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Three's money man reveals UK mobe firms' dark pricing dealings
Users would hate networks less if charges were upfront – CFO
Mobile operator Three reckons that networks are giving punters such a crappy experience with hidden charges, it's no surprise they want to bail out at the end of a contract. Networks resort to “dark pricing” tactics to recoup for the subsidies for swanky smartphones, he said.
The firm's chief financial officer, Richard Woodward, explained how it all worked, while pointing out that it would be smarter if all the operators just charged a bit more upfront on monthly contracts.
How much more would that be?
"About the price of a cappuccino," Woodward said.
Speaking at an analyst briefing yesterday, Woodward said operators' "dark pricing" included rip-off charges to domestic freephone numbers, high roaming charges outside the EU (and within the EU, for that matter), and exorbitant charges to overseas numbers - far higher than the call's true wholesale cost.
Three has embarked on this plan itself already, raising the fixed monthly contract price while taking out the gouging to 08 numbers. From last week, calls to 0800 numbers - which are free on landlines - will also be free from Three's mobile numbers. Premium calls to 084 and 085 numbers will be charged at 4p a minute, roughly comparable to landline rates.
"This should have been outlawed a long time ago," Three's UK CEO David Dyson added. He said the charges amount to a £600m bill for punters. 50 per cent of mobile subscribers surveyed had experienced some kind of bill shock - and 08 numbers were often to blame.
Hutchison's network has gone far further than Neelie Kroes, the outgoing European Commissioner required them to do and scrapped roaming and data gouging when in select countries as part of its “Feel At Home” offer.
It's patchy at present because the number of countries it applies to it still quite small, but it is terrific if you occasionally go to the US, Italy or Macau: three of the 11 countries included. The others are Ireland, Hong Kong, Oz, Austria, Spain, Denmark, Sri Lanka and Indonesia. Feel At Home offers up to 25GB of data while abroad, with 20p/minute rates back to the UK.
Three has also started to crank up the upfront costs. It quietly raised the price of its contracts for annual deals and 30-day deals.
This puts a dent in its "no extra charge for 4G" boast, made to spike the arrival of EE some 16 months ago. Technically it's true, but everyone is paying more than before.
Dyson said Three had turned on LTE in 36 towns and cities was on course to activate 4G in 200 by the end of the year - with 98 per cent coverage by the end of 2015. "I'm comfortable with the pace of that roll out," said Dyson. One in four of Three's 8m customers have a 4G-capable device.
It's also trying to turn its Three stores into service centres, rather than high pressure selling marts, and launched a “Rescue” package - with a replacement phone cloned and delivered within 24 hours.
Three reckons that the entire industry benefits from lower costs from churn. Punters reach the end of a 24-month contract furious at the experience. The grass is always greener, and so they hop over the fence. This makes retention and acquisition costs high for everyone. If operators raised the fixed monthly cost by a couple of quid, they recoup the Apple tax and Samsung taxes more transparently - and cut out the hidden charges.
There is, however, a fly in the ointment. It requires some maturity from the customer.
The British punter "loves a bargain" - a one-upmanship comes from boasting of paying £16 rather than £19, or £12 rather than £15. A mature punter making a rational choice knows you get what you pay for, in the end. ®