Mobile Phone Providers


It has come to that time again; I must renew the contract for my mobile phone. I have recently suffered at the hands of some frustrating customer service by O2, but there is not substantial enough incentive to change provider.

I had a browse around the different providers and packages available, whether it was to keep my current phone or to switch to a new phone and contract. What I soon came to realise that even though no provider would admit it there was to a degree extreme inter-dependence with the pricing and packages available. The only factors that could persuade me were additional benefits (such as O2 with priority tickets), advertising, or offering a marginally lower one off payment for the actual phone.

I was looking to change my phone to the current iPhone 5 and for a contract with at least 1 gigabyte of data, alongside unlimited calls and texts. For example (24 month contracts):



The Cost (Per Month): £37
Phone Price: £49
Package: Unlimited Minutes & Texts, and 1GB Data
Total Cost: £937



The Cost (Per Month): £42
Phone Price: Free
Package: Unlimited Minutes & Texts, and 1GB Data
Total Cost: £1,008



The Cost (Per Month): £41
Phone Price: £30
Package: Unlimited Minutes & Texts, and 1GB Data
Total Cost: £1,014



The Cost (Per Month): £34
Phone Price: £49
Package: 500 Minutes, 5000 Texts, and Unlimited Data
Total Cost: £865

Now it is evident that each package is different in its own way, and but it really comes down to the preference of the consumer, whether they want to pay a large monthly bill, or have little or no one payment for the device. Currently, it can be noted that this market is a great example of oligopoly.

It is clearly difficult for the consumer to decide which package offers the best all-around service, and the advantage EE have with 4G service is only temporary as the other providers are going to catch up. These are currently the four biggest firms, with other small firms still operating offering alternatives such as Tesco mobile, and the inter-dependency defines the oligopolistic nature.

The firms don’t heavily compete on price, but tend to increase advertising campaigns, or offer a range of benefits. O2 offers customer’s priority tickets to music and sport events alongside general offers from brands and food stores. Vodafone also creates offers from high street brands, and food stores, but also has the best roaming packages. EE has their current 4G network coverage, and most diverse coverage as a result of connection with T-Mobile and Orange. Three is the only to offer unlimited data in their packages, but then restricts minutes and texts and questionable coverage abroad.

Although I do not feel customer loyalty towards O2, I feel like it is more convenient to stay with O2 so keeping my number won’t be a difficulty, and I have already become accustomed to their online services. One factor which I have not yet covered though is the surcharges as a result of exceeding the data limit, currently it can be noted that the mobile providers are making the most profit out of data services as a result of the popularity of smart phones.

There is also the age long issue of small print. Currently providers seem to subsidise the cost of smartphones to an extent that it makes it attractive to switch to a new one every year. What consumers most often don’t realise is that there are various service charges, and unbelievable surcharge rates. It can be increasingly frustrating as you are told rather clearly the monthly bill and the upfront cost but they fail to directly mention the actual long term operating cost.

The industry in itself can be seen as a huge bundle of inter-dependence which in no way is really benefitting the consumers, the firms don’t want to compete on price, so they try to persuade with consumer benefits and advertising. O2 (under Telefonica) and Vodafone are an example of two aggressive advertisers and they currently fight for market share in the UK, this can be seen as a classic example of game theory where they have reached the Nash equilibrium where they both advertise.

This market is particularly frustrating as it seems that with your choices that you are in a scenario where you pick the lesser of two evils, rather than one standing out as the clear best choice. I can complain but the situation in the United States seems to be far worse, there is the situation where a consumer looking for the best coverage for a smartphone is forced into a duopoly between Verizon and AT&T. They not only have high initial payments for the devices, but then continue to have confusing plans which are separate for data and calls. The packages fail to offer a middle ground for consumers, meaning that if there are certain requirements such as more data the consumer jumps to a higher price level.

For now it looks like I will stick with O2 and an iPhone as after searching through different phones and different plans, nothing seems to incentivise me to move away. I already know how to deal and put up with customer services, although I wish that paper billing was not a part of the past, as it was great to see a breakdown of calls, texts, and data usage.


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