O2 in the Unitted Kingdom has launched “O2 Refresh,” a new service plan that decouples a two-year service contract from the consumer purchase of a phone.
O2 Refresh therefore offers two separate plans, one for the phone and one for the airtime.
The issue really is “transparency,” not savings, as some have suggested would be the consumer value of moving to “unlocked phone” policies.
“By signing up to and paying separately for their phone and airtime, customers are given complete transparency, while paying the same overall as they would on a standard 24 month pay monthly tariff,” O2 says.
That’s the key. Some observers have argued that consumers should be able to buy fully unlocked phones and use them on any mobile network, or buy service without a contract.
With some technology constraints where both GSM and CDMA are used, ipeople generally can do that.
What O2’s new plan shows is that the “remedy” of separating device purchases from service plans doesn’t actually provide all that much consumer benefit. If consumers can afford full retail price for phones, they already are free to buy them. If they want service without contracts, they already can buy such service (prepaid, generally).
Under the O2 Refresh plan, users actually will not save money, and still will have a contract. The incremental advantage for O2 is that it can advertise lower monthly fees for service. The advantage for a consumer is the ability to upgrade a phone at any time.
“Increasingly our customers are telling us that they don’t want to be tied to the same phone for two years,” said Feilim Mackle, Telefónica UK sales and service director.
Customers will have a choice of three O2 Refresh Airtime Plans, which have been tailored to meet varying call, text and data requirements. For £12 a month, customers get 600 minutes, unlimited texts and 750MB of data; for £17, customers will have unlimited minutes, unlimited texts and 1GB of data and for £22 they receive unlimited minutes, unlimited texts and 2GB of data.
At launch, O2 Refresh will be available on a range of phones including the HTC One, Sony Xperia Z, Blackberry Z10, Samsung Galaxy S3 and Apple iPhone 5. Following the launch, O2 Refresh will be extended to include a wider range of phones, with a specific focus on high-end smartphones including the Samsung Galaxy S4.
In essence, that approach is what T-Mobile USA is doing with its “no-contract” approach to mobile service pricing. Consumers can buy a full-price retail phone or under an installment contract, with service then offered without a contract.
As you might guess, the actual out of pocket monthly payments for T-Mobile USA service might not change very much.
If one assumes most consumers still are going to opt for device installment plans rather than buying their devices outright, the savings are relatively slight, on a recurring basis, for purchases involving high-end devices.
T-Mobile USA has a $60-a-month 2.5 gigabyte data plan is more than $300 cheaper over two years than an AT&T plan that offers 3 gigabytes and 450 minutes of talk time with the same device. For a user who opts for the installment plan, that works out to about $12.50 a month lower bills than for the rival AT&T plan.
There is an argument that T-Mobile USA plans will save more, compared to service from Verizon Wireless. A user buying that same T-Mobile USA plan, and using the installment plan, would save perhaps $20.83 a month, over two years, compared to a single-user Verizon Wireless plan with 2 gigabytes of data (though the Verizon Wireless plan also would offer unlimited talking and text messaging).
Transparency is a good thing, of course. But the notion that phone unbundling and an end to contracts necessarily provides huge end user value is not so clear.
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