Internet on mobile phones: The data swindle
Monday 13 September 2010 09:44:45 by Sebastien Lahtinen

Earlier this year, The Guardian reported on a student who received an £8,000 mobile broadband bill from Orange after taking their broadband dongle abroad, a story we have seen numerous times over the past few years. Following similar events and general concern with the mobile operator market, the European Commission introduced regulation that forced mobile operators to both limit the charges for using your phone in the EU, but also required operators to put in place an effective default credit limit on accounts.

As of this summer, anyone exceeding 50 euros (or equivalent limit in local currency; excluding VAT) whilst roaming, should find their service suspended, unless they agree with their mobile operator to remove this limit. A warning text message should also be sent when 80% of this limit is reached. This protection measure is designed to ensure that consumers in particular, do not find themselves with unexpected bills when they return home to the UK.

Whilst mobile phone companies have implemented this protection for customers roaming onto other networks whilst visiting EU countries, we have discovered that some network operators have been quite content in sending bills running into hundreds of pounds for browsing the Internet in the UK, something they could simply not do if you were abroad.

The problem

If you are a 'pay monthly' subscriber on a mobile phone contract, you receive a bill every month for your subscription, calls, text messages, data usage and any other charges you incur on your mobile phone, so you have to rely on common sense to make sure you don't end up with a large bill. When you're making phone calls, you tend to have a sense of how much you're using the phone and you can reasonably estimate how many text messages you've sent. However, using the Internet on your mobile phone is a bit more complicated, because the charges are in megabytes (MB) and you don't instinctively know how much data an individual application may be using.

Because of the delay of anything up to a month from using your phone to getting a bill, pay monthly subscribers could find a surprise in the post if they were using more services than they expected.

The sting

Whilst many subscribers will purchase or upgrade mobile phones in stores or on websites which bundle the sale of the mobile phone with a mobile contract (or renewal), it is possible to buy a mobile phone without a contract, for example if you're buying a second hand phone to save money, or indeed by walking into a retail store such as the Apple Store and buying an iPhone.

If you buy a new smartphone and use it with your existing SIM card, then you may well find yourself in a situation where your mobile service package doesn't include a 'data' (also often referred to as 'Web browsing') bundle. This means that you can be charged for any data you use at anything up to £4/MB. To put this into context, for around £5/month you can usually receive a data bundle of anything from 500MB to 1000MB (1GB) per month which equates to a maximum of £0.01/MB.

This disparity in pricing means that anyone who starts using a smartphone but without a data add-on on their contract, could easily be facing bills running into hundreds of pounds as the costs can be 400 times more expensive.

Smartphones like the Apple iPhone and the various Android phones are becoming very popular and there are significant numbers of users buying them in a retail store separate from mobile phone contracts, without being aware of the risks they incur if they don't also contact their network operator to get a data bundle added.

This problem applies to most of the major UK mobile networks and is most likely to affect users on an older ‘pay monthly’ mobile phone contract who buy a new smartphone mobile directly from a retail store or online, to replace an old phone which wasn’t used for accessing the Internet, without updating their mobile phone contract to include Internet browsing.

The confusion

Various charging schemes are in operation across the networks for mobile Internet usage, and various network operators offer multiple options depending on the bundle/package that you are on:

1. Data bundle - where you pay a fixed monthly fee (typically between £5 and £10/month) and receive an inclusive allowance of between 500MB to 3000MB (3GB). If your usage exceeds this, then you may end up on a 'per MB' tariff, so you still need to be careful.
2. Daily price cap - some network operators operate a 'pay as you use' plan which results in a charge being applied for every day you use your mobile phone to access the Internet. This typically ranges from £0.30 to £1 per day. It usually comes with a limit of up to 25MB/day either as a 'fair usage policy' limit (which means exceeding it may result in a letter being sent to you to ask you to consider your usage) or as a fixed cap after which you will be charged on a 'per MB' basis.
3. Per megabyte (per MB) charging - with costs being anywhere from a few pence up to £4/MB. It is quite common to see costs in the £1 to £2/MB region.

The one notable exception: Virgin Mobile

We tried to speak to many mobile networks in an attempt to clarify the pricing where we couldn't get the information we needed from their website, and a number suggested that they would use their discretion when customers were using data excessively, or pointed out that there were plans designed for smartphones, however few would explain how they dealt with excessive use in detail, or define what this meant.

"If a customer exceeds their allowance we will monitor their activity on a case by case basis and notify them if we feel their usage is excessive."

Statement from a network operator

Out of all the major networks, only Virgin Mobile were able to confirm that their price cap applied to all customers, including those with older contracts which meant that reasonable use of mobile Internet access was only going to result in a bill of £9 for a month based on its 30p/day charge for up to 25MB of data usage. Further, when challenged on the pricing beyond 25MB, Virgin have also advised us that from the end of September, those exceeding 25MB/day will be charged £1.99/day (as opposed to 30 pence), which will protect even the heaviest of users.

Advice for consumers

1. If your mobile phone connects to the Internet, make sure you have an inclusive 'data' bundle or a package with a capped rate for Internet access. Most current mobile phones can connect to the Internet, whether it’s just to update the weather forecast or download apps—you don’t have to browse the web to be using up data.
2. Watch your usage. You can download applications which help to track your data usage, or you may be able to log on to your network operator’s website to find out how much data you are using.
3. If you’re worried, switch off data. Turn off data on your mobile phone if you are concerned, especially if you’re going abroad; although the European regulation means that you will be better protected than before when travelling within the EU.

Advice for businesses

Business users are affected in the same way, if not more so, as some mobile operators don't apply the same caps to daily usage on business packages as consumer ones. Often, the person paying the phone bill is also not the same as the mobile phone user, increasing the risks that the user will continue to be unaware of the charges incurred.

1. Ensure all your employees are aware of the costs related to use of their mobile phone, especially abroad.
2. Check that any smartphones in the business have an appropriate data or 'Internet browsing' bundle.
3. Encourage staff to monitor their own usage using software available from most app stores.
4. Ensure the person within the organisation responsible for paying mobile bills keeps track of increasing trends of data usage and contacts the employees concerned.
5. Consider instructing staff not to use SIM cards provided by the company in any personal mobile phones.

Our view

The EU regulation was designed to protect mobile users from receiving unexpected bills, but it does not address the overarching issue of ensuring the mobile user can make an informed decision when they incur charges. It's time for the mobile operators to accept responsibility for looking after their customers and ensuring that it's not possible to unintentionally run up large bills. It's hardly rocket science to send customers a text message when their usage exceeds some pre-determined limit, unless the customer has specifically asked them not to do so.

What makes this worse is that some network operators will allow you to 'opt in' to a daily price cap, and all you have to do is ask. We cannot understand why these caps can't be applied automatically to every contract, when there are no costs involved in doing so and it is clearly in the consumers' interest.

We would also add that whilst researching this story, we found the mobile phone contracts incredibly difficult to follow due to the enormous number of price plans and options many of which had separate contract terms, and charges on out-of-bundle usage were often unclear and located in small print. We would like to see Ofcom as the regulator, look to engage with mobile operators in an attempt to simplify contracts and make sure that all costs were accessible in a clear format. We certainly welcome the approach taken by 3, which has published a price guide document.

For some years, we have been considering the idea of standard labelling of broadband services, similar to the way 'energy labels' tell you how energy efficient your fridge or television set is. We suspect a similar approach would be of benefit to mobile phone services, and we hope to work to achieve this.

Important note

We would like to note in particular that the issue we have highlighted applies to using the Internet from your mobile phone without an appropriate data bundle. All the mobile networks offer bundles which are designed for smartphone users which can ensure or minimise the chances that you would incur any "per MB" charges. Also, by definition mobile broadband packages are data packages, and most include a usage bundle as part of the subscription.