EE forced to backtrack on 5G data tariffs

It does appear EE has been forced into a rethink on 5G data pricing, as the firm launches an unlimited data offering to keep pace with rivals in the UK.

Like hamburgers at breakfast, the 5G tariffs didn’t look right to start with. The price points were too expensive for today’s cash conscious consumer who expects the world for tuppence. EE might have been first out of the gate to capitalise on the growing 5G euphoria and earn the right to boast about being first, but it has been forced to backtrack a little.

The only issue with being first is that you give everyone else a taste of what is on the table. Even if EE had nailed the proposition and priced it perfectly, it left the door open to be embarrassed by rivals to be undercut. If the aim of the game was to secure post-paid subs and look to long-term ROI, EE left itself exposed to a cheap shot.

That said, it has now seemingly rectified the situation.

When it first launched in May, prices were tiered depending on download limits. Not only did it not look practical, limits would be reached relatively easily, it was expensive. Admittedly the price of 5G devices were factored in, but with rivals presenting options which were easier on the wallet, a new approach was needed.

“If you want an unlimited data plan, you should get it on the UK’s best network, with the coverage and speeds that let you make the most of it,” said Edward Goff, Marketing Director at EE.

“Our new unlimited range offers customers the ultimate smartphone experience in more places across the UK than any other network, all with no speed caps and great swappable benefits like Amazon Prime Video and BT Sport.”

What is worth noting is that the unlimited offer for 5G-SIM only plans is still expensive.

MNO Price
EE £44 a month
Vodafone £30 a month
Three £22 a month
O2 Unknown

Each of the telcos have taken their own approach to data pricing. EE offers 5G SIM-only contracts for £44 a month in the most traditional manner. Vodafone has offered tariffs on speed tiers with the £30 a month tier offering the ‘fastest available speed’, which might vary dependent on where you are. Three is offering 5G connectivity for free for anyone who has an unlimited 4G contract. The £22 a month deal is SIM-only.

O2 is the only one not to release pricing for its 5G data tariffs, being the last to market, though it certainly has taken the opportunity to undermine the promising progress made by rivals.

Although few in the EE offices will be happy to backtrack and have a rethink on the unlimited plans, it does now look to be in a very competitive position. It is the most expensive, but it does have the best network and most consistent, high download speeds. If performance is the measure of success in the consumers eyes, EE is certainly hitting the right notes.

Another factor to consider is the ‘swappables’ element of these deals. For those who sign-up to a 12-month SIM-only deal on 5G for £44 a month, three ‘swappable’ content deals will be included. Each month, customers will be able to elect which bundled content services they desire, ranging from zero-rated video data or music, additional roaming locations, BT Sport or Amazon Prime Video.

The team could probably do with negotiating a few more partnerships as it does look a bit thin on the ground, though it is a reasonable offer.

What we are yet to see from EE is an aggressive push towards the convergence game. Executives have been giving the same presentation at conferences for years, promising a seamless connectivity experience for customers through mobile, broadband and wifi assets, though there doesn’t seem to be much activity on the marketing front to link-up these elements in one conclusive offer.

Either there is something in the pipeline or this is a case of negligence. The combination of EE mobile and BT’s wifi and broadband assets would create a connectivity offering few could dream to compete with. Three and Vodafone are plugging into the convergence game with their own fixed wireless access (FWA) offerings, but EE seems to be lagging here. The opportunity to make noise is there but the team seem to be enjoying the uncomfortable silence.

EE is arguably the market leader in the UK, though thanks to O2’s MVNO relationships it can claim to be the network with the most mobile connections running across it. With the unlimited offer, bundles, biggest and best network coverage and BT’s wifi and broadband assets, EE has an opportunity to nail itself down as the top mobile provider in the UK.

Trying to pick out the winner in the UK’s 5G race is starting to get very difficult.

5G pricing: the best is yet to come

Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this piece, Jennifer Kyriakakis, Founder and VP of Marketing at Matrixx, explores best practice in the pricing of telecoms services in the 5G era.

The advent of 5G technology will bring a monumental shift in how traditional telcos operate their business. In the run up to full scale 5G deployments, many forward thinking telcos have launched digital brands. These are essentially 100% digital versions of their businesses packaged as a different brand. Many of them are using their digital brands to experiment with customer experience, service offerings, and business models that will become mainstream with 5G. The theorem: If we don’t have the pricing models and business infrastructure in place to properly extract value from a 5G offering, we’ll end up losing out to the next wave of OTT players. So let’s figure it out now, before the networks are in place.

As operators debate how best to price 5G, some early examples, such as Three in the UK are offering 5G at no additional cost to current 4G plans. The idea seems sound as a starting point, particularly as there is little 5G network availability and devices haven’t yet caught up. But does it make sense in the medium to long term, or do these tactics risk further devaluing the very asset that differentiates them? Are these early pricing models really strategies for 5G, or merely placeholders as telcos continue with transformation efforts that will set them up to compete with OTTs and digital players?

Operators have a powerful opportunity to create a competitive advantage with their 5G offering. Getting the pricing model right is a strong place to start. With the industry already throwing different pricing models at the wall, which one will stick?

The Pay-for-Speed approach

This approach started in some markets with 4G and while it’s simple and straightforward for the consumer, it also sets the precedence that speed is the only value lever telcos have to offer. For example, Vodafone became the first UK network to offer unlimited 5G data plans. Ditching the monthly data allocations, Vodafone offers three speeds; 2Mpbs, 10Mpbs and then the fastest speed possible. People have the choice on how fast they want to download or stream content.

If you are a super user or have a family of six who are always on their phones, it makes sense to pay for those faster speeds. If you are in retirement, don’t necessarily have a job in tech or could care less about YouTube, then having the choice for lower speeds may be a good option.

But is this model sustainable? When in the future, the amount of data – everything from gaming to connected home, health apps, IoT, streaming video and more -could outweigh the speed? Would an operator lose a revenue opportunity on super users who take advantage of accessing large amounts of data at the fastest speeds?

The Rewards approach

Others are taking an ecosystem approach banking on potential new revenue streams by creating value-added services, which often come to life through rewards-based programs. These programs offer incentives such as discounts, coupons and first-access to concerts and movies, to entice users and make the app experience more sticky. By building loyalty around an ecosystem now, as 5G services arrive they have established channel relationships with partners who will be leveraging 5G in the future for AR/VR services and are actively participating in the revenue chain.

Verizon’s Up Program is a great example of this, as they offer discounts and rewards on technology, dining, sports experiences and stage-side concerts. They tout deals monthly and even daily, driving people to check in on the app frequently. Once there, they encourage users to manage their services, often upselling them on new benefits.

By creating these rewards-based programs they are not only appealing to the next generation of users, but they are also creating a more valued relationship between consumers and their brand. This brand strategy is one that few operators have navigated successfully, but it is crying out for change in a new 5G era if operators expect to compete with OTT players.

The Marketplace & Bundled approach

Operators that create marketplaces are offering users opportunities to connect with friends, form inner social groups, gift data to friends, and also manage their plans in real-time. These marketplaces are highly sticky, driving customers to spend lots of time within the marketplace, which breeds more opportunities to sell products and boost revenue.

Another approach are operators who are choosing to bundle the price of data with a specific service. For example, if you want Netflix delivered in high-definition to your smartphone, you’ll pay a flat monthly fee for that service and the data will be included. These bundled-service options work well for a variety of value-adds, including VR gaming, augmented reality services, IoT of the home and more.

This sets the market up nicely for two-sided business models which will emerge with full scale 5G. Getting consumers used to paying carriers for services vs. network access is phase one to future multi-faceted models in which the carriage is monetized through different partners and models.

So have any 5G pricing models arrived yet?

While these offerings are all based on 4G today, they set the foundation for turning customers into high-engagement fans, in turn increasing their revenue streams.

5G introduces hundreds and even thousands of possibilities to utilize the network efficiently and generate additional revenue. Operators that are moving now to innovate and distinguish themselves from their competitors are setting themselves up to reimagine pricing for 5G and drive new revenue vs. defend against price wars and the resulting churn.

 

Pod 15 jul Jennifer croppedMATRIXX Founder and Vice President of Marketing, Jennifer Kyriakakis, brings deep expertise in both telecoms and software with roles ranging from complex systems delivery to technical sales to strategic marketing. Her 20 plus years of experience helping Telcos reinvent themselves has propelled the growth of MATRIXX into markets all over the globe.

Three set to cause more disruption with 5G pricing plans

EE is finding out first is not always best as Three is set to join Vodafone is offering more attractive 5G data tariffs.

When EE first launched its 5G tariffs earlier this year, it was as everyone would have expected; the MNO charged a premium, and a lofty one at that, the 5G connectivity. Vodafone undermined this position with an innovative approach, tiering on speeds not data allocations, and now Three will go one step further offering access to 5G connectivity at no extra cost to a customer’s 4G connectivity plan.

All new and existing customers will have access to 5G with no speed caps and at no extra cost on all contract, SIM only and PAYG mobile plans. There will be data caps if you have currently have a cap on your 4G plan, however SIM-only unlimited data plans start at £20 per month.

“The forthcoming months are going to be game-changing and with our unrestricted plans, we are looking forward to unleashing the full potential of 5G to all,” said Three CEO Dave Dyson.

The approach is a sensible one from Three and leans on the strategy put forward by T-Mobile in the US. 5G is currently seen as somewhat of a bonus for customers right now, due to the limited geographical coverage of the airwaves. Offering 5G connectivity for free will certainly attract some customers, who will just have to worry about getting a 5G compatible device.

“Three’s hand was likely forced to some extent by Vodafone’s initial disruptive and unexpected pricing strategy for 5G,” said Kester Mann of CCS Insight. “But its enviable spectrum holding places it in a commanding position to undercut any rival.

“More than for any other UK operator, 5G is crucial to Three. It represents an opportunity to reinvigorate the brand, overcome a negative network perception, achieve the scale it as long-for craved and push into other segments such as convergence and enterprise.”

This is where Three will have to be careful. With more of society migrating to digital, consumers will come to expect a more resilient and consistent experience from connectivity providers. This is where Three has fallen down in recent years.

In the latest Opensignal report, Three was battling it own for last place with O2 in the majority of the categories. It had the lowest availability scores, poorest for video experience, second-slowest on speeds and worst for latency. This will not be good enough in the 5G era and if this trend continues, it would not be surprising to see Three lose market share.

Three might have been able to disrupt the market on price during the 4G era, but that will not be enough to mount a serious challenge to market share in the 5G era. Consumer expectations will shift across to availability and experience soon enough. Three has an opportunity to make a genuine impact on the status quo, but it needs to kill off the perception (which has often translated to reality) that it has the worst network in the UK.

The stars do seem to be aligning for Three. Pricing looks to be right, it has the best spectrum out of the four MNOs, the UK Broadband acquisition has set it on the convergence path and its traditional customers are perfect for the 5G era. If it can create a network which competes with the best in the UK, the next couple of years might be a very interesting quest for Dyson and his cronies.

Vodafone UK edges in front with ‘wider pipe’ approach to 5G

It’s always difficult to offer a winning position before all hands have been shown, but Vodafone looks to have stretched a nose ahead in the UK 5G race.

For the moment, we can only really judge two of the four 5G propositions in the UK, though there have also been hints from Three. With EE launching its 5G assault last month, and Vodafone switching on this week, it does seem that the latter has re-found its mojo and could challenge leadership positions in the UK connectivity standings.

As it stands, O2 and EE are sitting very comfortably in the number one and two spots respectively. With 36% and 33% market share for mobile subscriptions, according to Ovum’s WCIS, Vodafone is a distant third with 20% and Three falls away with 11% in fourth. However, that can all change very quickly, it wasn’t long ago Vodafone was the clear market leader.

Looking at the current offerings from the UK MNOs, Vodafone does look to have a more attractive offering. On the subsidised handsets front, the two are pretty much on par with Vodafone being a little bit cheaper. However, the SIM-only offering might grab the attention of a lot of people.

This is a model which we think is much more suited in the 5G era. If you believe the technologists, delivering data over 5G networks is cheaper than 4G. This is down to efficiency gains on the spectrum front, as well as improvements to antenna and the introduction of new technologies such as Massive MIMO. If it is becoming cheaper to give data to the increasingly insatiable consumer, why not offer unlimited.

Tiering on speeds is a very interesting approach. Data usage is going up for every demographic, such is life as more aspects become digitised, but the variety of ways people consume that data is becoming increasingly varied. Some will only use the internet for browsing, some focus on video consumption and others are gamers. Each different experience can be satisfied by different speed limits.

What will need to be done over the next couple of weeks and months is educating the consumer. Most consumers think faster is always better, but sometimes this is not the case. The majority of consumers could get by with mobile connectivity of 10-20 Mbps, but many think they need the fastest possible connection.

If you are in an urban setting and not able to use the internet on your device properly, the immediate assumption is that speeds are not fast enough. This might be the case, but another explanation is that there are too many people attempting to connect through the same cell site. This is network congestion, its not necessarily anything to do with speed, but too many people are clogging up the digital highway.

This is where 5G can add benefits over 4G. Think of the ‘internet’ as a water pipe. Not only does 5G make the water flow faster, it makes the pipe wider to allow more water to flow through it. This should address the network congestion challenge in various places if more people are connecting more devices to the same cell sites.

With this concept in mind, Vodafone has built the speed-tiered options; all you have to do is work-out how you use your phone, decide on a suitable speed and then you never have to worry about using up your data allocation ever again.

The one criticism we have is the pricing, which you can see below:

Speed limit 2 Mbps 10 Mbps Fastest possible
Price £23 £26 £30

On the lower end of the scale, the 2 Mbps tier, we believe Vodafone has charged a bit too much. And on the upper-end, the telco probably could have charged more. The strategy appears to be gearing as many people as possible to the middle tier which effectively undermines the concept of having experience designed tiers in the first place.

The success of this initiative will entirely depend on whether Vodafone can educate the consumer on the basics on connectivity experience. The water pipe analogy is a good one to explain the difference between 5G and 4G, though it would also help to inform users of how much speed is required to do what.

How much do you need to use WhatsApp, watch YouTube or play Harry Potter; Wizards Unite, for example. The general consumer in the UK will not know the answer to this question, and unless they do, this Vodafone strategy will likely fail.

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