Millions of Americans recently received unwelcome news about their cell phone bills. In late June, T-Mobile (TMUS) said it was retiring over 1,000 older plans, shifting customers to newer offerings at an added cost of as much as $6 per line per month. And starting in August, AT&T (T) hiked rates on some of its older plans by $10 to $20 and increased a monthly per-line fee by $1.
The changes contributed to a steep 5.9% jump in Americans' wireless bills from July to August alone, according to Consumer Price Index data. It was the largest single-month jump since the Bureau of Labor Statistics began tracking the category nearly three decades ago. In a twist, last month's rising phone bills may have helped convince the Federal Reserve to implement its first interest rate hike in three years.
The steep price jump likely contributed about 10 basis points of August's 0.3% month-over-month rise in core consumer prices, according to Wall Street analysts. The hotter-than-expected jump in this category, which strips out price changes in the particularly volatile food and energy sectors, helped cement expectations for the Fed's 25 basis point hike to benchmark rates on Wednesday. Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments Consumers are seeing higher cell phone bills now for a variety of reasons: Wireless companies are spending billions to build out their vast 5G networks and are also seeking to pass growing regulatory costs on to consumers.
Carrier spending on new sites and expanded network capacity topped $30 billion last year, according to CTIA, an industry trade group. Ultimately, though, the latest moves are also consistent with wireless companies' strategies, said Lauren Hannula, managing editor of WhistleOut, a comparison shopping platform for phone and internet plans. The Big 3 carriers – Verizon (VZ), AT&T, and T-Mobile — have repeatedly emphasized that they aim to boost how much money they make per customer this year and beyond.
"I do think it's more of a pricing strategy than actually trying to offset the cost of network infrastructure acquisitions," she said. One other reason bills are moving higher? Phone plan taxes are also on the rise.
Last year, taxes, fees, and government surcharges made up a record 27.6% of the average wireless bill, according to the Tax Foundation, a research group that generally favors lower taxes. "Few people actually open their cell phone bill to see the expense of the taxes and fees that they're charged, but when they do, they tend to be rather blown away," said Adam Hoffer, the Tax Foundation's director of excise tax policy. Whether prices will continue to rise is unclear.
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