Jun 30th 2015

A phone don’t come for free

Over the years, mobile operators have flirted with the term ‘free’. It didn’t feel free in the heady days of my teenage years, when pay as you go was king. Nokia 3310: £80. Top up: about £10/week. Then SIM only deals started cropping up: Unlimited texts. That sounds a bit like ‘free’… what’s the catch? Oh! The price. Not free, is it?

In 2007 Steve Jobs got up on a stage and showed us all a tiny Apple computer, but he said it was a phone so we all agreed and bought one. It cost a world away from £80 and in fact, with a pay monthly plan lasting two years nowadays, it’s nearing ten times that. What do we all get for free? Texts and minutes, apparently. Those operator guys are so two thousand and late! It’s all about data now, and the data is made of gold, if the price is anything to go by. Modern plans include ‘free’ handsets? Give me a break.

Operators are concerned about OTT providers because they provide free services. Skype is the daddy of them all, not only because it’s been around the longest, but because everyone starting using it before anyone recognised the technology could genuinely replace traditional calls. Do you call granny in Australia on your mobile? Hell no, you Skype her, because it’s free and you can wave at her. Of course, we all know that it’s not free; you’re paying your broadband provider for the internet connection. But the problem is, your mobile operator of choice (until quite recently) doesn’t even have the option to be that provider. Hence they lose potential revenue they would previously have had off you (to make that ‘free’ call, naturally).

The problem manifests itself for the operator in many ways; directly, by losing out on simple call revenue but also because people will (understandably) pick the lowest possible data packages of, say, 1GB/month to be able to afford the rolling monthly cost to have the most desirable handsets. Once, an operator would sell call time by flaunting these sexy gadgets – remember the RAZR? Now, we don’t need convincing that we want an iPhone 6, but we will pick the plan because of the data price. That price, funnily enough, is not free.

Traditional telecoms margins for cellular calls are huge; they cost little to set up and are charged at high fees. The profit margins for data are minimal and that is partly why data is so expensive. If you buy 1GB/month to get a shiny iWant, chances are you’ll connect to Wi-Fi wherever possible to message your mates over Facebook to save data, and, in your mind, money. You can see how the problem of the perception of ‘free’ continues for operators.

It remains to be seen if MVNOs such as FreedomPop will make any sort of dent in the UK mobile landscape with its (you guessed it) free service that launches in July. Even if the connection is free, you still have to buy the phone. It’s easy to forget that the consumer doesn’t care who they pay, they just want to spend as little as possible.

The debate won’t die down. It’s undeniable that operators are losing revenue due to internet services. They now want to be the ones you pay for that internet connection when you Skype granny on your laptop. With BT moving back into mobile telecoms (and yes, my Nokia 3310 was on BT Cellnet), Vodafone launching broadband packages and 3 buying O2, everyone is clambering over one another to secure your custom – it’s just funny that when they get it they will insist that part of their service is free.


Babel PR