February 17, 2008
We live in an age of supercomputer-driven, lightning-fast digital technology that can determine the time of day down to the nanosecond.
So why do shipping companies routinely round up package weights to the nearest pound? How come cellphone companies round up calls to the nearest minute?
How many millions of dollars are these companies pocketing annually by charging you for nothing?
Newport Beach resident Khalil Jaber found himself asking these questions after going over some recent FedEx bills. Jaber, 47, sells medical equipment and is a frequent user of shipping services.
He found that no matter what a package weighed, it routinely was rounded up to the nearest pound and charged at the higher level.
"Why is this?" Jaber wanted to know. "If you buy a little over 3 pounds of ground beef at the supermarket, you shouldn't have to pay for 4 pounds. No one would stand for that. It's the same exact issue."
Consider the reach of the companies in question. FedEx Corp., for example, handles more than 7.5 million shipments a day. AT&T Inc. provides wireless service for more than 70 million subscribers.
If each FedEx package resulted in just a nickel of rounded-up cash, this would mean about $137 million a year in extra revenue for the company.
If each AT&T wireless customer made just one cellphone call per day, and that call resulted in just a penny of rounded-up charges, that would translate to more than $255 million in annual revenue for AT&T.
And neither company is alone in the practice of rounding up for billing purposes. Most rival shippers and
cellphone companies do the same.
Would it be so hard for companies to install technology capable of more precise measurements? Not at all, said Henry Chesbrough, executive director of the Center for Open Innovation at UC Berkeley's Haas School of Business.
He said shipping companies could easily determine the weight of a package down to the microgram, or one-millionth of a gram. "That's lighter than a human hair," Chesbrough noted.
By the same token, he said, cellphone companies could determine usage not just to the second but to the microsecond, or one-millionth of a second.
That would make no sense from a business standpoint, of course. But it demonstrates that giving consumers precise measurements of the things they pay for isn't a factor of some as-yet-undiscovered technology.
The technology exists, and it's not particularly fancy. All that's lacking is a willingness on the part of certain multibillion-dollar corporations to use it.
Jim McCluskey, a FedEx spokesman, told me the company prides itself on using state-of-the-art technology. "We have a very robust
technological enterprise," he said.
The reason FedEx rounds up package weights to the nearest pound, he said, is that this is what works best for FedEx.
"There has to be a uniform manner in which weights are determined," McCluskey said. "For us, this is an effective way to determine weights."
But wouldn't it be just as uniform to round down to the nearest pound?
"That's a good question," McCluskey replied. "Our standard has always been to round up."
In round-up world, the laws of physics apparently don't apply. For instance, DHL defines a package's "actual weight" as being "the weight of a package using a standard scale rounded to the next full pound."
The company illustrates this principle by stating on its website that "a 12 1/2 -pound carton will have an 'actual weight' of 13 pounds."
Back in the real world, a 12 1/2 -pound carton weighs 12 1/2 pounds, which is what any reasonable person might expect to be billed for, rather than 12 1/2 pounds of carton and one-half pound of nothing.
As if that wasn't strange enough, most shippers, including the U.S. Postal Service, also use something called dim weight, which is short for "dimensional weight." This is a calculation not of a package's relationship with gravity but its density, or how much space it occupies.
This is determined by multiplying a package's dimension -- length x width x height -- and then dividing by 194 if the total is 5,184 cubic inches or larger. Got that?
Shippers will determine both the "actual weight," which isn't really actual, and the "dimensional weight," which isn't really a weight, and then come up with a "chargeable weight."
That amount, needless to say, is whichever number is greater.
Karen Cole, a spokeswoman for UPS, said these sorts of measurements were a standard industry practice.
"I'm sure it boils down to simplification," she said.
That's one way of looking at it. Another would be that shippers are padding their pockets with a bogus system that charges customers for nothing.
Cellphone companies are also guilty of this by rounding up calls to the nearest minute -- in other words, charging customers for time they don't spend on the phone.
"It keeps things simple for customers," said Lauren Garner, an AT&T spokeswoman.
State lawmakers in Connecticut said this month that they were pondering legislation that would require wireless companies to charge to the second instead of the minute.
But that's a long shot, seeing as how cellphone companies fall under federal jurisdiction, and the Federal Communications Commission hasn't shown much interest in the matter.
Jaber, the medical-supplies dealer, said all he's looking
for is a fair price from the companies he does business with.
"Why should you have to pay for 52 pounds if the weight is 51.3 pounds?" he asked. "They weigh it. They can give you an exact weight."
No, they can give you an actual weight. Big difference.
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