Phil Long's blog – Teletranone

Many will be aware that Twitter is currently a-buzz with iPhone and Apple users bemoaning O2’s policy towards upgrades from the old 3G to the new 3G S – under the hash-tag #o2fail – as well as what seems an extortionate rate for data tethering.

The upgrade problem comes through O2 somewhat setting expectations with the upgrade from the original iPhone to the iPhone 3G. Naivety on both sides has played a part here – customers in believing that there was an ‘implied’ promise to allow upgrades on the same terms when Apple refresh the product, and O2 in not thinking early adopters would interpret that offer in such a way. O2 have, quite rightly, pointed out the original iPhone was not subsidised, whereas the 3G has been – hence the drop from £269 to £99 for the 8GB. Some foresight from O2 might have allowed them to ensure the terms were absolutely clear; that the upgrade offer from old to 3G was a one-time deal because of the unique manner in which the original was provided. Perhaps also, knowing Apple’s refresh cycle, O2 might have been better off-setting the subsidy over 12 months instead of 18.

So – we shouldn’t have expected O2 to write off the subsidy, and O2 should have been clearer on terms. Mistakes made, lessons learnt – etc. HOWEVER, where O2 are currently failing is in their inability to provide a ‘fair’ means for the fans, early adopters, whatever you want to call them to commit to another 18 month contract without buying their way out of their current one. I’m currently paying £35 per month and my contract expires in February, 2010. It would cost me £315 to buy my way out of that contract – on top of the cost of the £275 iPhone 3G S (32GB as the space is the main factor in my upgrade decision). So, that’s £590 and I’d also be paying £35 per month for my new O2 contract.

A fair deal would be allowing the upgrade while recovering the subsidy cost. Looking at the pay-as-you go costs, the iPhone 3G 16GB would probably cost roughly £400, unsubsidised (between the 3G 8 and 3G S 8 pay-as-you go prices). Given I paid £169 for my iPhone 3G that’s £231 of subsidy (ignoring that O2 will have a margin built in to the pay-monthly cost – so these figures are at most - and give O2 some of that margin on the hardware too!). That’s £13 a month of my contract paying off the subsidy – with 9 months left I’d pay £117 to pay that off. Still not cheap, but a lot more reasonable than £315 – and O2 retain my business and I get a new shiny thing; win-win, right? There are a number of people saying ‘tough, you signed a contract’ on Twitter in response to #o2fail – but I’d argue that good business here would be to offer a deal as I’ve described that addresses O2s costs while not bleeding their loyal customers dry.

Next up is the price of Tethering – and this applies to all iPhone users, new and old. On our “Unlimited Data” service we would be charged £14.68 to use 3GB of data via tethering, or £29.36 for 10GB in a month. The argument from O2 is tethering uses more data. Maybe so, but data is data and when they launched the iPhone O2 couldn’t have been more clearer on what unlimited meant. This is taken from an artle on the Telegraph.co.uk:

”Customers find ‘unlimited with limits’ confusing, plus most people don’t speak in megabits or understand what they equate to,” said O2 UK chief executive Matthew Key.

”So we’ve taken the decision to remove the fair usage cap so that ‘unlimited’ really does mean ‘unlimited’ – this is a market first.”

Well, O2 – you’ve gone and confused your customers as by charging for tethering you’ve essentially said that you’ve yet another definition of “unlimited” that includes “limits”.

O2 = Fail.

Popularity: 14% [?]

Related posts:

iPhone 3.0 update – my wishlist

iPhone Star Wars: Force Unleashed Gameplay video

Free WordPress App for iPhone