UK MNOs accused of using handset subsidies to rip off their customers

Research from Citizens Advice reckons four million people in the UK are still paying back their phone subsidies after the end of their contracts.

This will come as no surprise to anyone who has reached the end of a postpaid contract that came with a subsidised handset. It’s universally understood that such things are part service contract and part financing on the device, but MNOs are generally deficient in contacting their customers when the contract period is over.

They do get in touch, but usually with misleading offers such as ‘free’ new handsets, when in fact they’re merely calling for the customer to initiate a fresh postpaid contract, complete with a subsidised handset. An honest exchange would also offer a SIM-only deal that would offer far more data for far less money in the absence of a new device.

Citizens Advice specifically calls out EE, Vodafone and Three, implying O2 does a better job on this matter. It reckons these four million mugs are being overcharged, on average, by £22 per month, which seems about right. It also found that most of the time we’re paying more for the handset by getting it subsidised by the operator than if we just bought it on the open market, but there’s no surprise there.

“It is unacceptable that mobile providers are knowingly overcharging customers for phones they already own,” said Gillian Guy, Chief Exec of Citizens Advice. “We’ve heard a lot of talk from government and the regulator but now we need action. Other companies have already stopped doing this so we’re looking for these three major providers to follow suit. In the meantime, consumers should check their phone bills to see if they can save money with a SIM-only contract or upgrade to a new phone.”

Like most studies accusing utilities of ripping off their customers this ultimately comes down to telling them not to be lazy and check their contract every now and then. It’s not difficult to give yourself a reminder to renegotiate your contract when it expires so those who don’t should receive limited sympathy. On the other hand, from an industry that constantly wrings its hands about churn, this is hardly an example of customer service best practice.

Europe might force Apple to ditch Lightning Cable

A leaked email suggests the European Commission will revive efforts forcing manufacturers to standardize smartphone chargers, after previous commitments were simply disregarded.

Back in 2009, 14 smartphone manufacturers signed a memorandum of understanding (MoU) committing themselves to switch to a common charging port for handsets released from 2011. The deadline passed, and while similar letters of intent emerged in 2013 and 2014, the frustration of iPhones and Androids having different chargers continues to plague the digital society. According to Reuters, EU competition chief Margrethe Vestager is sick of the situation.

“Given the unsatisfactory progress with this voluntary approach, the Commission will shortly launch an impact assessment study to evaluate costs and benefits of different other options,” the leaked email states.

As the vast majority of devices now use micro USB-B or USB-C for some newer devices, the gripe does seem to be directed at Apple. It is hardly an unusual situation that the iLeader walks to the beat of its own drum, though now it does seem Europe has had enough. It will likely take years to rollout across devices, but the Commission might well force Apple’s hand.

Apple is a stubborn company, and while this posturing from the European Commission might be a worry, nothing is likely to change in the immediate future. An impact assessment will take months, and there is bound to be some resistance to the idea as Apple kicks up a fuss.

That said, iLifers will welcome the idea as the first world frustrations of having no battery is a daunting prospect.

Could Trump be the ZTE saviour?

The threat of extinction for ZTE was realistic as it seemed the US was gaining the upper hand in the apparent US/China trade war, but President Trump might prove to be an unlikely hero for ZTE.

Only a couple of days after ZTE announced it was ceasing all major operations as a result of the US ban shattering the firms supply chain, Trump revealed in a couple of tweets he and President Xi were working alongside each other to turnaround fortunes. Few would have predicted this turn of events, but the Trump presidency has been anything but predictable to date.

What this actually means remains to be seen. Details are expectedly light, but Trump has called the US Department of Commerce into action to save the troubled telco vendor. The Department of Commerce has not made an official comment as yet, but what might be expected are tighter restrictions on ZTE.

This is part of what makes the situation complicated. The threat of expulsion and restrictions was not enough to keep ZTE honest the first time around, so what the Department of Commerce can do this time is not known for the moment. Both parties are heading into waters unknown for the moment, but perhaps this will be a bit of a wake-up call for ZTE.

Certain aspects of the ZTE business need to remain reliant on the US, but it has been reported that 80% of the business is. ZTE’s relationship with Google is pretty much unavoidable, such is the dominance of Android on the OS world, but allowing such a dependence everywhere else to develop over time now looks like a ridiculous development.

While Trump coming to the saviour of ZTE might have surprised some, it could prove to be an inspired move. The President now seemingly has the upper hand at the negotiating table with the Chinese government; the US can now effectively decide the future of the business. That is a powerful card to hold.

AT&T, Verizon and GSMA face collusion investigation

AT&T, Verizon and the GSMA are the subjects of a reported probe from the US Department of Justice as to whether the trio have been blocking or hindering the adoption of eSIMs.

According to the New York Times, the Department of Justice has opened an antitrust investigation to understand whether the three have been in cahoots to make life difficult for users wanting to switch services to competitors through the eSIM technology, designed to make life fairer for the consumer. Should there be any truth to suspicions of a co-ordinated attack on consumers, there could be some pretty serious consequences.

The DoJ takes these sorts of issues pretty seriously, stating the following on its website: “Consumers have the right to expect the benefits of free and open competition — the best goods and services at the lowest prices. Public and private organizations often rely on a competitive bidding process to achieve that end. The competitive process only works, however, when competitors set prices honestly and independently.”

There have been various examples of the DoJ tackling market collusion in recent years, including an investigation as to whether the four major airline carriers were keeping ticket prices artificially high, with the most stringent of punishments being $100 million. In some circumstances, the fine can be increased to twice the gain or loss involved with the nefarious activity. Although the DoJ will take any collusion accusations seriously, industries where there are a smaller number of providers raise red flags. The telco space is technically a perfect scenario for collusion.

While there has not been a comment from the DoJ, Verizon and AT&T have both downplayed the investigation, brushing off any concerns, while the GSMA has released the following statement.

“This standard contains a wide range of features, including the option for the eSIM to be locked. In the United States, consumers would have this option; however, they would need to explicitly consent to this under specific commercial agreements with their mobile operator, for example when purchasing a subsidised device. The development of the latest version of the specification is on hold pending the completion of an investigation by the United States Department of Justice. The GSMA is cooperating fully with the Department of Justice in this matter.”

Sources close to the matter have said the investigation was launched after one device manufacturer, said to be Apple, and a competitor of Verizon/AT&T filed complaints the development or actioning of the eSIM technology was being hindered by the trio. The complaint states AT&T, Verizon and the GSMA were pushing the development of the standard down a direction which would not be beneficial to the consumer. One of these developments would be to lock devices into a single provider.

eSIM technology would allow consumers to switch providers without having to physically change the SIM in the handset. It is one way in which the industry is trying to remove the unfair and unjust strangle hold telcos have on their customers. Switching providers is a tiresome and unnecessarily prolonged exercise for users as it stands, as providers make it as difficult as possible; some just give up through frustration which is not the sign of a healthy relationship.

AT&T and Verizon are the dominant players in the US mobile space, controlling around 70% of the market share, though the ability to more seamlessly switch providers might erode this position. The last few years have seen T-Mobile US make very positive steps to challenge the status quo, therefore it might make sense Verizon and AT&T would look to influence standards to protect themselves. The big question is whether this alleged influence would directly hurt competition and consumers. Consumers are often an afterthought for telcos, especially those who are at the top of market share rankings, though protecting the consumer would be top of the priority list for the Department of Justice.

Makan Delrahim, who leads the antitrust division at the DoJ, has previously spoken about the “cartel-like behaviour” of the telcos, while the department is also scrutinising the AT&T/Time Warner deal on the grounds of competition. We get the impression the DoJ is searching for evidence of wrong-doing as opposed to performing an independent investigation. It is a slight nuance, but could swing 50/50 calls.

Apple looks to news to supplement obscene smartphone profits

On the day Counterpoint Research estimated Apple collected 86% the total handset market profits in Q4, rumours have resurfaced about the firm wandering further into the world of news service subscriptions.

According to Bloomberg, the iChief is preparing to launch a new subscription-based offering for its Apple News service, integrating the recent acquisition of Texture into the mix. The new venture will form part of a greater push from the firm into online content and services, to generate additional, sustainable revenue.

Apple has had a news service application for some time now, but like most of the iLeader’s efforts to crack the content game, it has been pretty substandard. Last month the firm agreed to acquire Texture, a news aggregator platform which allows users to subscribe to more than 200 magazines for $9.99 a month. Apple is yet to comment on the upgraded app and service, though people familiar with the project estimate the service should be available within a year.

Previous attempts to bring news to the iFollowers have not been great. Newsstand was previously launched as an aggregator platform, though users had to subscribe to the titles on an individual basis. Apple News was launched in 2015 with a similar approach, and the fact no-one really talks about it tells you how much of a success it is. The Texture model, a subscription point for multiple titles, is a much more cohesive approach and will have greater appeal to today’s users.

Titles currently included in the Texture catalogue include All About Beer, Bloomberg, Wood, Diabetes Self-Management, National Geographic, Veranda, Forbes and Fit Pregnancy and Baby. There is certainly something for everyone.

The services unit at Apple accounted for 13% of total revenues in the last quarter, but what should be noted is that this isn’t simply the content and subscription businesses, insurance takes up a large chuck of the revenues. Other products include the App Store, iTunes Store, Apple Music Subscriptions, Apple Pay, iCloud Storage Costs, as well as AppleCare. Getting into the recurring revenue business is certainly a good bet, and positioning itself as an aggregator would seem like the best strategy when you look at the original content it has developed so far.

The team are supposedly aggressively producing new content, perhaps to gloss over previous attempts. The first attempt was ‘Planet of the Apps’, essentially a ‘Dragons Den’ rip-off for apps, and it was truly shocking. Carpool Karaoke was equally as cringe-worthy, as the Apple team took liberties with the definition of ‘original’. More recent attempts have seen Stephen Spielberg drafted in for a reboot of ‘Amazing Stories’, as well as a futuristic drama from the director of the Hunger Games films Francis Lawrence.

These efforts look more promising, but Apple isn’t doing anything revolutionary or new, just re-scripting stories which have already been told. This isn’t how the content production world works; risks have to be taken to find the next ‘Breaking Bad’, ‘West World’ or ‘Stranger Things’.

Apple has long spoken about the objective of cracking the software, services and content space, as a means to supplement the hardware business, but when you look at market estimates it certainly comes across as long-term planning; there is no need right now!

That said, while profits in the global handset market declined by 1% year-on-year, according to estimates from Counterpoint Research, Apple accounts for 86% of profits made across final quarter of 2017, with the iPhone X accounting for 35% alone. In terms of the profit share by handset model, Apple accounted for eight out of the top ten worldwide. The team also claim the iPhone X generating five times more profit than the combined earnings of 600+ Android OEMs during Q4 2017.

Competition seems pretty thin on the ground for Apple, as while Samsung has the dominant market share position, it simply can’t compete with the luxury positioning of the Apple brand. The brand has been a delicate and intricate development over the last decade, however it is certainly paying off. It seems it doesn’t matter what the iLeader asks for, its army of loyal, iCultist followers will pay it. Some might be locked into the ecosystem, but the majority are the blind followers, worshipping at the altar.

The smartphone space is becoming less profitable as more users are holding onto devices for longer, before searching for cheaper deals with second-hand and refurbished phones, but that will mean little to Apple. As long as it is taking the vast majority of profits from the industry it will be in a healthy position; it will still make billions upon billions. If it does manage to figure out how to do content and services, the decreasing profitability of the handset market will matter even less.

Samsung begins mass production of 512 GB flash storage

Samsung has announced the beginning of mass production of what it claims is the world’s first 512 GB embedded Universal Flash Storage (eUFS) solution for next-gen mobile devices.

The new solution will provide a huge boost for storage on flagship phones, as well as another product for the strong performing division of Samsung to continue growth. Samsung is already the world’s largest memory chip maker, and should the claims prove to be true, this position will only be consolidated as there are few competitors offering the same capabilities.

“The new Samsung 512GB eUFS provides the best embedded storage solution for next-generation premium smartphones by overcoming potential limitations in system performance that can occur with the use of micro SD cards,” said Jaesoo Han, EVP of Memory Sales & Marketing at Samsung Electronics.

“By assuring an early, stable supply of this advanced embedded storage, Samsung is taking a big step forward in contributing to timely launches of next-generation mobile devices by mobile manufacturers around the world.”

The solution consists of eight 64-layer 512 Gb V-NAND chips and a controller chip, which the team claims doubles the density of Samsung’s previous 48-layer V-NAND-based 256 GB eUFS, using the same amount of space. Although only claims for the moment, Samsung said it will be able to store 130 10 minute 4K Ultra HD video clips, ten times as many as a 64 GB eUFS.

Right now the numbers are just claims, but considering how difficult it is to offer anything new on smartphones these days, such a boost on memory would almost certainly interest the major players.