Earlier this year, we saw the ‘end of an era’ in mobile telecoms – from July, customers no longer needed to obtain a PAC code from their current provider if they want to switch. Instead, they can move to a competitor simply by sending a free text message to their provider, who is banned from making notice period charges after the switch date.
Given this change coincided with the beginnings of the launch of the 5G network in the UK, one interesting question is whether the availability of 5G will spark a rush of customer switching as they look to move onto an enticing next generation deal?
Firstly, it helps to remind ourselves why the switching change was made. According to Ofcom, 38% of customers (2.5 million people) experienced major problems in switching under the old system. Around seven in ten experienced at least some difficulty, such as contacting their current provider, getting the information they need from them, or actually getting the service cancelled.
The ‘text-to-switch’ service makes life much easier. Customers can avoid having to speak to their current provider and face unwanted attempts to persuade them to stay. Operators are banned from charging for notice periods running after the switch date. This puts an end to customers having to pay for old and new services at the same time – saving them around £10 million in total each year, according to Ofcom.
So, with EE and Vodafone having launched a 5G service in some cities already and others launching any time soon – will millions of customers have their fingers hovering over the ‘send’ button to notify their providers of a switch?
It looks unlikely. There are a number of factors that are likely to limit a ‘rush to 5G’.
First, many of today’s (4G) handsets are expensive, costing £1,000 or more, and most contract customers will have taken 12-36 month contracts to spread the cost of the phone. Unless they can afford to pay the balance off – or a rival provider offers to do so – then that debt will be a block to moving. They are likely to be inclined to wait until their present contract is nearing its natural end.
Customers on SIM-only contracts, meanwhile, are far more likely to think about making the move.
However, we also have to factor in the cost of the new 5G handsets that will be required. These are likely to be more expensive again compared to 4G handsets, and that is bound to deter a good portion of prospective customers, at least at first. There are also questions over the availability of 5G handsets, particularly in the early days.
To really spark a rush to 5G, there will need to be some new ‘killer’ capabilities or exclusive content available at a competitive price. At present, it is not clear what these will be. We also don’t know how long most 5G contracts will run for – if they run over longer periods than customers are used to, that could be another deterrent.
5G will have a huge impact on the future of telecoms and will reshape the market, but it won’t happen overnight. This is probably just as well, because whether the mobile network operators (MNOs) could cope with a huge influx of customers in the first wave is open to debate. At present, 5G has limited availability and not all mobile network providers are offering the same coverage. Even on 4G, only two thirds of the country can currently receive full coverage and, according to Ofcam, discussions are underway with the main MNOs to expand network coverage within rural areas. Could this slow down 5G uptake further?
So, while switching by SMS is sure to have been positively greeted by the UK’s mobile customer base, it seems unlikely 5G will lead them to swamp providers with bad news text messages from day one. 5G may in time be the catalyst for significant customer movement between providers as winners and losers emerge – but those days won’t come until full 5G services have been established, which is still a few years away.
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