Mobile phone cuts will leave low earners worse off
This week, the cost of calling a mobile phone will be slashed. However, it won't be without penalty. While the big mobile companies bring costs down for many, there will most likely be a shake-up that will lead to the reintroduction of expiry dates on prepay top-ups.
O2 has apparently warned Ofcom that its proposals are "irresponsible" and could force millions of people on low incomes to abandon their phones with Orange adding that they think the plans are "a backward step". Vodafone meanwhile has claimed that these proposals could see the end of mobile handset subsidies which effectively means that customers will need to pay for new handsets when they sign up or renew a contract.
The Guardian says that Ofcom hopes to save consumers £800m a year from 2015 by reducing mobile termination rates – the price networks charge each other and fixed-line companies such as BT to connect calls – from 4.3p a minute today to just 0.5p by 2015.
BT and 3 teamed up to fight the charges, arguing that mobile termination rates are an unjustifiable subsidy for the mobile phone industry. However, other mobile phone companies are saying that they use these charges to subsidise a service to lower-income customers.
With over half of UK's mobile phone users having a pay-as-you-go phone, many with the sole intention of only having in case they need to get hold of someone in an emergency, the mobile companies say that these charges make them a viable source of income. Under Ofcom's plans, they argue that it would be pointless providing infrequent callers with a phone.
When pre-pay services first appeared in the UK, most prepay vouchers had an expiry date. After complaints from consumers, these limits were scrapped. However, with this loss of revenue, many companies are looking to reintroduce these time-limits.
This will leave people who stuck a tenner on in case of an emergency required to top-up £10 per month or risk disconnection.