British Consumers Threaten 3G UK Success

Britons worry about the cost of using mobile phones far more than is commonly assumed, argues new research released today (Tuesday 1st April) by The Work Foundation’s iSociety Research project. This misunderstanding of British attitudes to phone use threatens to delay the uptake of third generation (3G) mobile technology, or make 3G attractive to only a small number of consumers.

Many operators in the fiercely competitive telecoms industry are pinning their hopes on 3G, which offers new services like video calls, and football highlights. But with 3G handsets now available on the high street, MobileUK: Mobile Phones and Everyday Life, funded by Microsoft and PricewaterhouseCoopers, argues that high phone charges remain the overwhelming concern of mobile users. 3G phones – whose running costs could reach over £600 a year – are too expensive to attract most Britons. The average mobile phone user currently spends well under half that sum.

Co-author, Max Nathan said: “There is a myth that talk is cheap. In fact, for most people, talk remains an expensive worry that needs to be kept under control. Our research suggests that the mobile industry must remember how important cost is to most people who buy and use mobile phones. The industry is aware of this but it doesn’t change the fact that until 3G becomes better value most consumers will find it an expensive worry too far”.

The research finds that mobile phones are already well established in everyday life, with over 75% of adults and over 90% of young people owning one. It uses pioneering ethnographic techniques to observe everyday mobile phone use in UK homes and workplaces.

The report also finds that:
· Mobile phone owners think their phones are expensive and addictive, and are all too aware of the cost of conversation
· Three quarters of mobile phone users remain on pay-as-you-go contracts to help them control cost and keep aware of how much money they are spending. Mobile users interviewed in the research for the report suggested that they did not trust themselves to take out a contract, because they would spend too much money.
· Mobile phones are increasingly a factor in family finance, with parents providing their children with money to fund their phones in exchange for household chores. Mobile phones now introduce children into an adult relationship with money.

Neil Holloway, MD of Microsoft UK and VP, Microsoft EMEA, commenting on the report findings, said: "MobileUK is a reality check for the industry – new technology only changes lives when people find it useful and cost-effective. At Microsoft, we believe that offering services such as email, instant messaging and Internet access on a mobile phone gives customers more choice in the way that they communicate"

Researchers observing cost-conscious consumers saw a number of strategies for reducing the cost of using a mobile:
§ The employer pays. Phoning someone at work, who returns the call, courtesy of his or her employer: if an employer pays the bills on the mobile, talk time can be anytime.
§ The phone as pager. Using an agreed ‘call sign’ that leaves a ‘missed’ call message and the caller’s number on a phone: this triggers a pre-arranged response, such as picking someone up from the station.
§ Communal talk time. Let over free minutes on a talk plan are shared between a family or group of friends, rather than by one individual.
§ Keep to your own network. Despite recent changes, consumers still think calls to other networks usually cost more. They often minimise them, sometimes with the annotation (with + or * signs) of phone books entries to indicate ‘own’ or ‘other’ networks.
§ Crib sheets. In one encounter we found that rates for calling each of the mobile phone networks from a landline and mobile were stuck to the cover of an address book – costs curbed with a neat crib sheet.

The report suggests five ‘economic tests’ that successful 3G services will need to pass:
· Test 1: Pricing. Future phone services will succeed only if they are competitively and clearly priced. By pricing new products and services at business users and ABC1s, mobile phone companies realise they are likely to miss much of the mobile market.
· Test 2: Practicality. Second, successful 3G services should be closely linked to specific tasks and functions which user will find valuable. Picture messaging is a good way of sending complex information quickly, or ensuring a visual record of an event. Paramedics, estate agents and traffic wardens should all find it useful.
· Test 3: Sociability. Services that exploit social network effects are also likely to be popular. The success of ring tones and screen savers shows that mobile services are successful to the extent that they can be shown, shared and passed on.
· Test 4: Mobility. Future services must target users’ mobility, and specifically the times and places in which they are mobile. Videos of football goals at the end of the match, or the ability to buy cinema tickets or get transport information should be popular.
· Test 5: Simplicity. 3G services will have to be simple and work properly. Any future attempt to introduce advanced services before they work to consumers’ already high expectations is likely to fail just as quickly.