Is the all-you-can-eat model ever a good idea?

Unlimited data plans, unlimited airline miles, all-you-can eat buffets -- looking at the logic (or lack of) behind companies that launch all-you-can-eat plans.

Jeremy Hobson: The head of AT&T says he has a big regret. He regrets that his company ever offered unlimited data plans to mobile phone users for a set price. The all-you-can-eat model, he says, is costing AT&T money. For more on this, let's bring in L.A. Times consumer columnist David Lazarus. Good morning, David.

David Lazarus: Morning, Jeremy.

Hobson: So is the all-you-can-eat model, if you will, not a good one for companies?

Lazarus: I would say it was never a good one for companies, 'cause it always seems to turn around and bite you in the keyster. I mean, in the case of AT&T's Randall Stephenson saying iPhone all-you-can-eat plan wasn't a good idea. Well of course it wasn't! Because people would start using it a lot. And then there was that much-discussed article in the L.A. Times the other day about American Airlines offering $350,000 all-you-can-use first-class tickets for the rest of your life. And what, it turns out that it's costing over $1 million a year per passenger!

Hobson: So then why do these companies do it in the first place?

Lazarus: I think they do it because they just don't crunch the numbers. And they figure, boy, not a lot of people will take us up on it, we'll get more money over the long run than the customer. What they don't figure is the customer's not stupid; you offer them something like this, they will figure out how to make the most of it.

Hobson: Now are the cousin of all-you-can-eat plans -- lifetime subscriptions -- are those also flawed in your view?

Lazarus: I would say so, simply because often times market circumstances or technology will overtake things. For example, a few years ago, there was a Seattle company called TrafficGauge, which offered lifetime subscription to real-time traffic information. And then it found out that that lifetime subscription was costing it a pretty penny, so it tacked on a $9.95 annual fee to boot -- thus reneging on its original contract, but saying, "Hey, what can we do. Times change." Well, of course they do.

Hobson: Well, what about all-you-can-eat buffets though David? They do seem to work. I mean, you go to some restaurants and they offer unlimited breadsticks or unlimited pasta -- they seem to stay in business.

Lazarus: Well, yeah, but these guys really crunched the numbers and they looked at how much people will really use, and they kind of use low-quality ingredients. So unless these guys get overrun by a troop of sumo wrestlers, it probably isn't going to happen a lot. Chances are they're going to come out ahead. But here's the main thing: In about 20 years, according to the latest projections, the obesity rate among adult Americans will be nearly 50 percent. So I would say, all-you-can-eat restaurants, they're like toxic waste dumps.

Hobson: L.A. Times consumer columnist David Lazarus, thanks a lot.

Lazarus: Thank you.

About the author

David Lazarus is an American business and consumer columnist for the Los Angeles Times.
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I'm curious what they mean by not profitable? Do they really mean not profitable or do they just mean not ludicrously profitable? $80 bucks a month for phone and data. What's their overhead? I would guess more than 50% of the bill is pure profit, probably much more. They already have the infrastructure in place. It's not like they have to run wires to homes like in the old days. Many smartphone users are using WiFi a lot of the time anyway so that's not even using the carrier's service. So what if they have to slap on a few more data switches for those data hungry gamers and netflix watchers. They can afford it. They've been rolling in money for years from penalty fees from subscribers who exceed their minutes. They want the same deal for data. It's plain greed with little or no competition to keep a balance.

My Dad who is 91 this year got a subscription to Reader's Digest for about $200 (guestimate) for life at age 21. The magazine has followed him all over the country for 70 years!

I had to write when I heard this interview. Why do corporations make unlimited product offers when they are very possibly unprofitable ? Because they are very short sighted. Quarterly results are the only thing that matters any more. The executives that sold the airline passes are long gone and received kudos for those programs at the time.

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