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.

UK consumers are not convinced by zero rating gimmicks

The telcos want us to spend more money with them, that is a given, but it appears the latest move to bribe consumers with zero rating offers is not working in the UK.

It’s been a slow creeping trend over the last couple of years, but the telcos are making less money. Whether it was the increasing irrelevance of voice minutes, or erosion of generated-cash through SMS, the data frenzy has been killing profits. It’s a cruel irony that the OTTs are using the very networks which the telcos have spent billions on to destroy the profit margin, but it is one which the industry has come to accept.

Monetizing data tariffs, and encouraging users to scale up to more expensive unlimited plans, was one way these trends could have been reversed. But according to new data from uSwitch, users are not convinced by new data plans that offer unlimited use of certain apps, favouring cheaper deals as opposed to the unlimited options.

“While these packages will be spot on for a large number of a mobile users – in particular younger users – they can feel a little restrictive,” said Ernest Doku of uSwitch. “For the older demographic that might not necessarily want to stream content on-the-go or who don’t use messenger apps, there will likely be little in this new provider battleground that stands out.”

Only 19% would switch to a contract with unlimited data usage on certain apps, with this number dropping to 11% for over-55s. 18-34 year olds were more receptive to the idea, with 26% open to changing providers. As 79% of adults now use on-demand services such as Netflix or BBC iPlayer, the telcos are making a fair assumption that these unlimited data tariffs would be appealing, but it does show sometimes statistics do not back up what was promised.

Mobile operators are increasingly turning to perks, such as free subscriptions or zero-rating offers, to attract new users, but it seems the UK are focused on the basics. 61% of the respondents to the research would change for a cheaper deal, 30% would change for better coverage and 23% would change for more flexible deals.

The last reason is an interesting one, and perhaps an encouraging statistic for Vodafone and Three. Both have launched more flexible, month-by-month plans (VOXI for Vodafone and Smarty for Three), which target more cash-conscious consumers.

That said, the statistics do also indicate one thing; to be a good mobile provider, you have to have a network which performs consistently well, and offer services at a good price.

This is a welcomed discovery for Telecoms.com, as it indicates the users of the UK cannot necessarily be bought off with gimmicks and advertising. The user is focused not on the short-term benefit of a free-service, but more of the performance of the telco, which will arguably have a greater impact on the users life.

But the smoke and mirrors should not be seen as a surprise. Why are telcos focusing on gimmicks and the cheesy endorsements of past-it celebrities, which make the brand look cheap and unappealing? Because you don’t have to spend as much on a second-rate celebrity as you do on making sure your network is up to scratch.

Perhaps this is another indication the telcos are shying away from actually investing for the long-term? Maybe it shows us the management team are more interested in short-term pleasures than longevity and sustainability? Or it might just say that the telcos don’t care about customer experience, just as long as they pay up once a month?

Where is the line in the sand for zero rating?

It’s a trend which has been growing steadily in the UK, but the line has not been found yet; when are zero rating offerings going to irk the bureaucrats of the telco world?

Vodafone has just unveiled VOXI, a young-orientated mobile service which provides zero rating on Facebook, Facebook Messenger, Instagram, WhatsApp, Pinterest, Snapchat, Twitter and Viber. Three has Go Binge, which offers free streaming on Netflix, SoundCloud, Dave and other channels. EE offers Apple Music streaming for free. Virgin Media offers zero rating for Twitter, Facebook Messenger and WhatsApp. It’s become endemic.

But when will competition authorities decide the practise is not fair? Over in the US, AT&T and Verizon have been bickering with the FCC over the legalities of zero rating offers, but such arguments don’t seem to have crossed the pond in any substantial manner to date. This in itself seems odd; usually the European Commission usually can’t wait to get it’s hands on a competition challenge, but it doesn’t seem to be bothered yet.

Maybe it is preoccupied, maybe it’s because its holiday time, or maybe the telcos haven’t crossed the invisible line yet. As regulation usually lags behind technological developments, there is often a testing of the boundaries. Like toddlers, the tech giants will push the limits until they upset the overseers and get sent to the naughty step.

That seems to be where the zero rating offers are at the moment. The line hasn’t been found and the lumbering giant in Brussels remains snoozing, working off a gluttony of lunch time chocolate smothered waffles. But this does seem to right in the Brussels ballpark, after all, zero rating offers do nudge users towards preferential services.

Data is a precious commodity for millennials; you wouldn’t want to run out in the middle of a cat video. Therefore, users will naturally lean towards applications which don’t run down the data allocation. It’s irrelevant as to whether most of these applications (excluding the video ones) use marginal amounts of data, when you are told something is free the natural inclination is to use it.

In this light it discourages competition. The operators are favouring the established and larger scale platforms, making it much more difficult for competitors to break into the space. It doesn’t matter that there is unlikely to be a Facebook usurper, with zero rating offerings favouring Zuckerberg and his cronies, user preferences will naturally lean that way.

Of course, operators will state they are open to new partners, but there has to be something in return. The operators will be sending a steady flow of users towards the platform, so there will naturally have to be some sort of reward; these are businesses not charities after all. The financials behind the zero rating offers have not been unveiled, but you can imagine there will be a kick back.

Maybe there is some sort of discount on Facebook advertising or free promotional activity on Twitter? These are platforms which have millions (if not billions) of users, there is an incentive for the cash-conscious operators. But what is the leverage for the challenger businesses? It will be unlikely they have the user base or the footprint to attract interest. So it is an uneven playing field which is growing steeper.

On the other side of the coin, some might argue this is just sensible business. It is a contra agreement between two organizations who are making best use of the assets which they have. It’s a relationship which benefits both, which possibly does not involve any cash transactions. In this light, it might be sensible to say fair enough, but this hasn’t usually stopped boresome bureaucrats in the past.

The European Commission is currently in an antitrust battle with Google over its Android software, though this is a different slant; Google is being accused of favouring its own services. That is seen as a no-no, but with the operators favouring the big boys and not getting involved with any challengers, you can just imagine this is the sort of competition debate the beer-swilling Belgium’s usually love.

Maybe zero rating is okay, maybe it will be viewed as a fair business exchange or maybe the operators will start looking for smaller fish to fry. Or maybe when the lethargic legislators are awoken from the summertime slumber in September, there will a new round of antitrust arguments.