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Do you remember the notion we used to have that multiple carriers selling the iPhone in the same territory seemed like a golden ticket to more options, lower prices and altogether more competitive deals for customers? Well, forget it. Ain’t gonna happen. Not if the UK’s […]

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Do you remember the notion we used to have that multiple carriers selling the iPhone in the same territory seemed like a golden ticket to more options, lower prices and altogether more competitive deals for customers?

Well, forget it. Ain’t gonna happen. Not if the UK’s mobile market is anything to go by.

Vodafone UK has today announced the launch date of the iPhone on their network (it’s January 14, by the way) but once you’ve picked your way through their online pricing minefield, it’s hardly anything to write home about.

According to the Financial Times, Guy Laurence of Vodafone UK said the carrier has been busy preparing their network for the iPhone for the last twelve months;

We started preparing our network over a year ago so that iPhone customers will really feel the advantage of being with Vodafone. We will offer an outstanding iPhone experience wherever our customers live, work and travel, delivering speed and reliability – something our customers have told us they really value.

Yeah. We also value more competitive deals, Mr Laurence.

I did a very brief comparison of the three cheapest contract deals (not pay-as-you-go) offered by the three biggest operators in the UK: O2, Orange and Vodafone. Here’s what I found.

The cheapest contracts are all pretty lengthy –two years, in fact. That doesn’t sound unusual for those of you in America, I know, but here in the UK mobile contracts are often no longer than twelve months. Being locked-in for two long years is a ponderous proposition for many Brits who might be graduating (tentatively) to the exciting world of modern smartphones from their old Nokia 3310’s!

In addition, none of the carriers offers a competitive price for the latest model, the iPhone 3GS. The most affordable iPhones happen to be the elderly 2008 model. The stingy 8 gigabyte 2008 model, at that. So if you opt for a two year contract you’re getting a model that, in about six months (barely one quarter into the lifetime of your new contract) is going to be two models behind the latest and greatest from Apple. I’m just sayin’, is all.

Here’s how it breaks down, assuming the recession has hit you as hard as it hit everyone else and you’re looking to buy the most affordable iPhone package with one of the major UK network operators;

O2
For £34.26 ($55.22) a month you’ll get 600 free minutes of talk time and 500 free text messages. Data is unlimited. Assuming you never use more than the free talktime/SMS, this will cost you £822 ($1,324) over the course of the contract.

Orange
£29.36 ($47.32) each and every month gets you a measly 150 minutes of talktime and 250 text messages. The lifetime cost – £704.64, or 1,131.37 of your shiny American dollars.

Vodafone
For a few pennies more than O2, you can get last year’s low-end iPhone for £35 ($56.20) each month. For your money you’ll get 600 free minutes and unlimited text messages. The lifetime cost – £840, or $1,348.70.

Please don’t forget – and I can’t stress this enough – this is an unusually-long contract for the UK, and yet it’s last year’s phone.  Add to that the fact that, of course, no one ever stays within the allotted talktime and SMS quotas – everyone has a bill that costs the monthly fee plus additional talk time and messages. Frankly, it all adds up to quite an expensive deal, given the age and limited storage capacity of the model on offer.

I should add, too, that “unlimited” doesn’t actually mean “unlimited”. It means you’re allowed to consume as much data as the network provider deems “appropriate” for normal use. This tends to hover between 500 MB and 1 GB per month, which isn’t too bad unless you use your phone for watching YouTube videos eight hours a day. (Still, I take offense at the way network operators so casually use the word “unlimited” when it means nothing of the sort.) The trouble is that, if our providers start behaving like AT&T, their idea of “acceptable data usage” is going to change, and not in our favor.

The 3GS, on the other hand, is astonishingly more expensive than the 3G with little appreciable difference between the providers in terms of handset costs and tariffs. I wonder if this is because of the already-steep up-front costs they’ve shouldered in order to offer Apple’s handsets in the first place. If that’s the case, perhaps I should be more disappointed in with Apple’s aggressive pricing policies that those of my nationwide cellular network operators. In any case, at this point in time, I see no compelling reason to move away from O2 at the end of my current contract.

Was I expecting too much in terms of competitive pricing? Are these prices fair, given the investments which must be made by operators to offer the iPhone ‘experience’? Or is this a shining example of unfettered network operator greed? Share your thoughts in the comments.

  1. Hi there,

    It’s all fair and well to have a grumble, but I have to disagree with a lot which you say:

    You emphasise that a 2 year contract is unusually long for a UK contract and “here in the UK mobile contracts are often no longer than twelve months”. This is utter nonsense. For at least the past 3 years most UK mobile contracts have been 18 months long. In the last 12 months or so these have steadily been growing to 24 month agreements.

    In terms of competition, Vodafone proves to be the most competitive deal of the bunch. You have failed to mention that they throw in unlimited texts and free voda-to-voda calls on all plans £35/month and above.

    Sure, the iPhone may cost more money than other handsets on the market. But people are still buying it! Why? Because the phone works. Apple have built up a strong and reliable brand which customers can put their trust in. They obviously don’t mind paying the extra money. You get what you pay for. Why isn’t the Nokia N97 the same price? Because even at £25/month it isn’t selling anywhere as near as many units as iPhone anyway, and the product is nowhere near as reliable.

    You get what you pay for! I don’t see why so many people kick up a fuss about the price of Apple products. It’s similar to supermarket shopping. I’m more than happy to pay 50p for a tin of own-brand tomatoes from Waitrose compared to 30p from Asda, the quality is bound to be better.

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    1. Weeeeell – it’s a tricky one. The thing is, we don’t know how much the operators have to pay Apple for each phone (actually the info is probably out there somewhere, I just haven’t bothered to look). It may well be that in order to reasonably recoup their costs, they have to offer 24 month contracts.
      Harry is right, to a certain extent – most mobile contracts nowadays are 18 or 24 months, but that’s because most operators now are throwing a laptop or games console in as a sweetener, at a cost to them of between £150 – £300, which probably gives us an indication of the cost to the networks of the iPhone.

      And I would argue that people don’t buy an iPhone “because it works”, they buy it because it’s very very cool, it’s the most advanced phone out there and it’s the one that every other phone manufacturer in the world is trying to match. Yes, you get what you pay for, but there’s no denying that the phone costs us an awful lot more than it costs Apple to make. They’re making a much greater margin on each iPhone than almost any other manufacturer makes on each of their premium phone models.

      So, then – back to the point of the article – why has there been no competition between the operators? Why have we not seen a price war to drag customers from one network to the other? It’s down to either one of two things, or a combination of the two, IMO.

      1. The phones are already subsidised up to the hilt by the operators, and they can’t reasonably drop the prices any lower without making a loss. Therefore the packages are as cheap as they’re going to get until Apple makes the phones cheaper.

      2. They don’t need to compete – the demand for iPhones is so strong that any operator who offers them is going to have more than enough business stemming from iPhones alone, so why eat into your profits.

      Now I’m only guessing, but they seem like two very likely reasons to me.

      And to echo the author and Omar – if you don’t mean unlimited, then don’t say it. There has got to be something under trade descriptions or advertising standards or something that should prohibit that (in the UK at least).

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  2. I agree with the part that if they are going to call it “unlimited” then it should be.

    I hope that at least here (US) the FCC or FTC take action against this deceiving practice.

    If is going to be 1, 3 5gb or whatever a month then said so instead of calling it “UNLIMITED”

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  3. Got Vodafone on my unlocked o2 iphone.

    key point is probably that 3G is much faster for me in london.

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  6. This is pretty much full of misinformation. You keep emphasising that you HAVE to buy a 24 month contract, yet (like all the other networks) Vodafone are doing 18 month contracts.

    Leading on from that, it’s no wonder the phone seems to expensive when you’re looking at the “Cheap” 24 month deals. On a £40/m (dropping down to £35/m after 9 months as you’re allowed to do) 18 month deal with a 16GB 3GS the total costs add up to ~£764.

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