The hidden cost of your mobile contract

Looking at the thumbs up/down signs, I am left wondering who would not support your comments NFH, and why. I agree with you wholeheartedly and I cannot begin to understand why masses of people have fallen for these contracts. Yes, PAYG is expensive but the high price sort of moderates use which puts time back in your day [unless you think you really can do two things well at the same time].

PAYG is expensive only to force people into buying bundles. If the networks can offer postpaid incremental tariffs as “corporate tariffs” (see below) and Three can do so at reasonable prices on PAYG, then they equally could offer them to retail consumers.

Over the years I have been fed-up with mobile service providers moving the goal posts. Here is one example. Not so long ago, credit on a Three mobile phone expired after 30 days. I discovered this when I tried to use the spare mobile I keep in the car, which had been unused apart from a test call. I got a new Three SIM after Christmas now that they have removed the expiry clause, and was pleasantly surprised to find I still had £9.97 credit after a test call.

NFH, PAYG is only expensive if you use it a lot. I don’t. I make necessary phones calls, occasional texts, and that is all I need. I very occasionally top up my £30 phone with £10 to cover 3 months or so. Between us Mrs R and I spend less than £60 a year on mobiles. We have a landline at home, though, and use our PC and iPad for internet access.

I really don’t know why people need to make such huge use of mobiles and what they did before they were available. Not a criticism, just a personal point of view 🙂

Malcolm – Until less than a year ago, I had a PAYG mobile and did not use it often. The main reason I moved from PAYG for my main phone was the high cost of daytime calls to mobiles from my landline. My landline tariff covered evening and weekend calls to mobiles and some of the people I have to contact during working hours only have mobiles.

Hopefully the cost of calling a mobile from a landline will plummet soon.

Our use of mobile phones is even more economical than Malcolm’s I should think. Apart from the other reasons, we also regard the mobile phone as an inferior instrument for a proper conversation. When we are out we have no desire for people to call us so we only use them for making very brief calls or texts [e.g. to have a taxi meet us at the station].

Malcolm, you say “PAYG is only expensive if you use it a lot“. This is precisely my point. Why should heavy users be forced to buy bundles or allowances in order to pay a reasonable price for their consumption? It’s absurd that one has to predict one’s precise consumption in advance and then pick a bundle or allowance just above this amount. We wouldn’t tolerate this forced prediction nonsense with electricity or gas, so why do we tolerate it with mobile phone service?

If this happened in the energy sector, Ofgem would clamp down on it quickly, but when it happens in the telecoms sector, Ofcom allows it to become the norm.

NFH, agreed. Incidentally, on costs I was amazed to find the large amount that is spent on communications: “On average, energy and communications household spend is at 5% and 4% of total household spend, respectively.” This is from a report issued by the UK Regulators Network (UKRN) – another body that looks over the activities of Ofgem, Ofwat, Ofcom, etc. But averages are very deceptive.

In a way energy contracts requires a sensible assessment of annual usage to pick your best deal – balancing gas against electricity tariffs and standing charge vs unit cost for example. Not perhaps as extreme as telecoms, unless you choose a unit-only tariff and then find you use a lot more than you estimated – it can be very expensive.

I don’t think it will be long before the cost of phone calls becomes trivial and the companies will be making most of their money from other services available via mobile phones including selling/renting new handsets, phone insurance, and so on.

I’m currently paying 50p per day for unlimited calls, which does not seem unreasonable since it includes an adequate download allowance. Having said that, I very much support moving towards paying for what you use. You can no longer buy current Adobe software and it’s very expensive to lease unless you use it regularly. Microsoft is heading the same way with Office 365. It’s about time we had the option to pay according to the amount we use software.

Malcolm, the main mobile networks all offer “corporate tariffs” to large businesses and public sector organisations. In the same way that nobody would tolerate having to buy energy in monthly bundles and allowances, these large customers don’t tolerate this practice with their mobile phone services, as they would generate significant wastage of thousands of fully-charged but partially-unused bundles or allowances every month. Consequently corporate tariffs are billed in arrears on a usage-only basis, similarly to Three’s 3p/min, 2p/text and 1p/MB, albeit at lower prices than Three. The “force of numbers” to which you refer therefore already exists with corporate tariffs. I’m advocating (see my first post above) that similar postpaid incremental tariffs should be offered to retail consumers as well. If this became the norm for retail consumers as it already is for large corporates, then the problem of “being on the wrong tariff” would largely vanish.

NFH, thanks for your reassurance. I imagine private customers are subsidising commercial ones to some degree. Commercial deals should be cheaper because of scale, but just how much difference is there between private and commercial? Do we know?

I looked at how government puchases mobile voice and data services and I tracked down this guidance document:

“http://ccs-agreements.cabinetoffice.gov.uk/sites/default/files/contracts/Simple%20Guide%20to%20Buying%20from%20the%20PSN%20Frameworks%20v4_1.pdf”

It seems that this leaves the negotiation down to individual departments or organisations setting up a “competition”, with the responsibility of defining their requirements. This is where I worry about the competence of those involved. Why not have an administration-wide agreement for mobile phones that the whole organisation subscribes to, properly monitored?

I seem to remember the NHS buys its huge quantity of supplies not with centrally-arranged prices but through its separate area units each making their own deals. Prices were widely different for the same product. If this is still the case I expect mobiles will be no different. Or am I too cynical?

The other point to note is that corporate tariffs are often available to the workers themselves (including their families) for their own private phones. Often you don’t need to be an employee because the main qualification requirement is a work e-mail address on the organisation’s domain name. Consequently I once acquired a corporate tariff from an investment bank where I was working and I kept it for three years after I left until the investment bank changed networks. The investment bank had been turning a blind eye to this widespread practice by departed workers because it inflated the network’s perception of the bank’s total expenditure, allowing a greater volume discount.

NFH – lots of this sort of discrimination takes place. Unions negotiate better deals than generally available for their members, companies do so for their employees. so do public services. Others not so fortunate will pay a higher price because of this. Is this right? One way to deal with them all is as benefit in kind and tax them, but just how complex should the tax system become?