Paying for it...

This week, through a haze of man-flu, I’ve been thinking about how mobile services and operators bill for their services and why it’s all a bit backwards.

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In the UK at the moment there is a big fuss about bank charges – the fees you pay to a bank if you exceed an agreed overdraft, bounce a cheque or similar. The law says that whilst it is OK for banks to charge fees on these occasions to cover their expenses, they cannot charge a penalty (apologies to anyone with any actual legal knowledge who will probably be wincing at that over-simplification). Campaigners have now realised that it doesn’t cost £30 to issue a standard letter and so the whole thing has gone to the High Court. A lot of banks are beginning to look unpleasantly greedy and unsympathetic to their customers.

Although clearly not a legal issue, I think other service providers – mobile network operators particularly – would do well to note what is going on at the moment though and realise that quite aside from anything else penalising customers for wanting to consume (this does not relate to the consumer’s ability to pay – it isn’t a credit issue) more of your service isn’t going to win hearts and minds…

Take 3UK’s mobile broadband offer as an example – in all other respects an excellent value service, but a typical case. Additional megabytes over the pre-purchased bundles cost 10 pence:

1GB per month costs £10 – effectively 1 pence per megabyte. The excess use charge is ?10 times that rate.

3GB per month costs £15 – effectively 0.5 pence per megabyte. The excess use charge is ?20 times that rate.

7GB per month costs £25 – effectively 0.3 pence per megabyte. The excess use charge is ?30 times that rate.

So the highest monthly-rate subscribers pay a penalty of a 30-times multiple in price if they exceed the bundled amount and this is typical across all the network operators.

Clearly excess use can’t be free – but there’s not a good reason for this sudden hike. It has been argued to be a capacity issue – the operators want to prevent excess use to ensure quality of service for all – but a consumer can simply buy several connections if they wish… their supply is not limited by network capacity.

Certainly pre-paying for service should make it cheaper and guaranteeing to purchase larger blocks of service should provide a cost saving – even my schoolboy economics can grasp that, but once exhausted why should the best customers – those who provide the most predictable revenue streams – be punished for attempting to purchase even more service? Cynically, I suspect firms build their pricing models to scare consumers away from maximising their use of the bundles, which increases margin (AMPU).

So what’s the answer? I think it’s the ‘per month’ element that is skewing things here. Back in the ‘bad old days’ it made sense to bill ‘line rental’ by month, but now we also pre-purchase quantities of service within these monthly payments and there’s no need. If bundles of messages / data / international calling were identified separately they could simply be charged as needed…. Used up the 200 text message bundle you purchased before the next billing cycle? Just purchase another at the same price – it lasts a month too, starting today. It could be a manual process or automatic with the usual ‘maximum spend’ controls to protect against unexpectedly large bills. Firms really looking to attract and retain customers could go further – offering to retrospectively upgrade the bundle to a higher one or allowing it to last longer than a month in low-use periods, but now I just want to have my cake and eat it…

What do you think?