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.

Apple warns of higher prices with looming Chinese tariffs

Apple’s relationship with the White House looks to be straining at the seams as the iLeader continues to criticise the impending trade war, while the President offers little knowledge of how supply chains actually work.

Using his favourite means to spread tripe, President Donald Trump took to Twitter to hit back at a filing make by Apple with the US Trade Representative. In the filing, Apple argues the tariffs would lead to higher consumer prices, slower economic growth in the US and Apple being exposed to higher competition from foreign rivals.

“Apple prices may increase because of the massive Tariffs we may be imposing on China – but there is an easy solution where there would be ZERO tax, and indeed a tax incentive,” the President wrote in a tweet. “Make your products in the United States instead of China. Start building new plants now. Exciting!”

While some of Apple’s products have been hit by the current tariffs placed on Chinese exports, the iPhone, which accounted for 56% of revenues over the second quarter of 2018, is yet to be effected. As a company which manufactures the majority of its good in China, Trump’s next tariff proposal, essentially covering everything coming out of China, would have a very negative impact.

On the surface, forcing Apple’s manufacturing process back onto US shores would be a political PR win for the President, though the move could be disastrous for Apple and iLifers. There might well be tax incentives in moving the manufacturing process back to the US, but cost of building the factories would be incredibly high, while labour costs are also much higher. Tax incentives might compensate for these incurred costs, as would a price hike to consumers, but there is a bigger issue at hand which the President doesn’t seem to understand.

Managing a supply chain in the manufacturing trade is more than simply understanding how much labour costs. It’s access to raw and manufactured materials, cheap energy and real estate and finally, skilled workers. Once the plant has been built, the transportation and logistics puzzle to access materials will have to be addressed. Finding the right plot will also be tricky, as real estate will have to be cost effective, but it will also have to be close enough to a large enough workforce. This in itself is perhaps the biggest challenge as important aspects of this workforce do not actually exist at scale in the US.

Precision tooling is an excellent example of one of these skills. Precision tooling is a trade which requires years of training, combining artisanal craftsmanship with precision engineering skills. Apple CEO Tim Cook pointed out a couple of years back at a Fortune conference China actually stopped being the low-labour market and instead has a skilled workforce which enables the manufacture of smartphones and other advanced electronics. There are of course cost savings to be made in Chine, but these skills are critical in the smartphone manufacturing industry, and simply cannot be created overnight in the US.

The risk for Apple when it comes to moving the manufacturing process into the US, isn’t simply the cost as President Trump is suggesting. There are immensely complicated supply chain issues which will take months and years to perfect, this was the case for China as well, but the manufacturing industry here has evolved with technology industry. Skills have been taken forward and adapted to the manufacturing process as more complicated techniques and processes become commonplace. The learning process in the US will have to be much sharper.

When you take these elements into consideration, the risk is much more than financial. Apple could probably absorb a couple of years of heightened manufacturing costs, such is the profitability of the organization, but what it cannot allow is for a glitch in the supply chain. This is an incredibly well-oiled machine which produces hundreds of millions of devices every single year. Poking, prodding, moving and shifting this machine will impact Apple’s ability to meet consumer demand.

On one side of the coin, this is not worst case scenario. Less products on the market create a sense of exclusivity, which is turn increases the value of the products. Many luxury brands limit supply to create this sense of exclusivity which inflates prices. Some in the accounting department might like this idea, but Apple is a different beast. Somehow, Apple has managed to create the image of an exclusive, luxury brand, while flooding the market with supply and still maintaining incredibly high prices. Its contradictory and defies logic in the branding and price game.

If there is money to be made, Apple will profit. If it can offer a customer an Apple product, it will make the offer. When there is an opportunity, Apple usually capitalises. However, this saga threatens to impact Apple’s ability to supply the masses with their iFix.

Most of the time, disagreements are about money. But President Trump doesn’t seem to understand anything more than surface complications here. Tax incentives and price hikes will not compensate for the massive issues the Apple supply chain could face.

Throttling video streaming is not criminal but Xfinity has botched the move

Comcasts’s Xfinity Mobile is going to limit video streamed over cellular to 480p resolution and cap hotspot speeds at 600 kbps unless customers pay more.

In a letter sent to current customers, which inevitably got posted online for all to see (on Reddit), Xfinity Mobile announced two changes to its service: it will limit the resolution of video streaming over cellular networks to 480p (so-called “DVD quality”), and it will cap the speed of hotspots powered by mobile device to 600kps. Although it may help customers’ data plans last longer, ultimately this is a measure to control cost. Comcast does not have its own mobile network and is reselling Verizon Wireless’s data.

Limiting the resolution of mobile video streaming is nothing new. YouTube will fall back to SD (240p or 360p) when the network quality degrades, prioritising continuous play over picture quality. For a long time, Netflix had by default capped the resolution of streaming over cellular at 600p before it gave users the choice to go for higher resolution.

Neither is limiting tethering using mobile hotspots. When T-Mobile launched its Uncarrier programme “One”, mobile tethering speed was limited at 128kps. Even with the expensive “One Plus” the hotspot speed was only lifted to 512kps.

However Xfinity could have handled the issues better to avoid the backlash on its reputation. Xfinity should realise that the increasing popularity of video streaming is the main driver for data consumption. Therefore when designing the products it should either raise the data plan cap of its “Unlimited” data plan, currently at 20GB, or go for real “unlimited” but bill different customers based on the speeds offered, like the common practice in Finland, where per capita mobile data consumption is the highest in the world.

More importantly, Xfinity should have given its existing customers the grace period till their current contracts ran out if it wanted to avoid antagonizing them. Exerting new limitations and charging additional fee for services that are in the original contract is even potentially a breach of contract on the service providers’ side.

EE allows parents to bestow the gift of data

In a move disturbingly in keeping with the times EE has launched a new service that allows subscribers to give their kids just what they’ve always wanted.

Gone are the days when junior might have asked for a new bike or a train set or some other wholesomely analogue toy. It’s all about data these days and EE knows it, so it has launched what it claims is the UK’s first data gifting service.

It fundamentally seems to be a tweak to the concept of a ‘family plan’ in which everyone has their own basic data allowance but if junior has been hitting YouTube hard on the way home from school and anyone else in the family has a surplus they can recycle their data in a show of digital benevolence.

This seems to be a good compromise towards totally shared data buckets, which run the risk of careless streaming leaving the whole family data-less until the end of the month. The transfer is done through the EE app and, judging by the images above, is pretty straightforward.

On top of that the app is being given a bunch more controls that are designed to enable parents to keep an eye on their kids’ device and data usage and include the following features:

  • Switch their child’s data usage on or off
  • Allow or prevent their child using their mobile phone allowance abroad
  • Restrict or allow international and premium rate calls
  • Set what content access their child has while browsing on the go

“Data gifting with EE helps families to get the most from their allowances by being able to move their mobile data around their smartphones, with easy to use parental controls,” said EE Marketing MD, Max Taylor. “So now mum and dad can turn their data into digital pocket money and reward the kids for good behaviour, or reduce the amount they are using, all without having to spend a penny more.”

Call us old fuddy-duddies if you will but there is something slightly disturbing about using data as the basis for parental Pavlovian reward systems, as it seems to present staring at a screen as the ultimate youthful aspiration. Having said that the genie is definitely already out of the bottle when it comes to kids and devices so maybe we should just resign ourselves to it, just as EE apparently has.

Vodafone has a surprisingly good go at tariff innovation

UK operator Vodafone has come up with a couple of new tariff ideas that, for once, look like they actually add some value to the consumer.

We’ve come to the expect the mobile industry to gratuitously dick about with its tariffs every now and then, apparently just to show it hasn’t completely given up on innovation. But usually the tweaks are so superficial and inconsequential to the end-user that we wonder why they bother. A couple of Vodafone’s bright ideas, however, seem to have some genuine merit.

For postpaid punters we now have ‘Vodafone Passes’, which allow you to pay extra for unlimited data on certain apps – effectively zero-rating them for a flat fee. Here’s the full range:

  • Chat Pass (£3/month) – Facebook Messenger, WhatsApp and Viber
  • Social Pass (£5/month) – Facebook, Instagram, Pinterest and Twitter
  • Music Pass (£5/month) – Spotify, TIDAL, Deezer, Napster, SoundCloud, Amazon Music Unlimited and Prime Music
  • Video Pass (£7/month) – Netflix, Amazon Prime Video, DisneyLife, Vevo, My5, YouTube, UKTV Play and TVPlayer, which includes channels like HISTORY, Lifetime, MTV & Comedy Central
  • Combo Pass (£15/month) – all four Passes in one

By far the most useful of these is the video one, especially if you can also use it via tethering in a tablet or whatever – which Vodafone has confirmed you can. The chat one is pretty useless for nearly everyone as IM uses so little data, and you can mostly say the same for social media. But we can imagine why people would pay extra to use Spotify on their phone without inhibition and that applies even more so to Netflix, etc.

Having commended Vodafone for innovating it should be noted that it’s far from the first UK operator to try this sort of thing. Three zero-rated a few streaming services in its ‘Go Binge’ tariff earlier this year, which itself seemed to copy T-Mobile US. And Virgin Media got the ball rolling over here last year by zero-rating some social media. But Vodafone seems to have a lot more apps available for zero-rating, something it’s stressing in its marketing.

The other bright idea is something called ‘Pay as you go 1’. This is a daily prepaid tariff that costs at most a quid, and possibly less. From 10 November you can set yourself up with Vodafone such that if you don’t use your phone at all in a day (presumably this doesn’t include incoming calls/texts) you don’t pay anything. You’re then charged 20p per minute for calls, 20p per text and 20p for 5MB of data until you hit a quid (i.e. almost immediately).

After you hit the £1 threshold you get unlimited minutes and texts as well as 500 MB of data for the rest of the day. The sub-£1 increments seem a bit pointless but the subsequent allowances seem generous and the flexibility to leave the phone in a drawer for days without it costing you anything will probably appeal to some.

Nick Jeffery, Vodafone UK CEO, said: “We want our customers to be able to use their phones exactly as they want to,” said Nick Jeffery, Vodafone UK CEO. “With Vodafone Passes, they can keep in touch, keep tuned in and keep watching without having to keep an eye on their data meter. With Pay as you go 1, we’re ripping up the existing Pay as you go rulebook, so that customers can use their phones knowing they won’t pay for what they don’t need, and they’ll never pay more than £1 a day.”

This sort of flexible, ad hoc tariff offering is what everyone has been saying operators need to do to generate fresh revenue streams for ages. Vodafone seems to have nicely augmented both its postpaid and prepaid offering with these new tariffs and it will be interesting to see if the rest follow-suit.