UK telecom giant BT has just announced a massive upgrade of their broadband services to unlimited bandwidth. Following closely on from the recent disclosure by the US cable companies that bandwidth caps are designed to make more money, not ease congestion, this latest move is both an indication of improving technology and also a recognition that increased competition and price pressures are forcing the major Internet suppliers to come up with creative ways of locking their customers in for the longest contracts possible. And boy is this a great plan…from their end.
The key points to realize, and this applies to every service provider on the planet at the moment, is the fact that a) customer loyalty in times of recession, especially a deflationary recession, does not exist and b) keeping a customer is infinitely cheaper than acquiring new ones.
What this boils down to is the fact that the marketing wonks in all subscription based services are feverishly hunting for ever more creative ways to lock us in to longer term contracts, and they’ve now come up with a doozy…the improved terms renewal.
Here’s how it works. The supplier, let’s say it’s BT, offers a standard product at £10 a month, say it’s a Family Broadband Package, on a 12 month contract. You sign up, and enjoy your service. But then 6 months down the line, BT announce a new bolder, brighter and more valuable plan, which you as an existing user can sign up for on another 12 month contract at exactly the same price OR LOWER. What do you do?
You sign up of course. But remember the 12 months starts running again from the date you sign to the new deal, so you’re now effectively tying yourself to BT for 18 months. Rinse, repeat ad infinitum.
The result is the customer gets locked in to ever lengthening contract terms (in BT’s case, you now have to sign up for 18 month contracts, soon it will be 24 and then…you get the picture) and the competitors are locked out of grabbing new customers from them.
Perfect eh? Expect to see more of this rolling padlock genius in different services such as utilities and mobile services. Already we’ve had 36 month contracts appear in the UK mobile scene, until banned by the authorities, but they’ll be back with more attempts to lock you down for as long as possible.
So what can or should you, as the customer, do? Well for one thing push back against long term contracts as hard as you can. There are always alternative short term or pay as you go options from smaller companies if you know where to look. They may cost more in the short term, but at least you’ll have the flexibility to move elsewhere if service levels fall.
You should also make it clear to your local political representatives and consumer groups that this kind of velvet glove lock-in is not acceptable. It’s anti-competitive and definitely anti-consumer. Sure you may get a good deal now, but what happens when the competition dies off because they can’t win the new customers they need to survive? Yep, market dominance and back to the bad old days. Remember those?