A predication for the future is that everyone will have their own separate mobile phones as this will make everyone individual. They would be able to carry out a range of functions from the phones as they would be so advanced, and the fixed telephone lines would no longer exist fro the purpose we use them today. These lines would be used only for high speed data access via the internet.
Ownership of mobile phones amongst adults living in the UK is half the population but it is worth noting that this includes the 15-24 brackets which contain the majority of teenagers, who are able to purchase mobiles much more freely since the introduction of “Pay as You Talk” pre-pay packages into the market. This is the biggest sector within the market with 87%
It is fairly easy to see from figure that the majority of members of the population in the highest income-bracket, own a mobile phone, and this was expected due to the relative expense of mobile phones. Whilst their prices have lowered in recent years, they are still considered by most of the population to be too expensive.
From the chart I can tell that Orange having the largest market share, but the share is held by each operator is roughly the same.
Here I can see that the leading package type in the UK is the relatively new Pre-pay package with a 70% share. It is also worth noting that, whilst there is no evidence here, the majority of consumers who own a Pre-pay package are under the age 18. This is largely due to the fact that minors cannot sign the contract necessary to have a monthly-billed phone and a pre-pay package is the only other viable option. It is also due to the introduction of mobile phones into teenage fashion as well as a general fashion accessory.
From the information gathered and put forward above, the following factors can be seen to be the primary factors affecting the demand for mobile phones:
- Cost, to the consumer, of owning a mobile phone.
- Cost of the mobile phone’s substitute, the fixed line.
- Fashion status of mobile phones.
The cost to the consumer is affected by both the supply and demand of mobile phones and the network services that operate them. Now that the operators’ digital networks are operating at very efficiently with coverage over nearly all of the UK, the price of operating the network is relatively low for the operator so the profit margin on line rental is very large. This profit margin is brought down slightly due to the subsidies paid by operators on mobile phones when purchased with one of their tariff packages, but the fact is that the high set up costs have all been covered now. This means that there is still a high profit margin and therefore the operators are willing to supply mobile phones and services at virtually any reasonable price. This results in a supply curve similar to this:
From the supply and demand diagram that I have drawn I can see the supply is rather inelastic in that a drop in price (S1, S2) results in a small decrease in quantity willing to be supplied by the operators (Q1, Q2). The demand, however, is rather different. Because of the strong willingness to supply, causing the shallow supply curve, the operators have provided low prices for consumers and as a result the demand for them has risen.
The price of mobile phones is also affected by the state of the market and the competitors within that market. The state of the UK mobile telephony market is known as an oligopoly. As a result the few sellers can manipulate prices and other market factors to their advantage. This also gives the appearance of a cartel or price-fixing agreement in operation.
The aim of cartels and price-fixing agreements is to maximise joint profits. This definition fits this market almost perfectly because all four operators manage to sustain a more or less equal market share and their profits are high due to the fact that their prices are equally high. It is important to realise that this is only relevant to call costs and the network services, since as the mobile phones themselves are not produced by the operators but rather electronics companies, such as Nokia, Ericsson and Sony.
The cost of the mobile phone’s substitute, the fixed line, fixed line providers, namely BT and cable operators are not in direct competition with mobile phone operators but there is a rather large difference in price of calls. Mobile phones have the obvious advantage of portability and this is what has allowed its operators to force higher call charges than companies that offer the fixed line service. This could well change in the future as the prices of mobile phone calls are driven down by the introduction of other entrants and competition between the firms.
From the above information I have put together I can see that the mobile telecoms market as increased rapidly over the past few years. The general trend is also that there is likely to be more growth in this market. Some of the main reasons behind this are that the mobile phone operators are virtually throwing offers at consumers to get them signed up. There is a massive introduction of technology being introduced that enables customers to carry out many new tasks such as actually send video clips to each other that they have created on their mobiles.
The cost of owning and running a contract phone is still expensive with and average monthly spending pattern of £18. This is much cheaper then what the cost used to be when these products where first introduced. Then operators also have many offers to get customers to ‘join up’ by giving away free mobiles and free minutes for them to use.
The mobile has also become a must have fashion accessory and customers are always upgrading their mobiles so they can have the latest technology or the mobile that looks the trendiest. So they have become a must have product and became the best selling product a couple of Christmases ago. The mobiles can also be a sense of security for people as they feel safe carrying them around in case of emergencies and it a case of ‘the technology is there why not use it’. I can see big growth in this market in the future as the technology develops and also the introduction of high speed internet access as already been pushing people away from the fixed line phone to mobiles. Prices have fallen drastically as demand for digital mobile phones increased and mobile phones became more and more popular. 07949478826
