A mobile price cap could be put in place in the future, according to a telecommunications expert, due to the rise in the cost of telephone contracts.
Price is the most important factor for consumers when choosing a supplier, according to a study by Telness Technologies, a cloud technology company, which is why a cap could potentially be put in place.
Martina Klingvall Holmström, co-founder of Telness Technologies, believes that a cap – similar to the energy price cap introduced by the government – could be good for the industry.
She said: “A cap is quite likely to happen and I think it could be good for the market. We need differentiation in the industry and a cap will improve the market which means operators can offer customers different things and give consumers more choice. ‘
Telecom expert believes smartphone price cap could be put in place in future
What would a cap imply?
If a cap were introduced, it could be implemented in several ways, according to Martina.
One suggestion is to put a upper limit in place with consumers not being able to pay more than a certain amount per month. The cap would likely affect the airtime and data element of a contract, rather than the cost of the phone itself.
This is because mobile phone access is now becoming a necessity, as opposed to a luxury, as people need to have access to live and work.
Due to the rise in cell phone prices, cell phone contract prices can even be around £ 60 or £ 70 per month for newer models. But while the phones themselves push up the prices, so does airtime and data usage, in particular.
Alternatively, there could be a minimum price put in place to ensure that essential infrastructure works can be financed by operators.
Martina said: “Another suggestion would be to put a cap on the minimum price instead to help operators support infrastructure for customers.
“Right now the operators are so similar. There is a constant price war with costs for consumers too low to support the construction of new infrastructure.
“In this scenario, a cap could focus less on price and force operators to be more innovative and different from other providers.”
Maintaining and improving infrastructure is very important to the mobile industry, but it can be costly.
For example, the ongoing 5G rollout in the UK is currently only available in select cities. But with more infrastructure in place, the more widely it will be available.
While a minimum cap is likely to shock consumers, it could help them in the long run because it gives them more advanced options in the future, according to Martina.
Why is a cap necessary?
Ultimately, telecoms are a necessity, like energy, says Martina, because the user needs them in their daily life and in their business.
Thus, like energy, it could benefit from a cap, to prevent the rise in prices from spiraling out of control.
One of the reasons she thinks a cap would be good for the industry is that “mobile services all sell the same kind of products,” for example, similar contracts for similar phones.
This means that differentiators are hard to find and therefore price is the real battleground.
Martina said of the potential cap: “Phone companies are pretty much the same with similar offers. Therefore, pricing becomes very important.
As such, instead of raising prices to create competition, putting a cap in place will create real differentiation between suppliers.
Martina Klingvall Holmström, co-founder of Telness Technologies, thinks a mobile cap could be good
Martina says as an example: “Before the roaming cap, there was a network that said that its customers did not have to pay extra to use their plan abroad. But as a result, other suppliers started to do it. ‘
She said once the roaming cap is in place, providers could make other deals to separate themselves from their competitors, creating more competition.
Another reason for putting a cap is the ever-increasing need for mobile phones and internet access on the go.
“Working from home is a major motivation to have a ceiling. Ten years ago you didn’t have to have a phone, but now we can’t survive without it.
“Due to Covid and the lockdowns, consumers need to do a lot more online. You have to work from home and use more data. It’s a whole different environment than it was ten years ago – instead of having a phone for fun, it’s a necessity now. ‘
She believes that another of the main problems in the industry is the lack of customer satisfaction.
“I want the customer experience to be appreciated in order to build trust and satisfaction within the area.
“There is a customer service base with other industries, but not in telecommunications. It’s so important to so many people. Networks need to gain trust and gain good customer experiences.
Ofcom said mobile usage has increased over the years, prices have actually gone down
How realistic is the idea of a cap?
While a cap may seem like a far-fetched idea to some, Martina again uses the example of data roaming to highlight the likelihood of this happening.
Previously, UK travelers could use their mobile data, minutes and texts within the EU without incurring additional charges, after companies were prohibited from charging additional charges to customers.
After Brexit this was removed and businesses started charging again.
However, Martina says this highlights that it’s not a big step to suggest that caps on your phone bill would be introduced.
“It wouldn’t be something very new.
Despite this, industry regulator Ofcom said the price of mobiles had actually fallen as usage increased.
This suggests that the market has already become more competitive over the years – and potentially a cap would not be necessary.
He added that mobile customers usually pay a lower price if they sign up for a Sim-only deal.
However, at the same time, its latest price trends report also found that some operators’ prices increased for new customers and many existing customers in 2021.
For example, BT / EE increased prices by 3.9% from March 2021 on fixed lines, broadband, TV, BT Sport and mobile, Three introduced price increases of 4.5%, to be applied every April, and Vodafone introduced price increases of 3.9 percent, again to be applied every April.
As more and more people work from home, they will use their smartphones and internet access more.
How would this affect the market?
Martina believes that there would be more competition in the market if it were introduced.
She said: “If caps were announced tomorrow, say, you would have big operators launching an effort to try to drive customers away from their competitors, creating an even bigger price war and potentially leading to bankruptcy. the little ones. ”
However, there is a risk that a cap will backfire and “kill different segments of the industry,” according to Martina.
She said: “While some companies are too big to fail, they would likely be happy with the price caps, as it could actually make it harder for small businesses to compete.”
For example, if a cap is set too high, other, smaller companies may not be able to compete and will have to exit the market.
She said, “However, some of the smaller, more agile networks might be able to respond faster because they aren’t burdened with high IT costs.”
During this time, caps often see prices cluster near or at the top of the allowable level.
She added that it will also depend on how quickly different operators can adapt – if they can at all.
Many large companies have high infrastructure and costs to cope with, but since they are industry giants and have huge existing customer bases, they will likely be able to scale reasonably well.
Overall, Martina thinks a cap would be good for the industry.
She said: “I actually think a cap could be good. Although it depends on the type of plug, it could lead to a more competitive and innovative space. ‘
What is in place to help customers manage their invoices?
Currently, if someone changes suppliers, renews their contract, or enters into a new contract with their current supplier, they can request an invoice limit that will be included in their contract.
Those who are under contract can ask their supplier to apply one but they are under no obligation to do so.
Most will send text messages to customers who are nearing the end of their data, minutes, or text usage.
If you feel like you need help with your bills, talk to your supplier and see if they can help you set a limit or a payment plan.