/ Technology

We want fairer mobile phone deals for all

Girl using mobile phone

As the Government hosts a summit with mobile providers, we’re calling on ministers to get tough with an industry that’s been allowed to confuse consumers for too long. Are you paying too much for your contract?

Ministers today met with mobile phone industry executives to discuss concerns over pricing, whether it’s confusing tariffs or above inflation price rises. And we have some advice of our own.

Haggling for a better deal

According to our research, four in 10 people have resorted to haggling to get a better mobile deal. Nearly nine in 10 were able to negotiate a better deal, saving more than £100 a year or getting extras like a new phone or free minutes.

With mobile providers offering much better deals to customers who are savvy enough to haggle, why can’t they offer more transparent and competitive deals to everyone all of the time?

When it comes to switching, another of our surveys found that a quarter of people tried to leave a landline, mobile, broadband or pay TV contract early in the last five years. Yet, only seven in ten were successful and four in ten mobile phone customers who left had to pay a penalty charge.

Transparent and competitive mobile prices

So, we want the mobile providers and Government to introduce the following measures without further delay, and without waiting for possible new EU regulations:

  • Easier switching with your SIM unlocked for free once the handset is paid off, and no penalties for leaving a contract after six months.
  • Simpler mobile tariffs with handset and service charges separated, and the handset costs automatically dropped once paid off, so consumers are not overpaying.
  • Caps on bills set by consumers to give them control over how much they spend and prevent bill shock.

Following the success of our Fixed Means Fixed campaign, Ofcom ruled that you can exit your mobile contract without penalty if your provider hikes contract prices. However, we think you should be free to leave any mobile contract after six months, even without a price rise, to put competitive pressure on providers to offer customers the best possible deal.

The Government must get tough with telecoms providers and help put the millions of consumers who are struggling with the cost of living in control of their mobile bills.

Comments
Member

I would like to see an end to the up-front cost of mobile phones being subsidised by inflated monthly charges because this:
– Encourages consumers to acquire handsets they cannot truly afford through an unhealthy “buy now pay later” consumer debt culture with a disguised loan from the mobile network.
– Distorts competition by disguising the true price of the handset and of the service, as opposed to a SIM-free handset and SIM-only service.
– Encourages wasteful acquisition of new handsets because consumers mistakenly believe they are receiving the handset for free or for very little.
– Necessitates long contract durations in order to spread the cost of the handset, which inhibits competition by preventing consumers from switching networks.
– Causes consumers to continue paying the inflated monthly charge even after they have paid off the subsidy of the handset, unless they remember to take action at the end of the minimum contract period.
Subsidised handsets are usually SIM-locked which:
– Inhibits competition by making it more difficult to switch networks.
– Prevents consumers from using local SIM cards abroad, allowing UK networks to impose unreasonably high roaming charges by excluding foreign competition.

For these reasons, Ofcom should encourage unsubsidised SIM-free handsets and competitive SIM-only contracts to become the norm, as is common in many other countries. At the very least, networks should be forced to unbundle the monthly handset subsidy repayment and the monthly charge for service (as O2 has started doing), itemising the two separately with independent contract durations and even an APR for the loan. The monthly handset subsidy repayment should not be allowed to continue after the cost of the handset has been paid off.

I would also like to see a ban on bundles. Bundles are of no benefit to consumers because their sole purpose is to allow the network to overcharge the customer in scenarios where the customer uses more or less than the exact allowance provided by the bundle:
– If the consumer uses less than the allowance, then some of the allowance is wasted, causing the network to receive revenue for a service was not used.
– If the consumer uses more than the allowance (or doesn’t buy a bundle), then the network imposes an unreasonably high and disproportionate out-of-bundle rate which is often many times the pro-rata rate of the bundle. This is such a problem that the Americans even have invented a word for it – “overage”.

The networks should instead charge a clear and transparent price per minute, per text and per megabyte instead of bundles. Three charges in this way on its prepaid tariff (3p/min, 2p/text, 1p/MB), and most networks also charge similarly on corporate tariffs offered to very large companies. Large corporates don’t tolerate the bundle rip-off and nor should consumers. To provide volume discounts to heavy users, networks could impose tiers whereby higher usage is charged at a lower price per unit. The only bundles that should be allowed should be those providing unlimited usage (e.g. of minutes, texts or data).

Imagine if we had to buy electricity and gas in bundles, whereby you had to guess exactly how much energy you would use in a given period. It would be intolerable because it would always result in overcharging. If we wouldn’t tolerate it in the energy sector, why has it become so acceptable in the mobile phone sector?

Member

I agree it is silly that buying a phone at a very low price with a 2year airtime contract is as cheap or cheaper than buying the same phone SIM free.

Member

Actually, this is not the point. For example, it is nearly always cheaper to buy an iPhone SIM-free from Apple at full price and get a SIM-only contract; the overall cost over two years is less than a bundled iPhone and service contract. My point is that the networks should stop pushing their more expensive option of a SIM-locked phone funded by a disguised loan which is coupled with wasteful bundles to create an enormous monthly charge.

Member

But this “enormous monthly charge” is often cheaper than buying a SIM free phone and a bundle – which suggests something very wrong with the pricing structure.
For many users a £20-£30 monthly charge is more desirable than a £500 one off payment.

Member

More often than not, it costs more overall to acquire a phone as part of a contract than to buy it SIM-free with a SIM-only contract. If consumers want to pay for their phone in monthly instalments, then they should be told the APR they are paying rather than the repayments for the phone being disguised as a monthly charge for service. Why do so many consumers buy a mobile phone on credit when the same consumers would not buy other electronics such as laptops or televisions on credit? It’s because the networks are pushing the “buy now pay later” option for the reasons given in my long post above.

Member
John B says:
18 November 2013

Its called giffgaff

Member

There are plenty of other providers other than Giffgaff offering SIM-only contracts. The only difference with Giffgaff is that it’s prepaid.

Member

“With mobile providers offering much better deals to customers who are savvy enough to haggle, why can’t they offer more transparent and competitive deals to everyone all of the time?”
This is a recurring theme in these conversations – suggesting that haggling should be outlawed. It is a fact of both personal and business life that negotiation to get a better deal takes place – whether buying a product or a service, improving your salary or wage.
Should we deny those with the gumption to haggle a result?
Just a question!!