Vodafone and EE 5G tariffs point towards a new form of digital divide

If the technology industry wants 5G to change the world, placing prohibitive pricing on data tariffs is a strange way to go about it.

The count-down clock to 5G is heading towards the small numbers, and now Vodafone customers will be able to pre-order 5G-ready devices and decide on what tariffs they are able to afford. Unfortunately for some, the prices might prove to be too much of a premium for wallets to stomach.

Devices and various different tariffs are now available for pre-order through the Vodafone website.

Tariff Samsung Galaxy S10 5G Xiaomi Mi MIX 3 5G
5 GB Red Extra £149 upfront, £58 monthly £99 upfront, £50 monthly
15 GB Red Extra £99 upfront, £62 monthly £99 upfront, £54 monthly
30 GB Red Extra £49 upfront, £66 monthly £49 upfront, £58 monthly
60 GB Red Extra £49 upfront, £70 monthly £49 upfront, £62 monthly
25 GB Red Entertainment £99 upfront, £69 monthly £49 upfront, £61 monthly
50 GB Red Entertainment £49 upfront, £73 monthly £49 upfront, £65 monthly
100 GB Red Entertainment £49 upfront, £77 monthly £49 upfront, £69 monthly

All contracts set at 24 months

What is missing from the above table is a nod to Huawei. Vodafone has hit the pause button on devices from the under-fire Chinese brand. As with EE, Huawei’s 5G phone will not be sold through the Vodafone website for pre-order. It would appear this will be the case until the difficulties with the operating system and ecosystem are ironed out.

Despite these complications, the prices are what the prices are.

“Given its high-profile battle with EE to lead in 5G, I expected Vodafone’s initial tariffs to be punchier,” said Kester Mann of CCS Insight. “The entry £50 offer includes just 5 GB of data; on a 5G network, customers could quickly burn through that.”

Mann is absolutely correct; 5 GB will not last long given the promise of the 5G ecosystem and the usecases envisioned. However, upgrading to bulkier tariffs is perhaps cost prohibitive, potentially creating a new digital divide.

As it stands, the price is prohibitive for some. £52 as a starting point is a high barrier to entry. It seems only the privileged will be comfortable with spending so much on a connectivity contract, creating a society of ‘haves’ and ‘have nots’ and another potential digital divide.

Although there have been promises 5G tariffs will be priced on similar levels to 4G, the premium should come as little surprise. People will be prepared to pay for bragging rights.

It should also be noted EE has priced the connectivity options at the same levels. Vodafone have slightly undercut EE for 5G tariffs, but not by much. This is perhaps a situation which we should have expected. Until all four MNOs are on the market with a 5G proposition, threatening to steal valuable postpaid subscriptions, the price will remain lofty.

Tariff OnePlus 7 Pro 5G Samsung Galaxy S10 5G Oppo Reno 5G
30 GB, one swappable £64 a month, £50 upfront £74 a month, £10 upfront £59 a month, £50 upfront
30 GB, two swappables £69 a month, £50 upfront £79 a month, £10 upfront £69 a month, £50 upfront
60 GB, two swappables £74 a month, £30 upfront £84 a month, £10 upfront £69 a month, £30 upfront
60 GB, one swappable £69 a month, £30 upfront £79 a month, £10 upfront £69 a month, £30 upfront
120 GB, three swappables £79 a month, £10 upfront £89 a month, £10 upfront £74 a month, £10 upfront
100 GB, two swappables £74 a month, £10 upfront £84 a month, £10 upfront £69 a month, £10 upfront
10 GB, two swappables £59 a month, £170 upfront £69 a month, £130 upfront £54 a month, £170 upfront
10 GB, one swappable £59 a month, £70 upfront £69 a month, £30 upfront £54 a month, £70 upfront
10 GB, two swappables £64 a month, £70 upfront £74 a month, £30 upfront £59 a month, £70 upfront

All contract set at 24 months

As you can see, the prices are not consistent with the overall rhetoric of the industry. For many years, the industry has preached of democratizing connectivity, while 5G was supposed to be a technology which benefitted the masses.

At the moment, the risk of a digital divide is very apparent. The rich will get the benefits while the poor remain in the 4G-era. While the genuine 5G usecases are yet to emerge, this is not necessarily an issue. 5G offers little more than increased speeds right now, a premium which isn’t really needed with the applications and services which are currently on the market.

Over the next 6-12 months, Three and O2 will enter the fray with their own networks. This should cause the price of 5G connectivity to tumble. Hopefully at least, as the current state-of-play is a connectivity world which has been designed for the privileged.

South Korean consumers will get 5G service starting from $48 a month

5G for consumers is expected to launch late this week in South Korea. The three mobile operators in the market have published their 5G packages, starting from 55,000 won and going up to 130,000 won.

After launching the pilot B2B 5G services simultaneously in December, South Korea annouced it would launch consumer 5G service by the end of March. But there was a minimum delay. When the Samsung Galaxy S10 5G hits the retail market on Friday 05 April, all three mobile operators in the country, SKT, KT, and LG Uplus (LGU+), are expected to switch 5G services on. In addition to fast internet, there will also have a 5G UHD live broadcasting service that KT is going to launch.

In the run-up to it, all three of them have published the price list of their data packages:

south-korea-5g-pricing

Earlier in March, the Ministry of Science and ICT rejected a price proposal from SKT that set the entry price at 70,000 won ($62), deeming it too expensive and “restricting consumers’ choice.” The three operators then agreed to set the starting price according to the Ministry’s expectations at 55,000 won ($48). Park Jung-ho, SKT’s CEO was quoted by the local media outlet The Investor, “there was a request for a pricing plan in the range of 55,000 won (from the government). We are about to wrap up the discussion.”

Despite the equal starting price, there are differences between offers. While a 55,000 won package on KT and SKT will get the consumer 8GB data, the same price on LGU+ will come with 9GB. The most expensive offers on SKT and LGU+ are priced at 120,000 won and 95,000 won respectively, giving users 300GB and 250GB. Any packages from 80,000 won upward on KT will give users unlimited data.

There are also different speed caps. Speed will be capped at 1Mbps if the user chooses the starting package from KT and LGU+ and goes beyond his data limit. Higher package users on KT will have unlimited speed, while speed for users of LGU+’s higher packages will be capped at 5Mbps and 7Mbps if they go beyond their monthly data limit. KT also offers free international data roaming (185 countries outside of South Korea), but the roaming data speed will be capped at 100Kbps on the 80,000 won and 100,000 won packages, and at 3Mbps on the most expensive130,000 won package. SKT has not released details on its data speed cap policies.

However, although the 80,000 won package with unlimited data on KT is cheaper than the current LTE packages offered by the operators, consumer advocacy groups argue that 5G users could end up paying up to 20,000 won ($18) per month more than they do now with LTE unlimited data packages now. This is calculated by including the high price of the Samsung Galaxy S10 5G, which is set to be sold at 1.4 million won ($1,231). The LG V50 ThinQ is only going to be able to reach the retailers in Korea after May, company sources told ZDNet. There is no information when or if the 5G smartphones from other suppliers will reach the Korean market.

“Those who spend 30,000 to 40,000 won on telecom bills would not be able to use 5G network services. It is the worst pricing plan in the era of worsening income disparity,” said People’s Solidarity for Participatory Democracy, an activist group, quoted by The Investor.

Xiaomi the difference: Chinese smart device maker vows to disrupt UK market

Xiaomi launched Mi 8 Pro, the first time it has unveiled new products outside of Greater China, a sign of its ambition to expand in more mature markets.

At a Hollywoodian event (as almost all smartphone launches are nowadays) in Barbican Centre on Thursday, Xiaomi became the latest Chinese smartphone maker to introduce their latest products in London, following recent launches by Huawei and OnePlus. The company unveiled Mi 8 Pro, an upgrade version of its Mi 8 model launched earlier in China.

After registering impressive growth in India and other markets in Asia, as well as consolidating its position in China, Xiaomi, like some other Chinese brands, is eyeing the mature markets for new growth. Western Europe is an attractive option as the market is not flooded with hundreds of smartphone brands as in India and China, and there is a sizeable open market that is easier for new brands to set a foot in instead of having to crack the carrier market as in the US.

“Today we witness a new chapter in Xiaomi’s global expansion journey, underpinned by our global ambitions. We are thrilled to make great strides by announcing our arrival in the UK,” said Wang Xiang, Senior Vice President of Xiaomi Corporation.” By bringing a range of our amazing products at honest pricing we want to offer more choices and let everyone in the UK enjoy a connected simple life through our innovative technology.”

The newly launched Mi 8Pro and its predecessor share exactly the same hardware and software, powered by Qualcomm’s Snapdragon 845 CPU, 6.21” AMOLED display (yes, need to go to the second decimal digit), 8GB RAM and 128GB onboard memory,12MP+12MP AI dual camera on the back, and 20MP selfie camera, Dual 4G SIM, Dual frequency GPS (to minimise coverage dead zones, like near tall buildings), infra-red facial recognition (to unlock with facial ID in the dark).

On the software side, Xiaomi overlayed a light MIUI skin on top of the latest Android release, plus a couple of its own preloaded apps (browser, messaging, etc.). Presumably the main point is not how many people will use its apps but rather to gather usage data. The Xiaomi executives did stress the number of active MIUI users in the world and in Europe (its products are already being sold in Spain, Italy, and France). It has also preloaded a MS Office suite, one of the first offers Microsoft made to the Android ecosystem back in 2016.

Under the spotlight was its photography technologies including the so-called “4-in-1” super-pixel, that is combining 4 pixels into 1 to take in more light, therefore to capture more details even in low light environment. Also being boasted is the speed the phone focuses (using the so-called Double Pixel Auto Focus, DPAF, technology, demonstrated in a video as faster than both the iPhone XS and the Samsung S9+). Nowadays, no presentation of smartphone cameras is complete without talking AI, and Xiaomi is no exception. The main talking point here was on the analytics capability to separate foreground from background, making post-shot processing easier.

The only genuine upgrade the Mi 8 Pro offers over the Mi 8 looks to be the fingerprint reader. It is at the back of the phone on the Mi 8, but is upgraded to on-screen reader on the Mi 8 Pro.

All the bells and whistles aside, what Xiaomi most wanted is to stand out in two areas: design and price. It is clearly successful in one, maybe less so in the other. Xiaomi claimed to go down the minimalist route for its design, claiming that it was inspired by the exhibits at the Helsinki Design Museum. It even got the director of the museum to go on video to endorse an earlier product. But what it got to show its innovative design on the new product is a transparent back-cover where the upper part of the inside of the phone is visible. But to those of us old enough to remember the 1990s, this is more a retro than inno. Swatch’s Skeleton series, anyone?

Xiaomi Mi 8 Pro_Front resized Xiaomi Mi 8 Pro_back resized

But when it comes to pricing the strategy is much bolder and more likely to succeed. Xiaomi broke through in the device market in China in 2011 by offering smartphones with decent specs at a very affordable price. This strategy has carried them through ups and downs all the way to London. The Mi 8 Pro will be retailed at £499.99. This is vastly lower than other smartphones with comparable hardware specs. Xiaomi is clearly targeted at the so-called “affordable premium” segment.

On the distribution side, Xiaomi started in China exclusively using online distribution channels. There have been followers with mixed success, but at the same Xiaomi is also diversifying to brick-and-mortar retail outlets in markets like India, Malaysia. Xiaomi also aims at a mixed channel strategy in the UK, it opens its own online shopping channel, getting online and offline channel partners (Amazon, Currys, Carphone Warehouse, Argo, John Lewis, etc.) on board, as well as opening its own authorised retailer in southwest London on 18 November. It also tied a partnership with 3UK, though Xiaomi executives would not tell more details of the terms or the packages 3 plans to offer.

Also introduced to the UK market at the event are a smart wristband (Mi Band 3, main feature being its display larger than previous generations) and an electric scooter, to deliver the “ecosystem” story—the executive stressed Xiaomi is more than a smartphone company. On display in the experience area were also smart speakers, set-top boxes, smart kettle, and smart scale.

Our overall feeling is that, the Mi 8 Pro smartphone is decent but not fantastic. However the price point Xiaomi sets it on is disruptive. This strategy has worked for the company in China and other Asian and European market, taking them to commendable market positions and financial success. It may stand a chance.

Xiaomi event pic2

Super-complaint targets claimed telco customer exploitation

The UK Citizens Advice Bureau (CAB) has launched a super-complaint with the Competition and Markets Authority (CMA) asking the regulator to outline plans on how it will protect the consumer from loyalty penalties.

The super-complaint does not target the telcos specifically, though the industry has been given its fair share of attention. Research released by the CAB last week suggests the loyalty is being penalised across five ‘essential’ markets (mobile, broadband, home insurance, mortgages and savings), with service providers over-charging customers to bring in an extra £4.1 billion a year.

“It beggars belief that companies in regulated markets can get away with routinely punishing their customers simply for being loyal,” said Citizens Advice CEO Gillian Guy. “As a result of this super-complaint, the CMA should come up with concrete measures to end this systematic scam.

“Regulators and Government have recognised the loyalty penalty as a problem for a long time – yet the lack of any meaningful progress makes this super-complaint inevitable. The Government’s price cap in the energy market will protect some loyal customers. However, there’s still a long way to go in other sectors. The loyalty penalty is clearly unfair – 89% of people think it is wrong. The CMA needs to act now to stop people being exploited.”

While the claim from the CAB is a damning one, it is supported by additional research. Research commissioned by Broadband Genie has found many over 55s could be paying too much for their broadband service, but lack the knowledge or confidence to choose a new package. 51% of respondents said they had been with the same provider for more than five years, 41% had never changed supplier, though price rises would have certainly been applied during this period. The Broadband Genie research reinforces the claim consumers are being penalised for loyalty.

A super-complaint is a complaint made by a government-approved watchdog organisation on behalf of consumers, which is fast-tracked to a higher authority such as the CMA. Since being introduced as part of the Enterprise Act 2002, the CAB has exercised the right four times, including the complaint against payment protection insurance (PPI) in 2005 which helped to generate at least £32.2 billion in refunds and compensation for customers.

This complaint not only follows up research from the CMA, which claims four million people in the UK are still paying back phone subsidies after the device has been paid off, but also an Ofcom consultation which is investigating the pricing strategies of the telcos for the very same issue. As you would imagine, the telco industry is not particularly pleased with the busybody consumer protections group escalating the issue to the lofty offices of the CMA.

“With a consultation ongoing, we feel that Citizen Advice is jumping the gun in relation to the broadband market and we are concerned that the narrative of a ‘loyalty penalty’ conflates customer loyalty with ill-informed or unengaged customers,” the Internet Services Providers’ Association (ISPA) responded. “Loyalty to a provider does not necessarily mean that a customer is not content with their service, especially as in the broadband sector there are a range of non-price issues that the customer may value, including performance, service quality, and reliability.”

This is hardly a surprising statement from ISPA, as while the telco industry will not want to found out for ripping off consumers, it will certainly not want to give up the ‘free money’ generated through the lazy behaviour of consumers. Unfortunately this is not only an issue for the telcos as the complaint could also impact brand credibility and trust as well as bank accounts. Time and time again the telcos have been shown to employ dated business practises, not presenting themselves as customer centric organizations. Telcos are generally pretty bad at managing their brand or presenting themselves as forward-looking, consumer orientated businesses, and this noise surrounding the super-complaint will not help.

Aside from the money and the brand credibility, long-term consequences of the super-complaint could also be quite damaging. According to Stuart Murray, telecoms specialist and a partner at UK law firm TLT, government intervention on pricing could have a knock-on effect for investment.

“The CAB’s super-complaint goes to the heart of how a market-led economy works and any interventions that have the effect of regulating prices in competitive markets like telecoms may result in significant and unintended consequences,” said Murray. “If the CMA took steps to regulate pricing in the telecoms industry, this could have a negative impact on investment, reduce innovation and give consumers less choice, as well as dis-incentivising consumer engagement as people come to rely more on regulatory intervention.

“In a market-led economy, people who actively engage in markets benefit from discounts paid for by higher charges paid by those who are less engaged. The government and private sector have launched several campaigns in recent years to raise awareness of the benefits of engaging in these markets and encouraging consumers to exercise their rights to switch providers if another company is offering a better deal. This is a positive step – as long as measures are also taken to protect the truly vulnerable, who find it difficult or are simply unable to engage.”

This is certainly an area telcos should be keeping a keen eye on, as the long-arm of the government has been searching for ways to gain more authority in the industry. Should the super-complaint lead the CMA towards more stringent pricing regulations it will inhibit new ideas and innovation at a time when the telcos need it the most. Unfortunately, this does seem to be another step made down the path of utilitisation.

Ofcom reveals UK consumer telecoms value for money is improving

UK telecoms regulator Ofcom has published a report into what people pay for their communications services and it implies we’re getting better at shopping around.

The report is titled ‘Pricing trends for communications services in the UK’. Among its headline findings are that, while some people are still paying a fair bit more for their broadband, mobile, etc, they’re getting less ripped off than they were a few years ago.

For example, around four million UK homes with ADSL are outside their lock-in period and could upgrade to a better service for less money. Standard BT ADSL is apparently £42.99 per month, while BT’s superfast services start at £24.99 per month. The same goes for mobile, with a lot of people staying on plans that included handset subsidies even after the lock-in period is over.

“Broadband and mobile firms often target their best offers and discounts at people who negotiate or switch provider,” said the Ofcom announcement. “So, consumers who shop around, and know when their initial contract period ends, typically pay less than those who don’t.” The usual suspects such as uSwitch said much the same.

The implication of some of Ofcom’s findings is that the CRM/BSS and general customer care systems of communications providers are geared towards exploiting people who lack the inclination to shop around. Presumably some are more proactive than others when it comes to informing their customers about the best deals and it would be interesting to see if they’re rewarded with greater customer loyalty.

Ofcom pricing infographic