, AT&T has had no difficulty forging an emotional brand connection with its customers. And if you think brand loyalty isn't important, then AT&T's second-quarter best-ever postpaid churn rate of just 0.86% would beg to differ.
However, Verizon has done exceptionally well with driving customers into its stores, too. Verizon lays claim to the most expansive 4G LTE network in the country, and according to ACSI's annual survey it ranked highest in customer satisfaction of the four major carriers, with a score of 75. ACSI's survey, which isn't necessarily a gauge of brand loyalty, factored in everything from network coverage, where Verizon excels, to the helpfulness of its staff, website satisfaction, and range of data plans available, just to name a few of the 10 components.
It'll be interesting to see whether there comes a point where consumers scale back on their plans or usage because of rising cell phone tax rates, but regardless of whether it happens, AT&T and Verizon appear prepared to not only deal with rising taxes, but to thrive in these environments as well.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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