There could be a mobile price cap put into place in the future, a telecom expert believes, due to the rising cost of phone contracts.
Price is the most important factor for consumers when choosing a provider, according to research from Telness Technologies, a cloud technology company, which is why a cap could potentially be implemented.
Martina Klingvall Holmström, co-founder of Telness, believes a cap – similar to the energy price cap introduced by the Government – could be good for the industry.
She said: ‘A cap is pretty likely to happen and I think it could be good for the market. We need differentiation in the industry and a cap will enhance the market meaning operators can offer customers different things and give consumers more choice.’
A telecoms expert believes that a smartphone price cap could be put in place in the future
What would a cap entail?
If a cap was introduced, it could be implemented in a number of ways, according to Martina.
One suggestion is to put an upper limit in place with consumers not able to pay more than a certain amount a month. The cap would likely affect the airtime and data element of a contract, rather than the cost of the phone itself.
This is due to mobile phone access now becoming a necessity, as opposed to a luxury, with people needing access to one to live and work.
As a result of rising handset prices, prices for mobile phone contracts can even be around £60 or £70 a month for newer models. But while the phones themselves drive prices up, so too does the usage in terms of airtime and data, in particular.
Alternatively, there could be a minimum price put in place in order to ensure vital infrastructure works can be afforded by operators.
Martina said: ‘Another suggestion would be to put a cap in place for minimum pricing instead to help operators support an infrastructure for customers.
‘At the moment, operators are so similar. There is a constant price wars with costs for consumers too low to support the building of new infrastructure.
‘In this scenario, a cap could focus less on price and instead force operators to be more innovative and different to other providers.’
Maintaining and improving infrastructure is very important to the mobile industry but it can be costly.
For example, the 5G rollout that is ongoing in the UK is currently only available in certain towns and cities. But with more infrastructure in place, the more widely available it will become.
Whilst a minimum cap is likely to be shocking to consumers, it could help them in the long term as it would give them more advanced options in the future, according to Martina.
Why is a cap needed?
Ultimately, telecoms is a ncessity, like energy, Martina says, as the user needs it in their daily lives and businesses.
Therefore, like energy, it could benefit from a cap, to stop rising prices getting out of hand.
One reason she believes a cap would be beneficial for the industry is because ‘mobile services all selling the same sort of products’, for example, similar contracts for similar phones.
This means differentiators are hard to come by and, as a result, price is the real battleground.
Martina said about the potential cap: ‘Telephone firms are pretty much the same with similar offerings. Therefore, pricing becomes very important.’
As such, instead of rising prices to create competition, having a cap in place will create actual differentiation between providers.
Martina Klingvall Holmström, co-founder of Telness, believes a mobile cap could be good
Martina says as an example: ‘Before the roaming cap, there was one network that said their customers didn’t have to pay extra to use their plan abroad. But as a result, other providers started to do this.’
She said once the roaming cap was in place, providers could put other deals on to separate themselves from their rivals, creating more competition.
Another reason to impose a cap is due to the ever growing need for mobile phones and on-the-go internet access.
‘Working from home is a major drive to have a cap. Ten years ago, you didn’t have to have a phone but now we can’t survive without one.
‘Due to Covid and the lockdowns, consumers have to do much more online. You have to work from home and use more data. It is a completely different environment to a decade ago – instead of having a phone for fun, it is now a necessity.’
She believes another of the main problems in the industry is the lack of customer satisfaction.
‘I would like to see the customer experience being appreciated in order to build up trust and satisfaction within the area.
‘There is a customer service baseline with other industries but not in telecoms. It is so important to so many people. Networks need to gain trust and gain good customer experiences.’
Ofcom said as mobile usage has gone up over the years, prices have actually gone down
How realistic is the idea of a cap?
Whilst a cap might seem like a far fetched idea to some, Martina uses the example of data roaming again, to highlight the likelihood of it happening.
Previously, travellers from the UK were able to use their mobile data, minutes and texts within the EU without incurring extra charges, after firms were banned from charging customers extra fees.
After Brexit, this was scrapped and firms have started charging again.
However, Martina says this highlights that it is not a big leap to suggest that caps on your phone bill would be introduced.
‘It wouldn’t be something that would be very new.’
Despite this, industry regulator, Ofcom, said the price of mobiles has actually gone down as usage has increased.
This suggests the market has already become more competitive over the years – and potentially a cap would not be needed.
It added mobile customers typically pay a lower price if they take a Sim-only deal.
However, at the same time, its latest Pricing Trends report also found that some operators’ prices rose for new, and many existing, customers in 2021.
For example, BT/EE increased prices by 3.9 per cent from March 2021 across landline, broadband, TV, BT Sport and mobile, Three introduced price increases of 4.5 per cent, to be applied each April, and Vodafone has introduced price rises of 3.9 per cent, again to be applied each April.
As more people work from home, they will rely on their smartphones and internet access more
How would this affect the market?
Martina believes there would be more competition in the market if introduced.
She said: ‘If caps were announced tomorrow say, you’d have big operators jumping in in an effort to try and attract customers away from rivals, creating an even bigger price war and potentially leading to smaller ones going out of business.’
However, there is a risk that a cap may backfire and ‘kill off different segments of the industry’, according to Martina.
She said: ‘Whilst some firms are too big to fail, they would probably be happy about price caps as it might actually end up making it harder for smaller companies to compete.’
For example, if a cap is set too high, other, smaller firms may not be able to compete and will have to exit the market.
She said: ‘However, some of the smaller, more agile networks might be able to respond faster as they’re not weighed down by high IT costs.’
Meanwhile, caps often see pricing cluster near the or at the top of the permitted level.
She added that it will also depend on how fast different operators can adapt – if they can at all.
Many larger firms have infrastructure and high costs to keep up with but as they are giants in the industry and have huge existing customer bases, they will likely be able to adapt reasonably well.
Overall, Martina believes a cap would be good for the industry.
She said: ‘I actually think a cap could be good. Whilst it depends on the type of cap, it could lead to a more competitive and innovative space.’
What is in place to help customers manage bills?
At present, if someone switches providers, renews their contract or enters into a new contract with their current provider, they can request a bill limit which will be included in their contract.
Those who are in contract can ask their supplier to apply one but they have no obligation to do so.
Most will send texts to customers who are nearing the end of their data, minutes or text usage.
If you feel like you need help with your bills, speak to your provider and see if they can help you set up a limit or a payment plan.
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