| 3. Bargaining Power of Buyers
In August 2005, the Florida PIRG Education Fund Report revealed how cell phone early termination fees hurt customers. Their research showed that half of cell phone users would switch carriers if they did not have to pay contract termination penalties. Feeling locked in a cell, most consumers resent the $150 - $240 penalties per phone, should they consider changing to another carrier for lower rate or better service.
The report also indicated that $4.6 billion have been paid in the last 3 years due to penalties – that’s $2.5 billion in actual penalties and $2.1 billion in lost services from consumers who either cannot afford the penalty or didn’t think it’s worth paying. This clearly suggests that buyers/consumers have little bargaining power in this end.
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