Metro Cellular, a service provider on the Cellnet and Vodafone telephone networks has decided to lower call charge rates by up to 30%. Users that buy their airtime through Metro will pay 28 pence a minute inside London and 21 pence outside. Current rates are 33 pence in London, 25 pence otherwise. Metro has made the move to improve its profit margins. Michael Goldstone, chairman of the group calls the current pricing structure totally illogical from both the service providers and the users point of view. Service providers sell equipment and airtime to users of cellular phones, both of which they buy wholesale. In order to entice customers on to the network, portable handsets are priced artifically low, as much as UKP300 below cost price. Service providers attempt to recoup the lost money – and make a profit – through selling the airtime. But Goldstone says this strategy is totally self-defeating. Users are attracted by the low prices, but then cannot afford to pay the high bills. A lot of customers do not last, and the providers end up cutting them off when bills are not paid. This results in a lot of lost profit as none of the original costs of putting someone on the network are recouped by the service providers. Metro is increasing the price of a handset by UKP150, although infrequent users can opt to pay the normal lower price and the higher call rates. Goldstone says the higher initial cost will also deter those that cannot really afford to pay for the call costs. However, he did not think that Metro would be able to bring down call charges any further.
