This document was last updated on 20 May 2003 at 17h00.
This document outlines my concerns about Pay as you Talk pricing changes that Vodafone intends to implement as of 1 April 2003. I am particularly concerned about Vodafone's plans to increase the minimum call cost, the cost of calls to landlines and the cost of calls to Vodafone mobiles.
I believe this document will be of interest to those current and potential Vodafone Pay as you Talk subscribers who make frequent short phone calls of any nature (including those who habitually hang up when they are put through to Voicemail), those who make calls to landlines and those who make calls to other Vodafone mobiles. This document will probably not be of much interest to subscribers who mostly make long calls to mobiles on other networks, or other subscribers for whom cost is not a critical factor in chosing a network operator.
My name is William Knottenbelt. I am a Vodafone Group shareholder (1300 shares, worth over GBP 1500 as at 21 March 2003) and a Pay as you Talk subscriber on the SmartStep tariff. I am not affiliated with Vodafone in any other way, nor am I affiliated with any other mobile operator, save that I have a small shareholding in O2 (156 shares, worth under GBP 80 as at 21 March 2003). I am not a professional journalist, nor do I have expert knowledge of the mobile communications industry. While I have endeavoured to establish and understand the facts as best a member of the public can, I have found it difficult to obtain clear, consistent and/or categorical answers from mobile operators (including Customer Services personnel and Press Offices). I would therefore recommend that you verify points that may concern you with the relevant mobile operator or regulatory body. I am keen that all facts presented here should be accurate so please alert me if they are not. I can be contacted at wjk@doc.ic.ac.uk.
All Vodafone Pay as you Talk customers in the United Kingdom (both current and potential) should be aware of changes to Pay as you Talk tariffs that Vodafone has introduced from 1 April 2003. For example, on the SmartStep tariff the changes are:
Vodafone will lower the cost of Pay as you Talk mobile phone calls between networks by 12.5% from 40p to 35p per minute.
BUT Vodafone also plan to:
Raise the minimum call charge from 5p to 10p (so even if you just get through to someone's voicemail and hang up, that will cost 10p) - an increase of 100%. On 1 January 2003, the minimum call charge was 2p; On 1 February 2003, it was raised to 5p, and on 1 April 2003, it will be 10p - so Vodafone will have implemented a breathtaking increase of 400% in the minimum call charge over the first four months of 2003!!
Raise the cost of calls to landlines and Vodafone mobiles from 25p to 30p per minute (for the first 3 minutes of each day) - a 20% rise.
You can find a copy of the notification Vodafone sent to me about these changes here (PDF format). Vodafone have kindly supplied me with copies of the notification templates for Smartstep, AllCalls, FirstStep, NextStep and Original Pay as you Talk customers.
This is not the first such rise Vodafone has foisted on its Pay as you Talk customers in the recent past. On 26 November 2002 the cost of sending a text message to a foreign network was raised from 12p to 24p - an increase of 100%.
When I phoned Vodafone Customer Care to enquire about the planned increases a Vodafone spokesman said Vodafone had to institute the increases to cover the cost of meeting call cost reductions recommended by OFTEL (the telecommunications regulator). It transpires that the Competition Commission has written a report (summary) recommending the lowering of call termination charges (i.e. the charges mobile operators make to other networks for calling mobile phones on their networks). OFTEL has announced that it is proposing to implement the recommendations of the Competition Commission report. If you are interested in more information about the context of the Competition Commission's report (and why the mobile operators might claim not to find it such a pleasant document) then I can recommend reading this article.
When I submitted an enquiry to OFTEL about this, I received two very interesting replies - one from Vodafone and one from OFTEL. Vodafone's reply reads as follows:
20th March 2003
Our ref: 195501441
Dear Dr Knottenbelt
Thank you for your recent enquiry to OFTEL, which has been forwarded to Vodafone on your behalf.
I am sorry to hear that you are unhappy with the Pay as you Talk (PayT) price plan changes that come into affect [sic.] on the 1st April 2003. The changes have occurred following the recent ruling from the Competition Commission, when they recommended that all networks reduce their call charges for cross-network calls.
This has in turn meant a general review of all of the PayT price plans, which is why some call charges have increased and some reduced. I apologise for any inconvenience this may have caused you, but I can assure you that our rates are still competitive against the other network providers.
There is more than one PayT price plan available, as you may know, and if you find that one of these is more appropriate for you, I would be happy to change it over for you free of charge. The normal cost for this is GBP 7.50.
I can understand your frustration but I hope I have been able to reassure you of our commitment to our customers. Should you require further assistance please do not hesitate to contact us.
Yours sincerely
[etc.]
You can find a copy of the full letter Vodafone sent to me here (PDF format).
There are a number of issues which concern me about this reply.
Firstly, although it is (perhaps deliberately) unclear, there seems to me to be an implication that the Competition Commission is somehow responsible for the proposed Pay as you Talk price increases. I am not aware that the Competition Commission recommended any price increases in its report. I await Vodafone's detailed justification of how the Competition Commission is responsible, or a statement from Vodafone that it does not believe the Competition Commission is responsible, i.e. that the decision to raise prices on its Pay as you Talk tariffs was Vodafone's alone.
[UPDATE: On this issue, a Vodafone Press Office spokesman comments: The mobile telecoms market is dynamic and evolving, and as a result, we constantly review our price plans in order to incorporate the changing habits of our customers as well as external changes and influences such as the recent findings of the Competition Commission. Planning for the current changes was underway before the Competition Commission findings were published, although their impact had to be incorporated. The Competition Commission at the time of their findings acknowledged that one of the possible effects would be 'a re-distribution of costs' and that they anticipated possible rises for 'handset prices and some other costs'.]
Secondly, I would be interested to know if Vodafone had reduced, or announced its intention to reduce, the call termination charge reductions recommended in the Competition Commission's report (see OFTEL's reply to my enquiry below). If they have not yet but are going to implement these reductions, I would like to know on what date they will be implemented. And if the date is after 1 April 2003 I would like to know the reason for the delay.
[UPDATE: On this issue, Vodafone remains suspiciously silent; I suspect they have not announced their intention to implement the reductions recommended in the Competition Commission's report after all! This is really a crucial point and I await further comment from Vodafone. The whole argument they have presented would seem to be predicated on their intention to implement the reductions recommended by the Competition Commission yet they seem to be introducing increased charges before they implement -- or even announce their intention to implement -- the reductions. As of 22 April I am still waiting to hear from Vodafone. As I understand it, the operators have until July 25 2003 to implement the changes, so why are the increases being introduced early? ]
Thirdly, even if the eventual implementation of the Competition Commission's report will result in a revenue shortfall that was not anticipated in Vodafone's business plan, how does it help to place the burden of meeting this shortfall on long-suffering Pay as you Talk customers, thereby encouraging mass defections of these customers to other operators? Is this really the way to create shareholder value?
[UPDATE: On this issue, a Vodafone Press office spokesman comments: As you have correctly identified, the pre-pay price changes are essentially a 're-balancing' of costs - and are not simply price increases. Where some elements, such as minimum call charges have increased, others such as offnet calls have dropped. As a shareholder, you will no doubt be aware of the importance of focusing our effort upon our higher spending customers, who should notice benefits from the changes.]
Finally, the offer to switch my Pay as you Talk price plan is hardly helpful since the minimum call charges are being introduced across all Pay as you Talk price plans (AllCalls, FirstStep, Original, SmartStep and NextStep).
[UPDATE: Vodafone have more helpfully offered to evaluate the effect the charge increases are likely to have on my phone bill. Many months later, as of 20 May though this still hasn't materialised so I presume their offer was not sincere and/or the outcome of the comparison was not favourable (I was not expecting it to be).]
OFTEL dealt with my query that I submitted through their website very politely, efficiently and promptly. Their reply to me -- which I believe to be an excellent example of high-quality, clear and elegant jargon-free communication -- is quoted in its entirety below. Overall I am very satisfied with the manner in which OFTEL has dealt with me.
Oftel Ref: CR/504636
21 March 2003
Dear Dr Knottenbelt
Thank you for your email of 14 March 2003 about Vodafone.
Oftel has not taken any action to force mobile companies to increase prices and any such price rises are simply the choice of the mobile operators.
Oftel has announced that it is proposing to implement the recommendations of the Competition Commission in a recent report on the charges mobile operators make to other networks for calling mobile phones on their networks. This will lead to lower prices for calling mobiles. The mobile operators have issued legal challenges to the Competition Commission's report and have not yet reduced such charges or demonstrated that they intend to do so.
The mobile operators appear to be claiming that Oftel's proposals for lower prices to call mobiles should result in their raising prices for calls from mobiles/ for handsets. The Competition Commission looked at the business plans of the mobile operators and concluded that this was not the case.
Accordingly, there is no justification for mobile operators to blame Oftel for any mobile price increases particularly before the mobile operators have reduced incoming call prices.
Yours sincerely
[etc.]
In defence of their position, at least two Vodafone spokesmen (one Customer Services spokesman and one a Group-level director) have hinted to me that other operators may follow suit with similar price increases when Vodafone shows the lead. This is of course always possible, so I am in the process of contacting these other operators for official statements on this issue and their policies with respect to how much notice they would give of any increases to their PrePay customers.
UPDATE: Orange and T-Mobile have in fact now announced reviews of their price plans. See this Register article for more details. One Orange customer enraged by the changes wrote in to say:
I am faced with virtually 100% price increases with Orange Just Talk. I was on a tariff which offered half price calls (25p peak and 5p offpeak) if you top up with fifty pounds or more (a no-longer advertised tariff). This will be changed to 35p peak and 10p off peak from 1st May 2003. That's a 100% increase for all off peak calls.
Further details of Orange's changes can be found here. Orange's response to another one of their customers who enquired about the changes reads as follows:Dear [Customer]
Thank you for your mail.
We can confirm that from 1 May 2003, Orange is to raise its Pay as you go charges. Charges for these calls have not increased since the launch of Pay as you go in November 1997. These charges still remain competitive compared to those of other mobile networks.
Orange offers a Pay as you go portfolio that allows customers to tailor their package according to how they use their phone. Value for money remain competitive compared to those of other mobile networks.
Orange offers a Pay as you go portfolio that allows customers to tailor their package according to how they use their phone. Value for money options include Choose your own off peak, fixed rates all day, calling abroad from the UK, Text saver & group saver.
This decision follows the Competition Commission's recommendation that mobile operators should charge less for calls received on their networks and more for handsets and other call charges.
I would like to advise that we do not have any literature at the present time that can be sent out to you, however the new changes can be found on our website www.orange.co.uk/changes. Alternatively, you can call our pay as you go Customer Services on 452 option 2 where one of our representatives will be pleased to assist you.
Kind regards
Tina
Orange Customer Services
Further details of T-Mobile's planned changes can be found here. I am not aware that either Orange or T-Mobile plan to introduce a minimum call charge along with their other changes. O2 Press Office has yet to respond, but their website would seem to imply that there is currently a minimum call charge of 2p and a text message to a foreign network costs 20p. Virgin Mobile have no minimum call charge and their Customer Services tell me that there are no plans to change their tariff; certainly as of 20 May no notificiation of tariff changes has gone out to Virgin Mobile customers (except for a notification that text messages between Virgin customers will cost only 3p on 1 May).
If you are concerned about the Pay as you Talk price changes, you may wish to begin by contacting Vodafone on 0800 101 112 to verify the details of the increases. If, like me, you think the proposed cost increases and the minimum call charge in particular are unacceptable to you, you may then wish to consider moving to a different operator. Once you have decided on who this will be, you can call Vodafone's very helpful Number Portability Line (08080 945 945) and request your PAC (Porting Authorisation Code), which you will need to switch networks. You may struggle to get through to a customer services representative - at 10h20 on Monday 24 March the wait for one call to get through was around 10 minutes - but be patient and your call will be answered. Thanks to OFTEL, switching networks is now a simple process; full information on Mobile Number Portability is available here. You may keep both your phone number and current phone model and need only purchase a SIM card from your new operator.
I myself am a Vodafone shareholder and have been a satisfied Pay as you Talk customer for many years so I have not taken the decision to consider leaving Vodafone lightly. However, since I feel I have been left with no other option, I am convinced that there must be many Pay as you Talk customers in a similar position.
My email is wjk@doc.ic.ac.uk if you would like to get in touch.
I would like to acknowledge the support and kind words of the many customer services personnel I have dealt with (from all networks), as well as OFTEL for the superb manner in which they dealt with my query. Thank you to Bobby Leach and Toby Robson from Vodafone who came back to me to clarify details.
Please note that the views expressed on this page are my own personal views and do not necessarily represent the views of any institution or organisation with which I may be associated. Neither myself nor any person or organisation with which I may be associated accepts responsibility for any application, use or interpretation of this document. Further I, and any related entities, disclaim all liability for direct, indirect or consequential damages or loss resulting from the use of this document. I have made considerable efforts to ensure that the information presented in this document is accurate but I cannot guarantee the accuracy of such information (esp. when I do not receive consistent answers or simply do not receive answers!), nor can I guarantee that the information will always be up to date.