Insights

Mobile networks are costing the economy billions – whose job is it to protect business?

BILLMONITOR | MARCH 19, 2020

With regulation now in place to protect consumers from the predatory practices of mobile networks, the question is: when will Government start safeguarding UK businesses?

The mobile networks are guilty of overcharging UK businesses and consumers approximately £7.6 billion each year. However, instead of remedying current practices, the UK government has pledged £500 million to work with them on future initiatives – this clearly sends the wrong message. 

BusinessmanThe mobile industry is fundamentally flawed, with, as much as sixty percent of a user’s telephone bill going towards sales commission. Acquisition teams and independent mobile phone agents are incentivised to put consumers and businesses on the most expensive contracts - the higher the mobile phone bill the higher the commission. This issue intensifies in the business space, with more complex contracts and fewer points of reference as to what constitutes a fair deal.

There is growing awareness of these bad practices, with action taken to improve consumer rights. However, the protections don’t extend to businesses. This disparity becomes even more incongruous when you consider the huge sums involved - consumers lose an average of £148 a year where they continue to be charged for their handset after it has been fully paid off, while businesses with 100 or more connections could save on average £231 per connection per contract.

DecistionThe Government has stated their ambition to make the UK a world leader in technology and unleash the potential of Britain’s economy. They can take a great step towards this by affording businesses the same protection from mobile networks as consumers currently have. We want a growing economy and a fair platform for businesses to thrive, so Government must now compel networks to turn from predator to partner.

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Mobiles phone networks overcharge UK businesses and consumers approximately £7.6 billion each year. But rather than addressing current poor practice, the UK government has recently unveiled half a billion pounds in funding to work with them on future initiatives. This dynamic must change, and the Government needs to recognise the poor practices bedevilling the mobile industry and implement a compulsive duty of care for businesses as well as consumers.

The Fundamental Problem

The mobile industry has a fundamental problem in that its historical growth has been primarily driven by high sales commission. In certain cases, as much as sixty percent of a user’s telephone bill goes towards sales commission.

This has incentivised acquisition teams and independent mobile phone agents to put consumers and businesses on the most expensive contracts. The higher the mobile phone bill the higher the commission. With no obligation to put businesses on the fairest deal, networks have become focused on how much money they can get out of an account.

They have more of an upper hand with business customers, as contracts appear more sophisticated and complex, and people have fewer points of reference as to what constitutes a fair deal.

This is not speculation; businesses are losing out on money that can be put toward growth initiatives. Our analysis shows that, upon review, nine out of ten businesses can be making a saving on their contract, with the average saving equating to half their current cost.

What should be happening?

Mobile networks should proactively be placing businesses on the deal most adequate to their needs. If this was the case, money could be redirected back into opportunities to contribute to business growth, like hiring new staff or upgrading their IT infrastructure.

It would provide additional resource for operations teams, who would not have to spend time navigating purposely difficult contracts. This would create both a financial and resource boost to the UK economy.

The UK telecoms infrastructure does require investment. Having left Europe there is a significant focus on boosting the nation’s productivity and the Government has signalled ‘levelling up’ digital connectivity as pivotal to their plans. Becoming a world leader in 5G and having full fibre connectivity in every home in the UK would provide a tangible boost to the economy. However, for this to materialise networks must demonstrate they can be allies to UK businesses. I would suggest this should happen before they are handed vast sums of money.

Government & the mobile networks

In October last year it was announced that the government would be contributing half a billion pounds to the largest networks – EE, O2, Three and Vodafone – to create a Shared Rural Network to solve connectivity issues in problem areas. This sends the wrong message for two reasons. Working on a joint initiative indicates mobile networks are an ally to the UK and makes it harder for Government to criticise them in other areas. More egregiously, by co-funding this initiative it becomes an endorsement of their current practices, ignoring the financial harm they are doing to businesses and consumers.

Examples of poor practice

In my role as Managing Director of Billmonitor, the UK’s leading service that supports consumers, businesses and public sector organisations to find the mobile plans that work best for them, I see a variety of predatory techniques that lead to overcharging.

For instance, I have worked with several businesses being purposely kept on unsuitable contracts to financially benefit the networks, including one that was paying for hundreds of handsets that had already been dormant at the last renewal nearly two years previously. It is examples like these that reinforce the need for a duty of care, to ensure businesses are on the fairest deal.

There are also cases where the network’s behaviour becomes wholly deceitful. I experienced working with an organisation that was still being charged after it had, publicly, burnt down. The network charged them for both the service they previously had and for a call divert following the fire.

With no legal obligation for the network to end the contract, there is nothing in place that would compel them to be proactive in cancelling the contract. If the networks had to suffer the financial penalties for poor practice, they would quickly improve, and we would have a much stronger economy as a result.

There are positives for consumers...

Positively, there is growing awareness of these bad practices, with action taken to improve consumer rights. Recently, Ofcom has introduced regulation to make it easier to switch providers. Last July, the regulator simplified the process of switching networks by allowing customers to receive their PAC code via text. This regulation cuts out the need for customers to ring up call centres.

Yet, it implicitly acknowledges that networks use their call centres as a tool for retention, talking customers into deals that are not in their best interest. More recent regulation on end of contract notifications, implemented in February, has enforced notifications being sent to consumers when their contract is ending. Again, this regulation highlights the problematic behaviour by the networks and puts a safeguard in place to inform customers.

Businesses need the same protection as consumers

These protections are not there for businesses. This disparity becomes even more incongruous when you consider the huge sums involved. It is disgraceful enough when consumers lose an average of £148 a year where they continue to be charged for their handset after it has been fully paid off. However, when you consider that businesses with 100 or more connections could save on average £231 per connection per contract, the increase in costs, and level of overcharging, spirals into the tens of thousands.

PlantThe Government has stated their ambition to make the UK a world leader in technology and unleash the potential of Britain’s economy. They can take a great step towards this by affording businesses the same protection from mobile networks as consumers currently have. We want a growing economy and a fair platform for businesses to thrive, so Government must now compel networks to turn from predator to partner.


Written by: Klaus Henke, Managing Director of Billmonitor for Business Matters.


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