Firms round up; we pay the price
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?
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.