An Open Letter to Olaf Swantee, CEO of EE

Hi Olaf.

I hope you don’t mind the informal start to my letter as, after all, your company’s recent one to me regarding an increase in the price for my package from EE was as equally informal (I’ve popped a copy of it in the gallery below, though I’m sure you already know all about it).

Before I start, I will admit that you have a contractual basis from which to make the change detailed in the letter, and can mount a robust (albeit one open to challenge) argument about regulatory compliance. That isn’t quite the point, though.

First, I’d like to draw your particular attention to the line that says “RPI (Retail Price Index) is a measure of inflation, which directly affects the cost to run our service.

Interesting. And I’d like to point out a few things to you which would suggest that you are mistaken.

  • RPI, as a measure of inflation, is now largely discredited. Anyone in the know, including your sector’s regulator, the Office of Communications (Ofcom), is migrating to the use of the Consumer Price Index (CPI). Have a look at Ofcom’s discussion in paragraph 3.155 onwards of the Wholesale Local Access Review.
  • Some debate exists on whether wages over the last 12 months have tracked CPI (which is lower than RPI, by the way); it somewhat depends on which decile you find yourself in. Considering this data from the BBC, I suspect you and your executive are OK but a substantial number of EE staff may not be. Unless, of course, you gave them all a CPI-busting wage increase of the RPI figure. Did you?
  • A substantial part of your business is your mobile phone customers calling landlines: 01 and 02 numbers. As a result of a European Union Recommendation some time ago, Ofcom lowered the termination rates on 1st January 2014 for these calls by around RPI (this review was started before the Office of National Statistics drove the final nail into the RPI coffin) minus 87% — a net 84% reduction in that cost to your business. Funny, but I don’t recall getting a reduction in my line rental or other charges, so I assume you’ve kept this windfall, yes? See Table 1.1 of the Final Statement in the 2013 Wholesale Narrowband Market Review for information.
  • The Treasury estimated that the 4G spectrum auction would raise around £3.5bn. In reality, it raised £2.34bn, so there’s a £1.1bn saving there for the mobile industry against a reasonable market expectation; thus, rationally-speaking, EE must have forward-priced its 4G services expecting to outlay a market value for spectrum, resulting in further savings on your part. Is this true?

I am sure you can see at this point why I have a problem believing you when you say that RPI (or CPI) has had a direct affect on your entire business; unless in spite of what I have cited above there is a cost that has risen so disproportionately high that it means the average cost increase is the same as the RPI? What could that cost be…perhaps Kevin Bacon’s fees?

Second, I would like to draw your attention to the back of the letter received, where you cite the question “Haven’t Ofcom recently announced that customers can cancel contracts because of price increases?” and offer response. And what is that response? “The new Ofcom guidance covers all contracts entered from the 23 January 2014, this price increased is not covered by Ofcom’s new guidance“.

I think it is fair to say that your marketing team deserve a commendation, as your deft copywriter has managed to overcome the obvious objection by being somewhat economical with the truth. You see, the regulation is still the same…a customer still has the right to a penalty free exit when a materially detrimental change has been imposed on their terms (see General Condition of Entitlement 9). All Ofcom have done is said that any such increase to the core bundle of services for contracts entered into on 23rd January 2014 onwards is de facto materially detrimental. As I have written before on this site, though, a contract entered into the day before this guidance came into force is not de facto materially detrimental for such an increase. That doesn’t really withstand much intellectual scrutiny as an argument, though, so perhaps we should go down to CISAS, which I think is the approved ADR scheme used by EE. Let them decide. Also, perhaps you’d like to tell all the good readers on Trefor.Net how much each Alternative Dispute Resolution case costs for you to resolve and let them work out how much your increase is worth to you…I suspect EE would be singing a different tune if that level of consumer power were mobilised.

And on that note, I am off to see if I can buy shares in CISAS. I, and many of my fellow consumers which have endured this change, look forward to your response.

Love, hugs and kisses,

Pete

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  1. PhilT

    Even the relevance of the CPI is suspect :-

    “The term ‘basket’ is perhaps a little misleading as it suggests goods included in your regular shop. While these items are included, other important types of purchases are included as well. For example, there are:

    Household bills such as gas and electricity
    Big ticket purchases such as fridges, cars and TVs
    Services such as childminder fees, marriage licences and nursing home costs
    Leisure activities such as football season tickets, holidays and concert tickets”

    does that really reflect EE’s cost base ??

    http://www.ons.gov.uk/ons/rel/cpi/cpi-rpi-basket/2014/sty-basket-of-goods.html

  2. Neil McRae

    I don’t like bill rises either but I think your argument has some flaws.

    Firstly EE pays people!

    do you get free minutes in your package? And did you also note that calls to mobiles have also had termination rates reduced, as well as roaming charges have been substantially reduced in Europe.

    WRT to the spectrum auction, have you thought that you might already be paying less because the spectrum auction cost mobile operators less?

    Neil.

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