Seven sneaky ways tech product vendors are making you pay more

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iPhone welcomed to Canada by massive online protest

Faced with a worsening economy, companies are afraid to raise fees.

Liberal MP David McGuinty (Ottawa South) talks about his “Get Connected Fairly” act.

It’s no secret that the faltering economy is taking its toll on the tech world. You may not have noticed, though, how often your wallet has been hit with sneaky fees as a result.

We’ve identified seven recently introduced surcharges on tech-related products – add-ons that vendors aren’t exactly trumpeting.

Ready to see where companies are hiding the new fees?

Sneaky Fee Philosophy

Sneaky fees are by no means new. A study two years ago found that consumers, on average, pay nearly $950 each in cloaked costs every year.

Now, with the mangled state of the economy heralding hard times ahead, corporations are have even more reason to try to bump up the price of their goods by subtly tacking on a few cents here and there for various nominal services and extras.

“Companies are struggling with this new economic environment in the last 12 months,” says Bob Sullivan, author of Gotcha Capitalism and columnist of MSNBC’s Red Tape Chronicles. “They’ll really be willing to do anything to survive.”

Finding Your Fees

We’ve all heard about and paid “system access fees” – as part of our cell phone bill.

What many don’t know is these fees were never intended to be a permanent charge. They were initially intended to raise revenues that help fund the cost of getting systems up and running.

The Canadian government asked wireless phone companies to collect such fees in 1985 for the state, and for two years the money went to the Minister of Industry.

In 1987 the government told companies to stop collecting the fees. They never did.

So for 21 years, wireless carriers have collected billions of dollars that many consumers mistakenly think are going to the government, noted Liberal MP David McGuinty — brother of Ontario Premier Dalton McGuinty.

McGuinty has uploaded a video to YouTube to draw attention to his online petition in support of Bill C-555, which he introduced in the House of Commons in June this year.

If passed, the bill would require telecom companies to stop charging the system access fee and become more transparent in their billing.
In the U.S. consumers have long heard about hidden fees in things like phone bills, such as the “Federal Subscriber Line Charge.”

There’s nothing federal about it – that one goes straight into the phone company’s coffers, as does the “Regulatory Cost Recovery Charge” on the cell phone service statement.

But newer costs are popping up in technology right now, and they may be affecting you in ways you’re unaware of.

1. Shipping Surcharge

Online shoppers, beware: The bill for buying or selling a product online is ballooning, due to a new wave of shipping surcharges. Carriers’ fuel surcharges have already doubled since last year.

And now, both UPS and FedEx have additional rate hikes in mind for home deliveries. FedEx rates will jump by almost 7 percent in January, while shipping via UPS Ground will go up by about 6 percent.

2. 3G Fees

Everyone’s excited about the new “low-cost” 3G phones–but the devices aren’t quite as economical as they seem.

Take the G1 Android phone: T-Mobile has spent plenty of time touting the handset’s bargain $180 base price, but it has been a lot less vocal about the activation fees that raise the price to $215.

On top of that, users must pay a minimum of $25 more per month for data access than they would for a regular voice-only cell phone, which subtracts $600 more from your pocket over the course of the two-year required contract.

T-Mobile is not alone. AT&T pulled a similar trick with its new iPhone 3G, playing up its lower sticker price (compared with the first-generation iPhone), but soft-pedaling its higher monthly service fee:

“They raised the price of their subscription and lowered the price of the gadget,” Sullivan points out. “Ultimately, after a year, your price would be higher.”

Marketing brilliance? Maybe. But 3G fans may not share a publicist’s admiration for the tactic.

3. Blu-ray Bucks

Netflix subscribers who request Blu-ray movies will be hit with extra charges starting in November.

The movie-by-mail company recently tacked on a dollar-per-month surcharge for users who rent high-def discs. You can opt out if you want, but not ponying up the extra dollar means no more Blu-ray discs for you.

4. Electric Charge

Keeping your gadgets juiced may already be costing you more than in the recent past. Four months ago, USA Today reported that utilities across the United States were poised to raise their rates for electricity by up to 29 percent.

The reason?

The utilities want to recoup fuel costs, build new power plants to meet higher demand, and update old power grids. So if you use a computer or other electronics at home, you’re probably seeing a higher monthly bill.

5. Tricky Travel

Surfing to travel sites such as Expedia, Orbitz, and Travelocity may make it easier to find the right flight–but you may be paying for that convenience on your final bill.

A significant shift has occurred in the ticket booking market from years past, when third-party providers often saved consumers dough. Most third-party services now stick you with a scarcely mentioned booking fee ranging from $5 to $25 per ticket.

But5 don’t try to avoid it by calling the airline directly: Most phone-based booking lines now charge extra, too, as do the agents at the airport counters.

These days, the simplest fee-free option is to buy directly through the airline’s site. (Of course, you can still use the third-party services to search and shop around before switching to the airline’s site to close the deal).

6. Cable Cost

Comcast is preparing to raise its rates in several different ways. The company has acknowledged that it will up its cable billing rates nationwide by an average of 3.7 percent in November. Basic service will jump about $3 in some places.

The price for add-ons such as DVR service and premium channels will rise by a dollar each per month, too. Comcast blames the fee adjustment on “challenging economic environment,” along with “gas prices, healthcare costs, increases in the cost [it] pay[s] for programming, and technology and service improvements.”

7. Text Tax

Our last sneaky fee targets businesses rather than consumers, but all such increases eventually get passed along to the end user in one way or another. Verizon has just announced that it’s adding a three-cent fee for all mobile-terminated text messages–texts that originate from a computer rather than from another cell phone.

As a result, companies ranging from Google SMS to the slew of free Web-based texting services will be paying extra. And soon enough, those services will start passing the costs on to us.

The Future of Fees

Sneaky fees end up hurting everyone. Companies might make a quick buck, but they take a hit on respect and loyalty–and, sooner or later, they’re likely to start losing customers, too.

“You can get away with hidden fees once or twice on consumers, but eventually, they get pretty mad at you,” Sullivan says.

Still, such added costs are unlikely to disappear. In an era where product comparisons are just a click away, being able to advertise the lowest possible figure as a base price has tremendous commercial value, and annoying the public is a price that many businesses are willing to pay to hit that number.

Ultimately you may not be able to avoid the charges–but at least you can know how much you’re really paying. And armed with that knowledge, you can make educated decisions about which services you really want to use–and which add-ons you’d rather do without.

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Jim Love, Chief Content Officer, IT World Canada

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