Dutch mobile services provider Simyo, part of the KPN group, has started offering two-year contracts. Customers who opt for a two-year contract will pay EUR 1.00 (US $1.02) per month less than the 12-month subscriptions and EUR 2.00 (US $2.05) less than a month-to-month service plan.
Simyo also offers a range of monthly data plans, from 2 to 10 GB. Customers who also purchase fixed internet from KPN get double the standard data amount.
Two-year service contracts, which lock a customer into a specific plan with one carrier were once a staple of the wireless industry and helped drive its growth early in the smartphone era, when these contracts allowed operators to subsidize device purchase. However, over the last decade, mobile operators have been increasingly moving away from service contracts, focusing instead on simplified plans which offer greater flexibility. MVNOs and budget carriers initially pioneered this strategy, and were often able to leverage it to attract consumers, who were frustrated with the rigid contract terms offered by market leaders.
All this history serves to make this latest announcement by Simyo – which is a youth-focused, digital-only, “fighter” brand – all the more unexpected.
That said, on closer examination, there are likely some reasons to believe this might signal an emerging trend for small carriers like Simyo. With large MNOs now able to offer deep discounts on mobile as part of converged quad-play plans, these mobile-only providers are facing difficult headwinds, having lost a significant amount of their pricing advantage. Further, now that the strategy of simplified plans without commitments has been fully embraced by most MNOs, offers from the smaller carriers are no longer differentiated. In short, these providers need to identify new ways to compete.
The reliability of revenue from contracted plans means that small providers can offer deeper discounts on these offers, restoring some of their traditional pricing advantage. It is an interesting bit of irony that Simyo, the type of operator which was first to abandon service contracts, is now reintroducing them. However, considering the changes in the difficult environment in which these operators are competing, it would not be surprising to see similar others follow suit in the near future.