Is competition working in the mobile phone market?
By S21, 13 Mar 2014
Imagine there were 5 gas pipes, 5 electricity cables and 5 telephone cables running to your house. Imagine that 5 different postmen arrived with letters for you each morning. Would this be a waste of resources and infrastructure, or would the competition transform the customer’s experience of these services?
When it comes to mobile phones, we really do have 5 different networks operating in the UK, so how does this improve mobile services for customers?
Competition & choice
Although competition is supposed to offer consumer choice, and choice is supposed to drive down prices, improve services and encourage innovation, if you read our user reviews of the mobile network operators in the UK, you might get the impression that these companies are all 1970s-style state monopolies or unregulated robber barons, trampling the little guy with their ruthless greed, indifference and incompetence.
But the picture is more complicated than it looks. Orange and T-Mobile merged some years ago and operate under a single umbrella company – EE. O2 and Vodafone now share network capacity, leaving only Three to go it alone with their network. You could say that despite all the different brands – including virtual operators such as Virgin Mobile, Giff Gaff, Tesco Mobile and Asda Mobile – there are really only three independent mobile networks in place.
These networks are highly regulated. The government controls and allocates the radio frequency bands used to carry voice and data. Ofcom oversees the network operators, telling them what they can and can’t do, including details of how they bill customers and what they can charge for different types of calls and data. Various other pieces of legislation determine how these companies are allowed to sell and advertise. The European Union lays down caps on charges for different types of calls. Even Apple dictates strict rules about which companies are allowed to sell its iPhones, at what price, in what manner, and how they can advertise and market Apple products.
So is this really a free market or a massively over-regulated one? Is it working in favour of the consumer, or is it one of the worst examples of rip-off Britain?
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Comment by Stephen
on 13th Mar 2014
The job of regulatory authorities is to enable companies to operate fairly, not to tell them how to do their job.
The job of the EU is to ensure that the Single Market operates fairly and that consumers across Europe all receive the same standard of service. It is not for the EU to tell companies how much they should charge for their services.
If governments fix the price of a service, then the only option for the companies supplying that service is to cut their costs as much as possible. Government interference removes any incentive for companies to compete and offer innovative products. It also discourages new entrants to the market.