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UK spends £3.5 bn a year on extra mobile phone charges

by Scott Bicheno on 11 April 2011, 12:17

Tags: General Business

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Bill shocker

There can be very few mobile phone users who haven't experienced some kind of ‘bill shock' at some time - when their mobile bill came in much higher than expected. Billmonitor, the only tariff comparison site endorsed by Ofcom, has looked at how much we overpay in its latest study, which you can access in full here.

The headline stats are as follows:

  • The UK spends £3.47 billion per year on charges outside of allowance
  • We're ‘wasting' £4.899 billion a year on mobile bills
  • 76 percent of users are on the ‘wrong' mobile phone contract.
  • On average we ‘waste' £194.71 each per year


By Billmonitor's rationale, waste occurs when we either incur extra charges over and above our contracted tariff, or we fail to use the full allowance offered by said tariff. The breakdown of the £4.899 figure that most media have gone with is: £2.62 billion from not using all your minutes, etc; £1.53 billion from using more minutes than covered on the tariff, and £0.74 billion from not ‘optimising' other free benefits.

The data for all these conclusions was derived from looking at 28,417 anonymised phone bills, and while we don't doubt many people are paying much more than they absolutely have to, we have to question the premises behind some of the findings.

Firstly there's the £2 bn difference between the total spent on extra phone charges (£3.47 bn) and the wasted amount (£1.53 bn). Does that mean £2 bn of those extra charges are not waste? If so why?

Also, the £2.62 bn figure attributed to taking out more expensive contracts than we need doesn't allow for the subsidisation of handsets, which is implicit in the contract. When we take out a £35 per month contract it's not necessarily because we need all the minutes that come with it, it's because we want the handset for ‘free'. In fact, you could argue the extra minutes are partly offered to reinforce the perception of value in these ‘free' deals.

All this doesn't mean this isn't an important study. £35 per month for two years is £840 for a handset that you can probably buy SIM-free for £500. If you think you'll spend less than £340 on mobile minutes, etc, over that time then maybe you are wasting money. But the £5 billion figure you'll be seeing all over the media (it's being discussed on Radio 4 as we write), doesn't seem to make any acknowledgement of the subsidisation model. It does make for a great headline though.



HEXUS Forums :: 6 Comments

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The “fail to use the full allowance offered by said tariff” is a large part of the reason why I gave up a contract phone and went PAYG.

But I agree with the (HEXUS) article - the picture is more complex than the headline figure would suggest. There's probably a large element of truth in the allegations though, even if the headline figure itself is an exaggeration.
Meh, networks have been gouging the consumers for over a decade. Everything from the cross-network fees, to SMS charges, and exaggerated tarrifs. It's no wonder the likes of Vodafone turns over tens of billions a year.
I never thought so many people would buy £600 phones. Let alone the number who paid £1,800 for the original iPhone, that was a complete half baked turd.

As such I wouldn't be remotely surprised if this number rises! If your wanting the latest phone, on what is effectively credit, then prepare to be gouged by the networks.
Let alone the number who paid £1,800 for the original iPhone

Err… what? :confused:

The original iPhone was priced at £269 with £35, £45 or £55 per month options on a 18 month contracts… so the most expensive option would be £1259. That also ignores the special £99 upgrade for the iPhone 3G (your 18 month period then restarted also) when it first came out, which would significantly reduce the effective cost of that original iPhone.

Anyway… would tend to agree that while there is some truth in the statement, I think the headline savings are likely much much lower.
When we take out a £35 per month contract it's not necessarily because we need all the minutes that come with it, it's because we want the handset for ‘free'.
Hmm, I'm very sure that this isn't the case for quite a few people. Personally speaking I know I'm not getting the best use from my £30/month contract - basically because I use a lot of data, less text messages, and hardly and talk-time (the fact that voice calls to other networks/landlines are excluded from the inclusive minutes being the one reason for this).

Now if someone had done a contract with 1GB data, 200-300 texts and 60 minutes talk time, then that'd definitely be better value for me. But no-one was doing that, and in fact, I'm not sure that there's something like that available (maybe T-Mobile with some combo of add-ons).

I'd vote for proper “menu” pricing - so you start out with (for example) 200MB data, 100 texts and 60 minutes talk time. Want a free phone? That'll be another £5/month. Need more data, that's another £5, etc. Plus - to the benefit of the phone companies - that kind of flexibility would make the job of price comparison sites very difficult.

Still, my contract's not up until June next year, so maybe by then there will be a “better” plan available.