News: As Three moves consumers onto more expensive contracts, businesses need to stay vigilant.
This week saw Three ending some of its cheaper contracts for its mobile customers and informing them that they had to choose a new plan, or they would be automatically moved onto a new one.
Framing the move in the language of innovation, Three told its customers that "we have to change our plans every so often" and told them that it had "a great range of new plans to suit your needs."
Three tried to sell the move to phase out its old plans as an opportunity for the customer to access new features, including its free international roaming, all-you-can-eat texts, personal hotspot allowances for customer data and the ability to cap spending, block expensive numbers and set up text alerts.
Whether legitimately or not, customers tended to view these moves as a "price hike" rather than the termination of an existing contract.
This is annoying enough for a consumer, but for a business it could potentially derail an entire communications budget. So how much protection do businesses have against this sort of price increase, especially as the UK prepares for several possible mergers and acquisitions in the mobile market.
The first thing to note is that businesses can negotiate longer contracts than consumers, that will protect them from changes in the market. However, as Rob Bamforth, Principal Analyst at Quocirca adds, this is much more true for larger businesses, which have "clout" and hence can set greater terms when negotiating a contract.
The SME market is much more vulnerable to price increases of the kind Three introduced, Bamforth says.
"Many SMBs will either use consumer or consumer like deals over a shorter period and are potentially vulnerable to sudden changes in pricing."
Bamforth adds that the proliferation of BYOD means that employees are often the customers of the mobile phone companies, meaning that any negotiating power that a company might have otherwise had is tempered.
"BYOD is also often accompanied by BYOC – bring your own contract, then cross charge the cost back to the company," says Bamforth.
However, he adds that this can work both ways, with consumers able to use switching.
"Businesses need to be aware of the impact of potential changes like this and it is a good idea to track mobile Comms costs and needs," he says. "Even BYOD will not always push the responsibility back to employees who may just claim if their costs rise.
"With mobile call and especially data tariffs forming a significant monthly outlay, the area of Telecoms expense management and visibility is just as important to SMBs as it is to larger organisations."
Another source of uncertainty will be the business climate. There are two big mergers and acquisitions set to impact the mobile market: Three’s owner Hutchinson Whampo is acquiring Telefonica-owned O2, while BT is acquiring EE.
Ofcom has now come out against the Three-O2 acquisition, arguing that it might lead to price increases. The regulator cited the example of Austria, where the reduction in the number of operators from four to three led to significant price increases.
However, from a business point of view, there is no reason for UK companies to be overly concerned about merger activity.
BT’s acquisition of EE will mean that EE’s business division is integrated into BT’s existing BT Business division as well as UK-focused parts of Global Services. However, EE has a relatively small presence in the business market, so this is unlikely to significantly affect competition here.
While Three owner Hutchinson Whampoa’s acquisition of Telefonica’s O2 is expected by some to lead to price increases in the mobile space, it will likewise have limited impact on the business market as Three has a fairly small presence there. It is also looking increasingly uncertain that it will be unconditionally approved.
Another factor that might allay business concerns over their contracts is the increased interest that Ofcom is taking in the sector.
Certainly the regulator’s proposed annual plan aims to "ensure that consumers and businesses benefit from a range of communications products and services" and to improve "consumers’ and businesses’ ability to make informed choices by seeking to provide more detailed information".
As a potential example of what is to come, Ofcom introduced new protections for business broadband customers to ensure that they receive accurate and reliable information about the speeds they will get.
The new voluntary Ofcom Code of Practice will see providers agreeing to give businesses clear and accurate information on the speeds they will get before they sign up to the contract.
They will commit to effectively manage any problems businesses face with their broadband speeds and allow customers to exit the contract immediately if the speed falls below a minimum guarantee.
BT Business, Daisy Communications, KCOM, TalkTalk Business, Virgin Media, XLN and Zen are initial signatories of the code, which will come into effect from 30 September 2016.
Overall, it is not time for businesses to panic about their mobile contracts, but it is important to be vigilant and well-informed nonetheless.