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Top 10 pricing traps in telephony

By Mark McLean

This article outlines some of the less obvious methods used by telephony suppliers to generate income. It can be useful to be aware of these when exploring products and services with potential suppliers.

1. Introductory offers

An offer for a telephone service may be presented as a loss-leading £11.99 a month for the first six months. But check what happens after that. If it rises to £25.99 per month, and carries a minimum term of two years, then you would actually save money by choosing a deal with a fixed monthly rate of £21.99.

2. ‘Bundled’ minutes

In tariffs for landline and mobile services, having the first so many minutes per month ‘free’ has become the norm, but this can make it harder to evaluate suppliers on a like-for-like basis. When comparing tariffs, work out the total cost for a standard level of activity which takes you outside the bundled allowance.

3. Minimum fees, setup fees and per-minute billing for calls

Telephone companies will publish a rate per minute to make calls. But they are less willing to publish any of the following:

• A minimum cost per call

• A set-up fee per call

• Billing by the next whole minute (rather than second)

If you make lots of short calls, these mechanisms can increase your bills substantially. For example, at 5p per minute, ten 20-second calls can cost 17p if they are charged by the second but 50p if they are charged per minute. They can also make your itemised bills confusing.

4. Capped call charges

A deal that says, for example, that a local call won’t cost you more than 10p, looks attractive. But before you accept it, check what evidence you have that a significant proportion of your calls last long enough to cross the 10p threshold. Remember also that the capped call mechanism may make an itemised bill more difficult to understand.

5. Low rates for certain types of number

Do not be seduced by low rates for calls to certain types of number, as these may be subsidised by other calls. For example, you may pay little or nothing for calls to landlines, but if you make lots of calls to other numbers, this can substantially increase your bill.

6. Use of licences for switchboard facilities

Separate licences may enable facilities such as call recording or voicemail. If you think you may need these facilities later, check on the cost of activating them by a licence.

7. ‘Commitment’ packages

The world changes in ways we don’t expect. A deal that ties you down for more than a year may look attractive, but if circumstances force you to cancel before the end of the term, you may incur heavy penalties which wipe out the original ‘saving’. Check these penalties before signing anything.

8. BT’s Payphone Access Charge

If you have a freephone (0500, 0800 or 0808) number and you receive a call from a BT payphone, you may be charged an additional premium (at least 10p per minute at time of writing) to receive the call if your freephone service is not provided by BT.

9. End-of-lease equipment return

Leasing equipment such a switchboard means there is no capital expenditure and spreads the cost of ‘ownership’, but your contract may require you to return it at the end of the term if you do not want to upgrade it. The costs of ripping it out and sending it back to the leasing company may be prohibitive.

10. VAT

If you wanted to dispute an item within a bill (e.g. an inappropriate service charge) and are refunded, then you should make sure that the refund includes VAT where applicable.

For more information on meeting your telephony needs please read the Good Telephony Guide (8.2 MB PDF file. Requires Adobe Reader. If you don't already have this, download it from Adobe).