Monday, 19 July 2010

Would you give BT £1 million just for being a helluva nice company?

We're doing a bit of a Watchdog service today.  Let's talk about phone calls.  Because it's good to talk!
Let's say you make a call of 3 minutes and 20 seconds at a cost of 2.45 p per minute.  How much should it cost?  Well, that's a duration of 3.4 minutes x 2.45p = 8.1666585p (£0.081666585). Oh, and there's a call connection charge of 9.9p, and then we should add VAT to this (17.5%), which gives us 21.2283237p.  Ok, so on your bill it should read £0.2123 as the cost of this call. Right? Wrong!

For BT and many other companies, they do this instead.

The call lasting 3.4 minutes is rounded up to the next minute, making the call duration 4 minutes.  Now, anyone who has completed primary school maths will tell you that you only round up then the number after the decimal is .5 or greater.  Ok, so they've rounded - it's not a big deal. Well, it might not be, if they just rounded once, but they don't. 

The cost for that call is now 4 x 2.45p = 9.8p.  Guess what? That's now rounded up to 10p.  Ok, so now the call-placement charge is added, which is 9.9p, except before this is added, guess what happens? That's right, it's rounded to 10p.  So lastly we add our VAT which gives us a grand total of 23.5p.  Phew, finally got there. Oh, except I forgot to round that one too.  Right, so the actual final cost is 24p for my call. This amounts to an additional 2.77p just from rounding at these various stages.  That's an extra 13% on your call cost.

Ok, so this is just a toy example, but it does illustrate the ridiculous nature of the phone companies' approach to maths.  You could do many examples where the cost of rounding would be greater (for even shorter calls with greater rounding discrepancies) or lesser (for longer calls that have lower rounding discrepancies). 

But how much would a company like BT actually make from this little mathematical sleight of hand? Well, it was recently announced that BT would be increasing call charges by 10%, which would affect about 12.5 million customers. How much could they make from these customers with their method of rounding?

If customers made say three calls per week, with similar rounding discrepancies to the example above, this would raise BT an additional £1 million per year (actually £1,038,750).  Does this seem fair to you?  Of course, this amounts to just pennies to individual customers, but I'm still not sure that justifies this particular billing formula.  BT made a profit of over £1 billion in 2009, surely they don't need to be multiplicatively  rounding customers' individual calls as well as increasing their call charges by 10%. 

I've mentioned BT here simply because they are the biggest telecoms company with the largest number of landline customers.  However, almost every other phone company operates a similar approach.  Is there any need for it?  Is there any justification for it? Absolutely not.  This is simply corporate greed creaming off as much as they can from people who can little afford in a time of deep recession.  These companies should feel shame, but of course that's the great thing about corporations; they have no heart.

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