The myth of the mobile market 'choice'
Four news stories in the past couple of weeks have highlighted some of the challenges for the UK mobile industry and its customers – both business and residential.
Firstly, there was a report that poor customer service was costing the mobile industry £1.6 billion a year because it was the main reason customers changed providers.
Secondly, MPs spent three hours debating notspots (areas of the country) where there is an absence of mobile and fast broadband coverage.
Thirdly, there were stories that Ofcom was becoming inclined to block the merger between Ofcom and 3.
And finally, Sainsburys announced the end of its mobile offering as it could not reach agreement with Vodafone on continuing the deal.
So what is it that links these four stories? Dave Millett, of independent telecoms brokerage Equinox believes that, although it may look like we have lots of choice in the mobile market, the opposite is in fact true.
"With landlines there are literally hundreds of companies you can go to in order to buy a phone line or broadband service. Not that the fixed industry doesn't have its own debates and challenges, such as whether BT Openreach should be separated from BT. But where it is different is that it is relatively easy for a supplier to buy capacity or lines from BT and resell them at a price of their choosing, wrapped up into different packages. This gives the consumer (business and residential) a lot of choice.
"The mobile market is more geared around people reselling the network's product rather than a more open wholesale market where new companies can just buy capacity and create their own packages and bundles etc. There are Virtual Mobile Network Operators (VMNOS) but nowhere near the number that would create a genuinely competitive market with loads of choice.
"Plus ask any of the VMNOs, both residential and business, about the issues they have had over agreeing deals and volume commitments – and you'll understand why there are so few, and why companies like Sainsburys have pulled out. Even 150,000 users were apparently not enough for Vodafone to reach a deal.
"The mobile market closes ranks and refuses to move on issues like carrying other network calls when they have no coverage (as happens when you are abroad). The networks even forced companies like Phones4U out of business by effectively abandoning them.
"The network operators may argue they spent a lot of money buying 4G licences but their report and accounts show they are not exactly hard-up for a penny or two. The main providers made combined profits of in excess of £6 billion.
"At Equinox we think that, as a result of BT buying EE and the potential O2/3 merger, Ofcom should force the networks to open up wholesale access and significantly lower the barriers for potential suppliers. This would enable more new companies to enter the market and create a much wider choice of packages for consumers and businesses.
"Also as has been shown so often the biggest spur for improving customer service is competition and fear of loss of business. At the moment it is a merry go round – how many people / businesses have tried out all the major suppliers and then gone back to where they started, realising that they are all 'as bad as each other'. Increased competition might also help incentivise the reduction of not spots.
"Certainly continually reducing the number of suppliers is bad news for everyone – with the exception of the networks themselves."