The great mobile phone rip-off: bad for business and consumers

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The great mobile phone rip-off illustrated by a business woman on the phone at an airport

In this month’s column, IoD director general Simon Walker considers the great mobile phone rip-off. In the second part of his column he suggests that many able business leaders are being put off by the threat of tabloid hypocrisy

As a good free enterpriser, I hate to see governments interfering with a company’s commercial decisions. Too many politicians think they know better than the market what constitutes a “fair” price, or what defines the cost of business operations. Fortunately, British ministers are generally loath to intervene because they sense they will probably get things wrong.

But there are, alas, sectors that do rip off their customers, often in a synchronised way which suits a cosy but otherwise competitive group of major players. Ten years ago I had a conversation with a senior executive of a telecoms company about the charges for international calls in Europe. My irritation was triggered by a £250 bill for two hour-long calls from my son in France to his then-girlfriend, who was based in the UK. He should have known better, but if telecoms firms kept exploiting customers, didn’t they recognise EU regulation was inevitable?

The executive acknowledged that his team had debated the issue and understood that consumers were angry. But the profit margins were just too attractive, he said. All the phone firms knew it was too good to last, but for as long as the system survived, they intended to milk it for all it was worth.

So I wasn’t surprised when Neelie Kroes, the then-EU competition commissioner, imposed draconian price curbs on cross-border telecoms and, subsequently, internet roaming charges. Sadly, the measures applied only to telecoms charges within the EU, as I was rudely reminded when travelling to Dubai and Saudi Arabia recently.

By the end of my visit, my text messages were full of O2’s notifications stating calls to the UK cost £1.79 a minute. If you opted out of its Worldwide 24 service, each megabyte of roaming would cost £6 [as opposed to the 3.6p per MB it costs in EU-regulated France]. Sure enough, my Vodafone personal phone, with no use but involuntary app updates, ended my first day away with £36 in charges.

This is a con trick. The marginal cost of calls or data roaming to telecoms providers is virtually zero. Like hotels milking their patrons with thousand per cent mark-ups for using a room phone, they operate on the principle that most business users won’t care because their company will pick up the tab anyway. And they get away with it, because there’s too little competition in the marketplace, and there are other regulatory priorities.

In the long run, it’s bad for business. They are exploiting the people on whose goodwill they depend and inviting regulatory intervention from a government that will rightly see a need to protect consumers. If it continues, I have to say “bring it on”.

Tabloid hypocrisy scares away talented leaders

When I worked for British Airways 20 years ago, our then CEO was never upset when internal sex scandals made the tabloids. They brought brand awareness, added to the stock of human amusement and had no negative effect on the share price.

I doubt that Lloyds Bank CEO António Horta-Osório feels the same way. British tabloids are a voracious beast, and it is unsurprising that they sanctimoniously tut-tut over the suggestion that any high-profile businessman has “hooked up with a secret lover in San Francisco”. Of course it’s none of their business and sheer hypocrisy to use vague references in a company’s ethics policy as a flimsy pretext for pure salaciousness.

There will always be tough questions to be asked of any business, especially one bailed out by the taxpayer. But by distracting attention from the real issues they should be raising, sloppy journalists are short-changing their readers, as well as frightening off able business leaders who are unwilling to cope with the hypocrisy so appropriately labelled la vice Anglaise.

Imagine if the balance sheets of Arcadia Group, or Sir Philip Green’s pension fund manoeuvres, had received a fraction of the space the Daily Mail squandered on photographs of Green on the deck of a yacht with Kate Moss?

Mobile phone rip-off: What do you think?

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About author

Simon Walker

Simon Walker

Simon Walker served as director general of the IoD from September 2011 until January 2017, having enjoyed a career spanning business, politics and public service. From 2007 to 2011 he was chief executive of the BVCA, the organisation that represents British private equity and venture capital. Walker has previously held senior roles at 10 Downing Street, Buckingham Palace, British Airways and Reuters.

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