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Commission Shmission

By TelcoOctober, 2006May 20th, 20242 min read

Nobody likes to see their mobile phone bill increase month after month to the point where it becomes a major expense – especially in times of rising interest rates. And unfortunately one of the most common reactions to a big bill is to try and blame someone else.

Lately the finger has been pointed at the mobile phone dealers who gain recurring commissions on bills going to their customers. (See Mobile phone industry should come clean and Mobile users locked in and losing out). This keeps coming up in the press at regular intervals, and always seems to be portrayed as something insidious. Apparently our filthy industry needs to “come clean”, because phone dealers are “getting away with it” (unlike those super-honest financial planners).

This simplistic view reveals a fundamental misunderstanding of the nature of a phone service. When you buy a mobile phone service, whether or not you are getting a “free” handset (will get to that some other time), you are actually buying a liability, and in the case of post-paid services, a line of credit. This is the case for as long as you own the phone.

As the agent who sold this to you, I have not sold you a book or a toaster that you pay for once. In that case, it would be reasonable for me to get a one-off commission (or a gross margin, if I was running a book shop) on the sale. Instead, I have sold you something that is an income stream for the phone company. So what is wrong with me getting an income stream as compensation for doing so?

And just as the book shop owner need not disclose what margin he or she puts on the books, the mobile phone dealer need not disclose details of their commission!

What do you think? Do (mobile) phone resellers deserve recurring commissions?

This was also posted at [Billing Bureau].

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