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In the News

Supernormal Profits: Are UK Mobile and Broadband Firms ‘Lining Their Pockets’?

Graham Watson

7th February 2023

Are Britain's mobile phone and broadband companies exploiting their dominant market positions? Certainly that's the implication of this Observer article that notes the extent to which they've raised their prices since the pandemic.

As a result, there's a suggestion that OFCOM might start showing greater interest in the sector, not least because some of them have been increasing their prices mid-contract. Many customers face a penalty charge if they cancel mid contract - this known as lock-in pricing.

Lock-in pricing

Lock-in pricing refers to a type of pricing strategy in which customers agree to purchase a product or service at a fixed rate for a specified period of time, usually in exchange for a discount or other benefit.

In the context of mobile phone contracts, lock-in pricing typically refers to the practice of requiring customers to sign a long-term service contract, often for 2 years, in exchange for a discount on the price of the phone or a reduced monthly service fee. The lock-in pricing strategy is used by mobile phone service providers to reduce customer churn and increase the predictability of their revenue streams.

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.

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