Maybe it's just me, but airlines and wireless service providers are the worst, right?

Well, this week we get a story about both.

I just got back from Europe and in the process got way too familiar with AT&T.

And in this, I learned something interesting: they make a lot of money off international plans.

Today I tell my story and how it can make you more money.

But first, our sponsor.

 

 

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Tiny changes, big profits

Over the last two weeks, I went on a trip to Europe with my family. We visited Vienna, Prague, and Copenhagen.

It was a great trip, but also, exhausting. And while I’m sure most international travel is exhausting, this was especially so: we took our two children who are 6 months and 2.5 years old. But we also met other family who had a 3 and 5-year-old.

No one tells you while you’re single or married without kids to enjoy those trips… because traveling with kids is a different experience.

Instead of museums, great food, and taking in the “vibes” of the city, we were looking for kid-friendly activities, eating while policing, and doing our best to not lose someone (grandparents included).

And if the trip wasn’t enough, I can’t be the only one who forgets how taxing the planning can be, right?

Now, I’m thankful: most of the others in the group handled the actual plans. But I was still left with a few responsibilities.

One of those was researching and procuring an appropriate international cell phone and data plan.

And in that process, I learned quite a bit.

One of those tidbits was this: AT&T collects approximately $1.41 Billion in annual revenue by automatically opting subscribers into their “International Day Pass” add-on.

That is barely 1% of their total revenue ($122 Billion in 2023), so you may be thinking “who cares.”

Today I tell you why you should care and how you can use this (or not) for your business.

The math

I’ll start this “math” with a big caveat: I have no inside information and am making broad assumptions throughout this piece.

Even if the numbers are incorrect, though, the lessons are still valid.

As I researched, I wanted to know: how many people use the “International Day Pass” each year.

AT&T doesn’t report this information, from what I can tell, so I was forced to make quite a few assumptions.

So, I looked up:

1.  ​AT&T has 115.5 million US subscribers​ 
2.  ​The US Population is 336 million​ 
3. 14.6% of US residents travel overseas each year (​49 million​)

Using the 14.6% of US residents who travel overseas each year, we can assume at least 16.8 million of AT&T subscribers did so too. I say at least, because AT&T subscribers are going to be more affluent than the general population.

So, how many of the 16.8 million were charged the $12/day charge and for how many days?

I really have to stretch with these assumptions, so I wanted to say conservative.

With the average length of stay overseas being ​almost 18 nights​ for US residents, I decided to choose an “average” length of use for the International Day Pass at 7 days.

So, if 16.8 million subscribers used the International Day Pass for 7 days each year, AT&T received $1.41 billion (16.8 million x 7 days x $12/day) from this add-on.

And you may be thinking, but a lot of people probably don’t use day pass, right?

Well, it depends.

The story

Before the trip, while researching my options, I saw that AT&T charged $12/day for International Day Pass. AT&T maxes the charges out after 10 days, so I was going to be charged $120 to use my phone internationally. My wife’s phone would be charged $5/day, as they discount the rate on the second phone on a plan.

So all in, it was going to cost us $170 to use these plans.

However, when researching international plans, it was clear I could get plans for 1/3 of the cost of the AT&T plan. For me, this was a no-brainer. Ditch AT&T’s International Day Pass and buy a new sim.

Well, it’s not that simple.

As soon as we arrived in Europe, both my wife and myself received this text from AT&T:

 

Sneaky, sneaky.

You see, AT&T automatically opts you into the service when it detects your phone overseas.

This could be great, right? Instead of racking up their expensive $2.05 per MB data charges, they cap your expense at $12/day. But for someone like myself who made other plans, this meant I was going to be charged for both the AT&T and new sim card unless I opted out of AT&T's service.

For me, this was simple. I replied “No,” then they requested a second confirmation to which I replied “Out.” Done, easy enough.

 

But then the story for my wife was different. My wife tried to opt-out three times before it finally worked. These three times happened over 3-4 days, which means we’re still likely to be charged for those days by AT&T.

So, what did that mean? That means I spent 45 minutes on their website chat function to be told they can’t do anything until I get the bill. This means I have to call and request the charges be removed sometime in the next few weeks.

What a frustrating experience! But for others, the automatic addition saves them tons.

So, is AT&T adding the service a sneaky play for revenue or a kind service to save their subscribers money?

What are their options?

So, if AT&T didn’t auto opt-in subscribers to International Day Pass, what are their other options?

1. Alert and provide options: They could notify subscribers of the per-usage charge and present them with the ability to opt-in to the International Day Pass by responding.
2. Auto-enroll on travel (current solution): They could auto-enroll everyone and require an opt-out.
3. Include International by default: Automatically include international plans in their default packages.
4. Provide tiered usage options: instead of only having one plan at $12/day, they could offer 2-3 plans that would allow for more or less usage.
5. Best Plan Guarantee: they could automatically opt-in subscribers to the best plan for them retroactively (based on their activity).

Lessons for you

AT&T’s choice of auto-enrollment resulted in $1.41 billion in revenue. Whether that’s more or less than the alternatives, we’ll never know.

But this decision, while only 1% of total revenue, has had a drastic impact on the business.

In 2023, their operating income was $23.5 billion. While we don’t know the cost associated with their auto opt-in decision, we can assume the cost is extremely low. No worker is involved and the cost of the texts are miniscule.

So with the cost associated being microscopic, we can assume the whole $1.41 billion is basically passing through to income. That means the choice to auto opt-in subscribers to the International Day Pass is lifting income by 6% ($1.41 / 23.5).

This takes Net Income Margin from 18.3% to 19.3%, which is significant.

Even seemingly small choices can drastically change a business. And consider this: they’ve likely made more than one “small” choice like this.

So, how can you do the same?

First, we want to make sure any decision aligns with the relationship expectation you have with your customers.

AT&T, and other wireless carriers, have a notoriously rocky relationship with customers. For them, this move seems “on brand,” even for those customers who don’t like the addition of the charge.

But it might not be right for your business.

So, ask:

1. What opportunities are there to upsell or cross-sell your existing products and/or services? How can you do this in a way that aligns with your company’s core values?
2. What services and/or features can we automate to reduce costs of deployment and increase efficiency?
3. Is there any way to renegotiate with suppliers or vendors to reduce cost, thus extracting higher margins with no impact to the customer?
4. Is there a new product and/or service we can offer to create more value for the customer? What will meet their needs and align with our core mission?

By reflecting on these questions and examining your current practices, you can identify opportunities to increase revenue, improve margins, and enhance overall business performance.

Remember, even small adjustments can lead to significant improvements in your business’s financial health.

Let me know… reply to this email: did this give you any ideas? How can we maximize revenue and margins like AT&T without turning our relationship with customers into that of AT&T?