‘I bought one for my wife'

‘I bought one for my wife’EW readers reply to David Manners’ report on mobile phone pricing
I read with interest the article in Electronics Weekly entitled: “It’s your call”. However, I feel that the reporter was a little unfair in the way the facts were presented. In particular the method used to calculate the annual costs of owning a mobile phone. He does not compare like with like.
Taking the Orange options as an example, since I own a Nokia Orange phone on a “normal” tariff, i.e. the sort of tariff initially introduced, and have just bought a pay-as-you-go phone for my wife.  
 
Now the reporter bases the cost of owning the phone for one year on the monthly rent of ?17.50. This is indeed the monthly charge for the phone, with 15 free minutes of use. (It’s actually ?15+ VAT which is ?17.62). The reporter has quoted the annual cost therefore as 12 times this figure. This is not unreasonable, until one sees the method used to compute the annual cost of ownership of a pay-as-you-go phone. In this case the reporter has not only included the monthly tariff, but the cost of acquiring the phone in the first place.
So, for the normal tariff, you quote the true annual cost of having the phone; for the pay-as-you-go you quote the cost for the first year of ownership. Now I do not know what the current costs are for signing up to a normal tariff, but the last time I looked it was not for free. Albeit the phones are usually much cheaper, but not free, and there used to be a connection fee. So all the costs for the first year for the normal tariff should have been included as well.
When the recurring annual cost is considered, then for low usage, the Orange phone requires a minimum of only ?5 a month for which one gets 10 minutes talk time.
The annual cost for owning the phone then becomes a mere ?60, or less than a third of the figure quoted for the normal tariff.
As for describing the phone as big and “clunky”, well I guess that all depends on your point of view. Certainly the Motorola mr201 is not the latest and greatest phone on the market, it isn’t small enough to fit in a shirt pocket for instance, but it is still a reasonable size for clipping to one’s belt or putting in a handbag: it’s hardly the brick that such phones used to be.
David Crowe, Raytheon Systems, Harlow
David Manners writes: This letter shows just how cleverly the mobile phone companies have structured their deals to avoid easy cost of ownership comparisons.
That doesn’t mean you shouldn’t attempt comparisions. In making them you have to start somewhere. My article clearly started by taking, as the baseline cost of ownership, the normal subscription deal of one year’s rental at ?17:50 a month and compared that with Pay-As-You-Go and Pay-Up-Front for a year deals over a year.
The baseline ?17:50 a month normally includes a very cheap phone (OK you can pay more but normally it’s a negligible cost without connection fee) whereas the other two options require the purchase of a phone for ?70-?100.
OK so I’m comparing the first year’s ownership cost. But I said this in the piece. It’s a first year cost of ownership comparison. There is no question of dishonesty.
Furthermore, first year is the important year. Dealers say that the normal thing people do after a year is enter into a new deal with a new, modern phone.
So the first year is very often the only year for many users. I think we all know the difference between a ‘big, clunky’ phone and a ‘small modern’ phone. Tables of weights and dimensions would be boring. Has he got his mobile sums right?
Regarding the write up by David Manners concerning mobile phone costs. Now I don’t work for any mobile phone related company, but I feel I have to point out a flaw in the write up, in that it is comparing the costs of standard ?17.50 per month mobile packages with ‘pay as you go schemes’, and basically stating that ‘pay as you go’ will cost you more.
However he is only costing the first year, which includes purchase of the phone (some ?70), whereas this charge will not exist in the second year, and so ‘pay as you go’ will be alot cheaper in the second year and third,etc. He has also not included the price of the phone in the standard ?17.50 per month packages, which can be ?50 or more if you want one of the more modern small phones.
So if you take the cost of phones in both schemes, and amortise these cost over a two or three year period, then ‘pay as you go’ does come out cheaper.
Chris Ford, Innovision Research &Technology


Leave a Reply

Your email address will not be published. Required fields are marked *

*