According to the study, 83 percent of 18–24-year-olds had changed their contract in the previous three years.
Telephone subscriptions price competition works quite well from the point of view of consumers, according to the preliminary research data of the Finnish Competition and Consumer Agency.
The general drop in the price level caused by competition narrows the price dispersion and thus also benefits passive consumers who do not compete for their subscriptions.
According to the research, tendering brings consumers an average saving of 24 percent when comparing list prices and final prices paid by consumers when contracts change. The savings apply to all tenders, regardless of whether the person continues with the same phone operator but with a different contract or changes company.
“The competition seems to work and benefit all consumers,” sums up the research manager Samuli Leppälä From the Competition and Consumer Agency.
Bidding brings some costs to customers, for example, opening fees for new contracts, and requires effort. In addition to prices, consumers should compare other features of the subscriptions, such as the size of data packages and transfer speed.
The ongoing research on competition in the telecommunications market is based on monthly data on Finns’ mobile phone subscriptions and their prices in 2019–2021. The authors are Leppälä, Jan Jääskeläinen, Antti Sieppi and Anni Väättänen.
Commodities The price gap consists of how much consumers are most willing to pay for them and at what minimum price the producer is willing to sell.
“The variation in prices between now and then is affected by what proportion of consumers goes to tender. If there are no competitors at all, there is no incentive for companies to offer lower prices, because new customers cannot be reached this way. Correspondingly, when the number of bidders increases, the producer has an incentive to make offers. This results in price competition and a decrease in the price level,” Leppälä explains.
However, the risk is that passive consumers will suffer from price competition. For example, if they prefer different commodities than the bidders, the company may compensate the offer prices received by the active bidders by raising the prices of the subscriptions that are less bid.
In telephone subscriptions, this risk applies especially to older age groups, who do not compete as much as others. According to the study, 83 percent of 18–24-year-olds had changed their contract in the previous three years. 65 percent of those over 80 had done so.
Some seniors also used slower connections, the demand for which is lower than others. Those over 70 preferred connections of at most one megabit, while only four percent of those aged 18–24 used them.
However, the risk regarding the elderly did not materialize, as the prices they paid did not deviate much from the average prices.
Among those under 70, the most popular internet connection had a speed of one hundred megabits. According to Leppälä, faster connections have become more popular now.
“We like as a good thing, the fact that competition benefits consumers. It is gratifying if the Competition and Consumer Agency has made such findings”, commented the lawyer Emmi Meriranta Consumers Union.
The consumer interest organization does not receive very many contacts about the telecom market and subscription prices. However, Meriranta points out that the price level in Finland is not the cheapest in Europe. For example, in broadband price comparisons, Finland ranks above and below the average in some categories.
“Finland performs well, but it is not the best forerunners in digitization, if cheap prices are used as a measure.”
Competition is beneficial for the customer, but it can also be frustrating. Many people have the experience of first having to change their subscription to a competing operator, after which the old operator makes a new offer.
Tendering should often be done every year, when the old benefit period is coming to an end and the price of the subscription increases.
“Beginners should start bidding by looking at their current bill and figuring out how much they call, send text messages and use the internet. It helps to conclude” what kind of connection you really need.
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