Hooptedoodle #95 - The Wrong Tariff

I spent some time this weekend sorting out my mother’s account with BT – that’s British Telecom, who provide her with (predictably) broadband and telephone services. She is a customer of BT largely because I am one, and I am one because part of the bewildering network of BT companies – Openreach – provides and maintains the cabling and the communications infrastructure in this corner of the world; I chose to avoid getting stuck in the middle of the finger-pointing exercise which invariably follows any problem with a slow, precarious country broadband service if you have separate suppliers who can pass the blame on to each other.

Apart from my lack of enthusiasm for their customer helplines, I find BT OK. It takes a bit of constant monitoring to make sure we get value for money, but they probably compare favourably at present with our alternative suppliers.

Someone else's mum

My mum’s problem was that she had got stuck in The Wrong Tariff. I myself am in what I consider to be The Correct Tariff with BT, but only because I have the time, the knowledge and the resources to put regular effort into monitoring my bills online, and keep tabs on the constantly changing product names and complicated pricing arrangements which telecoms firms – and much of the rest of the commercial world – use to con us out of our money, not to mention our time. My mum would not know where to start. I know how to do it, but increasingly I begrudge the effort required, and – increasingly – I am not sure why we have to keep up this struggle.

Some specifics – I just know you want some details of my mother’s account.

When my mum got broadband set up – primarily so that she could do her shopping online – we agreed to what was called BT Total Broadband 2, which allowed her rather more data-shifting capacity than she was ever likely to require, and also got her a complementary licence for anti-virus and firewalling from McAfee. For actual land-line phone calls, she was offered a deal called Unlimited Weekends and Evenings, which requires a standing charge of £2 a month, and allows you – that’s right – free calls to UK land-line numbers in defined off-peak hours plus some other discounts on calls to mobiles in those periods.

And, since about March 2008, that contract has been running happily. Every month, BT send a direct debit request to her bank, and convenience reigns withal. This month she got a letter from BT telling her that, since her current monthly debit is not meeting costs, she has run up a bit of a debt, and thus they will be increasing her payments to an amount which surprised me. My mum is 88 and pretty deaf, and uses the Internet about twice a month to get her groceries ordered. So I set up online billing for her with BT, and we had a good look at what’s what.

Wrong Tariff.

Because of her circumstances, she makes all her phone calls during the day. She is (sadly) running out of people she might wish to phone in the evenings, and the concept of a weekend is meaningless when you are 88. My mother is paying full price for all her phone calls. Also, her broadband usage is trivial, and the free McAfee package is so awful that we replaced it ages ago with a free Microsoft product which works better and is less of a nuisance.

Wrong Tariff – and, because we should have spotted it and done something about it before now, I have the additional burden that it is our – well, my – fault. If at any time I had called up BT and complained about value for money, they would have said – quite correctly – that we were getting what we asked for and signed up for.

Quite so

By reducing the service level to basic, no-frills broadband, and changing the phone contract details to Unlimited Anytime (£7 a month), as from 9^th September, her monthly costs will now drop from £59 to £35, which is important if you are a pensioner. The infuriating things about this are:

(1) Her use of BT services will be exactly the same, whatever the contract is called.

(2) BT claim that they keep a paternal eye on your account, to make sure that you are in the best-value, most suitable contract and that your payments are adequate. Bollocks.

(3) BT’s focus – in common with everyone else’s nowadays – is the new customer. By definition, anyone who is an old customer is a mug and should be stiffed mercilessly until they notice and complain about it. I call this “The Negative Loyalty Bonus”. It is everywhere – don’t get me started. In the last few years, we have had major fights about pricing with our insurance company, our supplier of domestic LPG, our mobile phone companies, our BANKS (aargh!), etc etc. In most cases, we ended up changing suppliers, and saved a lot of money, but many people don’t, and many people just keep on handing over cash they can’t afford.

I’ll spare you the rant about Aviva, BP, Royal Bank of Scotland and all the others – maybe for another day. This is now business as usual. I hate it. Let me end with two short stories about lightbulb moments in my economic education – I apologise if I come across as unreasonably trusting or naïve in these, but I tell it as it is.

My background includes a lot of study, including some heavy, classical economics, but I come from a druidic, actuarial world in which the prices of things are worked out scientifically with great precision, and the dirty spirit of competition sneaks into pricing only at the last minute, to ensure that one might actually sell something occasionally. The concept of someone getting ripped off is not incomprehensible, but certainly alien to my upbringing.

Story 1 – the Man from Swissair

In the days when I was in salaried employment, and before I made the strategic error of becoming unfashionably old, I used to get sent on what were laughingly described as management training courses. I can only assume they offered my employer a source of tax-deductible expense. The main, maybe the only, attraction of these was that I got to meet some interesting people.

On one course, there was a fellow from Swissair, and he described for my benefit that strange phenomenon which occurs on aeroplanes, where no two people may have paid the same price for their tickets, though they will consume the same food and fuel and arrive in the same place at the same time. Neanderthal that I was, I had never really thought about this before. The most interesting bit came at the end. There is a point, he said, where the tickets sold cover the cost of the flight, and anything at all you can make on any further empty seats is a bonus.

Thus the fact that business class passengers from Geneva to NYC in those days were paying £1400 a pop was irrelevant. Once the flight was paid for, any remaining seats could be sold for almost nothing. If the extra passenger would require say £50 worth of extra fuel and food, then he might fly for £50.50 and you would have made a profit of 50 pence.

Yes, I know that everyone understands this, but for me it was a lightbulb.

Story 2 – Price Guarantees

A kid who was a friend of one of my older sons got a job for six months before he went to college. He worked as assistant manager in a computer game store, on a shopping mall on the outskirts of Edinburgh. He was seventeen and a half, and he knew nothing about anything, but he explained to me how price guarantees work.

In his store there were notices up on the walls, which said something like

“If you can purchase any product from a physical shop within 12 miles of here for less than we sold it to you, we will gladly refund the difference”

And then, of course, they deliberately cranked up their prices by about 5%, right across the board, so they knew they were more expensive than the competition.

If anyone spotted a cheaper product elsewhere, remembered the guarantee, still had the receipt and could be bothered paying to travel all the way out to the outskirts of the city, the shop would happily, smilingly make the promised refund. Have a nice day. However, in reality, hardly anyone ever came back. The deliberately inflated prices made them a lot of extra profit – in some cases doubled the mark-up on specific products.

This applies in big, respectable department stores as much as nerd shops. If your local John Lewis publicizes such a price guarantee, it’s a pretty safe bet (said my young tutor) that they know their prices are high to start with, and they are chancing it.

Lightbulb.