Vodafone's double-step scam

It's an unending mystery to me how mobile phone companies have persuaded entire nations to pay huge monthly bills when only a few years ago people were complaining about the cost of public telephone boxes.

The most recent tactic adopted by the world's biggest mobile phone company, Vodafone, is simply to tell you one thing and a charge something else (always more), with the reasonable expectation that only a small percentage of people will notice and/or complain. It is the New Economics of the Withheld Promise.

The scam – because that's what it is – is to offer a special deal on a big package. So, for example, you are offered six months at half-price if you sign an 18-month deal. This aides the salesman into getting you onto a larger tariff than you really need by stressing the real cost to you at that moment. This much greater text and voice minute allocation in turn encourages more mobile phone use.

In one sense it is the same as selling cheap cigarettes to Asia in order to get people hooked, at which point you raise the price. Except the difference is that tobacco companies sell initially at a loss. Mobile phone companies have prices returning low-profit and high-profit.

The idea is that after six months, you will stay on the same tariff for 12 months but at the full price. Vodafone is buying your loyalty.

This would appear to be creative business modelling. However, the scam is that Vodafone conveniently and consistently forgets to add the special deal offered in the shop to the actual contract. So when you receive your bill, you are charged full price.

Complain about this, provide the paperwork, and the company will immediately and without hesitation provide a monthly “discount” on the account and reimburse you for any “discounts” you should have received previously.

The exact same approach is taken with the scam of our ages – insurance. Vodafone will give you two months free insurance and then start charging for it. But even if you turn up at a shop and cancel the insurance, you will find it still pops up on your bill.

Again, call the company up and complain and it will suddenly discover there was something on your account about cancelling the insurance. It will then cancel the insurance and refund any unnecessarily paid insurance.

It is a two-step process designed to catch out the majority of people who simply do not check their bills because they trust a company to supply what was agreed. When it becomes so profitable however that a system attains semi-official acceptance, it is a scam.

Currently there is no cost, only profit, to this two-step approach, so there is an extraordinary temptation to spread the approach across the industry. The competition authorities are still fighting with the mobile phone industry over previous scams.

The artificially high cost of calling between networks was dealt with. Now it is the extraordinarily high and unjustified costs associated with using your phone abroad. The mobile phone industry has developed its own culture of ripping off customers through unnoticed transactions and then gradually backing down as competition authorities hammer them.

Wouldn't it be nice if Ofcom and other regulators were as inventive as the mobile phone companies themselves and starting developing disincentives to prevent future abuse, raise than simply chasing the tail?