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Shady MVNOs damage the mobile market – time for Ofcom to take action

These days, setting up an MVNO is easier than ever. You don’t need to know anything about mobile to become a MVNO player. Nearly all operations can be handled by managed service providers (MVNEs) and the initial Capex is in the range of £500k, but could possibly be as low as £25k.  Low barriers to entry increase competition and put pricing pressure on incumbent operators. Surely this must be a good thing, right? Not so fast.

Well-known and established MVNOs in the UK such as Tesco Mobile, giffgaff, Virgin Mobile, Talkmobile, Asda Mobile, Lebara, TalkTalk Mobile, and Utility Warehouse offer service on par with the network providers themselves.

However, there are also a large number of smaller more obscure MVNOs. How many people have heard of White Mobile, Delight Mobile, Vizz Africa, Vectone Mobile, tello, Now Payg, Talk Home Mobile, The People’s Operator, Ovivo Mobile, Lyca Mobile, or Econet Mobile?

These MVNOs sometimes have appallingly bad service. A while ago I tried Lyca Mobile. I didn’t expect much, but I did assume that “mobile” was a mature standardised product (voice, voicemail, SMS, MMS, data). How wrong I was. Voicemail didn’t work, I couldn’t call some numbers and operators, there were texts that didn’t go through, and MMS wasn’t included in the service. When I called the Swedish railway information number, Lyca Mobile charged me almost £10 for a six second call. They claimed it was a premium number. It wasn’t, and their tariff chart didn’t include anything about this exorbitant rate. Their customer service consisted of script reading from call centres in India, and whenever I deviated from their script they immediately hung up.

I have read reviews of some of the other smaller MVNOs and it was easy to find similar complaints. Talk Home Mobile seems to have a billing system that grossly overcharges and eats away the minutes in your allowance very quickly (here). Users of Vectone report myriad problems (here, here, and here).

Last year all 50,000 users of Ovivo Mobile were left stranded when the service suddenly shut down. Ovivo had stopped paying for network access and Vodafone cut the cables. It was pure luck that Ovivo was gracious enough to give users their PAC-codes so they could keep their mobile numbers.

Mobile is an essential basic service and it is unacceptable that consumers risk losing their access, prepaid minutes, voicemails, and phones number if a shady MVNO ceases to operate. Consumers should also be able to trust the accuracy of the operators’ billing systems. A plethora of small unstable shady MVNOs will not “increase competition” but rather scare consumers away from competitive new market entrants. Only the incumbents will benefit from this.

Consumers who sign up for a mobile plan with an MVNO can not be expected to make their own risk assessment of the bankruptcy and fraud risk. Nor can they be expected to know that they might lose their phone number if the service provider suddenly ceases to operate. And consumers who suspect foul play with the billing system should not have to take on an MVNO themselves in the courts.

In my opinion, this is the responsibility of Ofcom, who should tighten the regulatory framework. For example, Ofcom could act as mystery shopper. They could buy SIM cards from all the operators, and then run diagnostic calls/texts/data generated by software. This would enable Ofcom to evaluate the accuracy of the billing systems and check that all number series are reachable. Network operators who don’t get paid should probably not be allowed to disconnect a MVNO, but should instead be given the power to temporarily take control of the MVNO. All tariffs should be available on the websites in a clear format. The charges that are most likely to impact the user’s bill should be easily accessible. MVNOs should not be allowed to hide extreme out-of-bundle charges in the fine print. And if an operator doesn’t offer something that users expect in a basic mobile service (for example SMS or voicemail), it should be clearly stated from the start.

If the MVNO market continues to operate like the Wild West, sooner or later real scammers will spot this opportunity. They can set up a legit MVNO and run it for a year to build a brand, gain a customer base and be included in price comparison sites. Then they will lower their prices and start an aggressive ad campaign. For example by offering attractive pre-paid 6 and 12 month pay-as-you-go plans. After a while they will change their terms of service and tariffs and introduce sky high out-of-bundle rates, stop paying their network operator and other vendors, offer the latest iPhone on sale, and remove themselves from the company directorships. And while they’re at it, they’ll probably overcharge all direct debits before they go bankrupt.

Let’s hope that this scenario never plays out as it would damage all MVNO’s credibility and make it even more difficult for new market entrants to compete with the incumbent network providers.

P.S. I recently left O2’s network for EE’s. O2 had the best network back in 2012 but their service has gradually deteriorated, at least in the south east of England (confirmed by Which? and Open Signals coverage/QoS maps). This congestion is most likely caused by an unwillingness to invest in more network capacity by the cash strapped owner Telefonica. As Telefonica have been trying to sell O2 UK for some time, they probably don’t want to put any more money into their UK network. This is a risky strategy if and when consumers begin to take notice. Even if a sale of O2 were to take place tomorrow, it would take several months before everything was finalised with new owners in control. I expect even further deterioration of customer satisfaction and QoS for O2 and all the MVNOs that run on their network. It could take up to a year for O2’s network to improve.

According to Open Signals, EE has better network capacity in the South East, which was very obvious when I switched. However, EE is at the bottom in the Which? customer satisfaction survey and they are one of the the worst major operators in Ofcom’s complaint league. As I didn’t want to be an EE customer directly, I chose one of the MVNOs that run on EE’s network. So far, so good.

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