Contract terms and switching costs
-The Swedish experience
Johan Rydberg, Legal Adviser
Consumer Market Department, Section for Consumer Issues
PTS
Content
•
•
•
•
A brief overview of switching
Why do consumers in Sweden choose not to switch?
Nordic comparison
Concluding remarks
2
The ”switching situation” in Sweden
• Switching costs are increasing for all electronic
communication services.
• This trend is negatively correlated to switching
behaviour.
• Problems related to leaving a contract is becoming
more frequent.
• Consumer focus has moved from service to terminal
equipment.
• Price complexity, especially for mobile phone services,
have increased.
3
Why do consumers choose not to switch?
• Are consumers satisfied with their provider?
• Are consumers able to compare services and aware of
the alternatives?
• Can consumers easily switch between different service
providers?
4
Are consumers satisfied?
Swedish Quality index – Consumer satisfaction
5
03
20 0303 01
20 -0603 01
20 0903 01
20 -1204 01
20 0304 01
20 -0604 01
20 0904 01
20 -1205 01
20 0305 01
20 -0605 01
20 0905 01
20 -1206 01
20 0306 01
20 0606 01
20 -0906 01
20 1207 01
20 -0307 01
20 0607 01
20 -0907 01
20 1208 01
20 -0308 01
20 0608 01
20 -0908 01
20 1209 01
20 -0309 01
20 0609 01
20 -0909 01
20 1210 01
-0
301
20
Are they aware of the alternatives?
The development of average price structure of post-paid mobile phone subscriptions in Sweden
100,0%
90,0%
80,0%
70,0%
60,0%
50,0%
40,0%
30,0%
Minidebitering
Månadsavgift
Etableringsavgift
Deb_tot
SMS/MMS/DATA
Totala samtalskostnader
Total öppningsavgift
20,0%
10,0%
0,0%
6
2010-03-31
2009-12-31
2009-09-30
2009-06-30
2009-03-31
2008-12-31
2008-09-30
2008-06-30
2008-03-31
2007-12-31
2007-09-30
2007-06-30
2007-03-31
2006-12-31
2006-09-30
2006-06-30
2006-03-31
2005-12-31
2005-09-30
2005-06-30
2005-03-31
2004-12-31
10
ar
-
09
10%
m
se
p-
09
ar
-
08
40%
2004-09-30
Andel 0 mån
m
08
ar
-
07
se
p-
m
07
ar
-
06
50%
2004-06-30
Andel 1 mån
se
p-
m
06
ar
-
05
30%
2004-03-31
Andel 3 mån
se
p-
m
05
ar
-
04
se
p-
m
04
ar
-
03
se
p-
m
03
ar
-
se
p-
m
Can consumers easily switch between
different service providers?
The expansion of a 3 month notice periods (blue field) – individual non-bundled services
Mobile phone subscriptions
100%
90%
80%
70%
60%
Subscriptions for fixed internet access
120%
20%
100%
0%
80%
60%
Ingen
40%
1 månad
3 månader
20%
0%
7
…and on top of all this comes bundling.
• Service bundles are becoming increasingly popular.
• Bundling often introduces long (24 month) minimum
contract periods.
• Service bundling also introduces additional switching
costs for exchanging individual services
8
Contract/Notice periods - A Nordic comparison
9
Nordic comparison on mobile numberportings
Andel porteringar av totalt antal abonnemang
per land, mobila
30,0%
25,0%
20,0%
Sweden
15,0%
Norway
Finland
10,0%
Denmark
5,0%
0,0%
2001
2002
2003
2004
2005
2006
2007
2008
2009
10
Are Swedish consumers more satisfied…?
11
Concluding remarks
• There are strong implications that the relative high
switching costs in Sweden have a negative effect on
consumer switching behaviour.
• In a Nordic context, the market in Sweden show signs
of beeing less active.
• Specifically, long notice periods (3 months) is
assumed to have a significant impact on switching.
• As bundling gets more common, the impact of MCP as
well as other problems for switching may well become
increasingly important.
• Switching costs will probably present us with a
regulatory challenge in the near future.
12
Thank you!
• The complete report ”The possibility to switch” can be
found at www.pts.se or by contacting me:
[email protected]
13