How to evolve from being a business into being a scam: Part 2. Mobile phone companies.

I complained the other day about the charges that both my British and Australian banks hit me with when I want to move and convert money to and from Australia, and the need to engage the services of an intermediary - in this instance an FX broker - in order, essentially, for the cost of getting my two banks to interact with one another to be more reasonable. At the end, I made a comparison with mobile phone companies, in that both sets of companies screw their customers without mercy for relatively infrequent services that the customers may not understand well, regardless of how trivial are the costs to them.

The analogy holds even more closely, though. The bank is essentially using the excuse of an international service to charge through the roof. How I resolve this is to make a local transfer (no charge) to the Australian bank account of the FX broker through the Australian payments system, the FX broker changes the money for me in the FX markets (modest charge), and the FX broker then makes a local payment to my British account (no charge).

As it happens, in recent days I have had the need to make quite a few mobile to mobile telephone calls to Australia. I have a contract with one of the four big network owning mobile phone companies in the UK. (I won't single the company out - they are all much the same). I could simply dial the Australian number on my phone, but once again the charges would be absolutely outrageous. It doesn't cost the mobile company dramatically more to terminate a call abroad than it does to terminate a call in the UK, but the charge to me is vastly more.

So, what do I do? Once again, I engage the services of an intermediary. I use a call forwarding service. I dial a British number from my mobile, which then asks me to dial the Australian number. I dial the Australian number, and then the call is connected. The call forwarding service then charges me a much smaller amount than the mobile company would directly.

The same thing has happened here, pretty much exactly, as with the bank. The amount of money the mobile phone company is making from customers who do not understand how the system works, and/or do not understand to what extent they are being overcharged, and/or lack the ability or desire to cope with the hassle of using an intermediary is such that they are willing to forgo the business of the customers who do understand this.

At the moment, though, they are only forgoing some of the business. I still have an account with a major high street bank, and I still have my main mobile contract with one of the four big operators. The reason is that for the regular, mainstream, local services that I need, it's very difficult to function without them. In a world with fewer barriers to entry, the intermediaries that I engage for my international transactions would start to compete with the larger operators on their other services as well, and competition would then force everyone's prices down. That isn't really happening, though. The mainstream players face too little competition on their mainstream services, and the niche players remain niche players.

(Two further observations on this. Firstly, yes, I could use an MVNO like Lebara who specialise in international calls. This would give me cheaper calls without having to go through the business of dialling a call forwarding service. Yes, indeed, but these companies only really work for people who want a phone for which all their calls are international. For those of us who are mostly domestic customers, who make some international calls (especially to mobiles) and who want the convenience, monthly billing, customers service etc of the big operators, they fall short. Anyway, they use the big operators' networks (and are so at their mercy, ultimately), so they are just a slightly different kind of intermediary to the call forwarding services. Secondly, it is undoubtedly true that large corporate customers of both banks and mobile phone companies are able to negotiate better deals than individuals, and not get screwed in quite the same way. This doesn't help me, though).

How to evolve from being a business into being a scam: Part 1. Banks.

Both my British and Australian banks charge me utterly outrageous exchange rates when I want to convert money between AUD and GBP. (We are talking something like 5% in spread and commission). As it happens, I am not going to pay $100 to you to change $200 - $20 is more reasonable - so I have to go off and use an independent FX broker. (Mine is based in New Zealand, BTW. I had to go through all the standard anti-money laundering crap of sending copies of my passport and utility bills before they would accept me as a customer, but they have themselves been excellent).

The fact that large banks have become organisations that will screw their customers outrageously at any tiny opportunity that they can find - often because they know that the customer is doing something complex that he does not really understand and does not know how to shop around for (or - better - which regulations make it difficult to shop around for) is a big part of why people hate them so much. You sort of know that you are being screwed, but don't know quite how.

Mobile phone companies (also much too close to the state, and also much too heavily regulated by regulators who have been captured by the phone companies) are very similar in terms of how they will screw you. In some ways they are practically banks themselves, too.

UK LTE networks

We now have three of four British mobile networks (EE, O2, and Vodafone) offering 4G/LTE networks. Just looking at the SIM only pay monthly tariffs (which are the cheapest), none of them are offering anything offering 4G data for less than £21 a month. 

Even that is a plan on EE that offers only 500Mb of data a month. To get a plan with a decent data allowance you are up for £26 a network on all three networks.

The fourth network, Three, is not launching until December - delayed probably because the bulk of their network is going to be running on 1800MHz spectrum that EE were required to divest as a condition of the T-Mobile/Orange merger, and transfer of this spectrum was delayed by the conditions of that merger. Three have said that they will not have special pricing for 4G and that customers will simply be able to use 4G data on their current tariffs. This means their cheapest 4G tariff (including 500Mb of data) will cost £6.90 a month, and their unlimited data tariffs (the cheapest of which costs £10.90 a month) will continue to operate with 4G. None of the other
operators are offering unlimited data on 4G at all

Therefore, the only network offering unlimited data will be offering it at approximately half the price of the cheapest tariff of any kind offered by anyone else.

There were always two ways to go with the introduction of 4G: you could use it to attempt to raise monthly spend from customers, or you could use it to try to increase market share. It was always likely that Three - having the lowest current market share - would go for the latter. That this would lead to such enormous price disparities as this was not expected by anyone, I suspect. I don't think Three expected that the other operators would try to make 4G quite as expensive as they have.

One possible caveat that may exist is that I have only been talking about tariffs that have been publicly advertised. There does exist a secret world of unadvertised tariffs that exists alongside the advertised ones. Some of these are offered by networks to their large business customers, and others to customers who ask to leave the network. Often this second category take the form of "Loyalty discounts" in which an advertised tariff is reduced by £x per month for the life of the contract if the customers signs for another minimum period). It may be that EE, Vodafone, and O2 are offering such discounts now, and "4G cheap" or "4G at no extra charge" is a sweetener being offered people who are talking to the customer retention departments. If not now, this will likely happen when Three have their LTE network online. Plus I am certain large corporate customers are negotiating to find the best possible deals, as they always do.

It will be interesting to see how this plays out. One possibility is that too many people go for Three's offers, and they find themselves hitting capacity constraints. If so, they may have issues, as they have what appears to be an adequate amount of spectrum, but are not as well served as Vodafone or EE. (O2 have by far the lowest amount of 4G spectrum of any of the four operators, which is why high price rather than market share might be the way to go for them). Curiously, also, 2x15Mhz of 2600MHz spectrum was bought by BT in the recent auction, and this would be very valuable to either Three or O2 if they hit capacity constraints at some point. It will be interesting to see how this comes into play, as it inevitably will at some point.

Kutaisi airport public transport information.

Kutaisi airport in Georgia is a new airport, with relatively few flights at present. However, due to Wizzair's direct flight from Kiev, it is now the cheapest location to arrive in if you are coming to the Caucasus from Europe. It is not easy to find out information about local transport to and from the airport, so I hereby place this information on the internet, hopefully to help other people.

The simplest way into Kutaisi is simply to get a taxi. A fare of about 25 Georgian Lari (£10, $15) seems to be the going rate. Whether locals get a cheaper price and/or taxi drivers will try to get away with charging you more if they can remains to be seen. On the other hand, the distance is about 20km, so this isn't particularly unreasonable.

When I arrived on January 28, there were two public minibuses (marshrutkas) waiting outside the terminal, one going to Batumi (2 hours away) and the other going to Tbilisi (four hours away). I don't know if such services go after every flight, but they are likely useful. Of course, they also likely go in the other direction, but when and where they depart from in Tbilisi and Batumi is not information I was able to find out, even with the help of a Georgian in Tbilisi. (as the Tbilisi bus goes in the direction of Kutaisi, it is likely possible to ask the driver to take you to Kutaisi for a few Lari, but I suspect that this depends on how full the bus is).

However, the key piece of information is this.

Kutaisi airport is on the main highway in Georgia (Georgian Highway number 1, European route E60), in the sense that you walk out of the terminal and past the car park, and the exit to the carpark turns straight onto the highway. Locally, this is the road from Kutaisi to Samtredia. (The airport is actually closer to Samtredia). To get into Kutaisi, you should stay on the same side of the highway as the airport terminal, and flag down the next marshrutka going in that direction.To get from Kutaisi to the airport, you should get the minibus to Samtredia, and ask the driver to let you off at the airport.

This should be simple, once you know this. (To get from the airport to Samtredia, cross the road and flag down a marshrutka going in the opposite direction. There is a bus shelter at which to wait).
Similarly, to get to Kutaisi airport from Tbilisi, you should get a bus to Samtredia and ask the driver to let you off at Kutaisi airport. (Getting on the bus to Poti likely works, too). Coming from the coast, get on the bus to Kutaisi, and ask the driver to let you off at the airport. In a pinch, get off at Samtredia, as this is much closer to the airport and going all the way to Kutaisi will involve 20km of backtracking.

When I was there in January 2013, there were no money changing facilities or ATMs at the airport. As the airport was brand new and still being finished at the time, this might be rectified soon. If not, this is unlikely to be a problem if the service you are boarding terminates at wherever you are going, as there are many money changers and ATMs in all Georgian towns, and getting a little money to pay the driver at the end of the route is feasible. If you are getting off in the middle of a route, this might be a little more problematic, and there is something to be said for having a few small denomination euros or dollars handy. (Good advice anywhere). If none of this works, appealing to the kindness of strangers is also likely to work. Georgians are very warm and hospitable people to visitors, and are likely to be sympathetic.

Update (19/2/13): I see that Wizzair have just announced that they are increasing the Kiev route to daily, as well as adding flights from Kutaisi to Warsaw, Donetsk and Kharkiv. That Warsaw flight is going to make it even easier for those of us trying to get to the Caucasus from Europe. Hopefully, the increased traffic will also encourage the owners of the airport to, say, install an ATM.

Further Update  (11/11/13): I went to Kutaisi airport again in late October. There is now a company (GeorgianBus) providing timetabled bus services to and from Tbilisi and Batumi to meet every flight at Kutaisi airport. They have a desk at the airport that sells tickets and accepts credit cards, tickets can be bought in advance online, and I highly recommend them. I also saw a local Kutaisi city bus (number 777) arrive in the carpark at the airport and leave while I was there. I suspect that this means that there is also now a timetabled bus service to Kutaisi, but I cannot vouch for this 100%. The airport now also contains a Tourist Information Desk that also changes money, cafe/bars both before and after security, and a kiosk selling Georgian mobile phone SIMs. Two things lacking are an ATM and a duty free shop, but there still appears to be some work going on on the airport terminal. Basically, though, this airport now has most of the regular facilities found in airports. There is no particular need for special preparations any more.