Click the Blue Word to Follow Us

In most sectors, businesses prize customer loyalty, often rewarding it with discounts to foster long-term relationships. However, the telecom industry appears to buck this trend. Recently, allegations have surfaced that the Big Three telecom operators are exploiting their loyal customer base, sparking the question: Why do service costs escalate the longer you remain a customer?

PART.01 The Big Three Telecom Operators Accused of Overcharging Loyal Customers

According to The Paper, consumers across various regions have reported facing higher plan fees as long-standing telecom users, while attractive discount plans are reserved for new or upgrading customers. Some have only secured these discounts after persistent communication with customer service, even threatening to switch providers or file complaints with regulatory bodies. This issue has ignited heated online debates.

IT Home learned of Ms. Li, a 12-year mobile subscriber, who pays 79 yuan monthly for a plan that includes just 5GB of data (with free usage after exceeding the limit) and 90 minutes of calls. After multiple unsuccessful attempts to reach China Mobile's customer service, she finally secured a better deal by explicitly stating her intention to switch providers and lodge a complaint with the Ministry of Industry and Information Technology. Her new plan, under a two-year contract, retains the 79 yuan monthly fee but adds 30GB of data (with throttling after exceeding the limit) and increased free call time.

Similarly, a Guangdong-based China Mobile user with nearly two decades of service reported a 159 yuan monthly plan that includes 400 minutes of free calls and 80GB of data. In contrast, her friend's 39 yuan plan offers not only a 480 yuan call credit subsidy but also 110GB of data, making it significantly more cost-effective.

China Mobile is not alone in facing such complaints. China Telecom and China Unicom have also been accused of similar practices. A five-year China Unicom user in Heilongjiang reported that his previous 159 yuan plan included 700 minutes of calls and 40GB of data. He recently found a more cost-effective new plan but was unable to switch. "After several complaints, my plan was upgraded to include 220GB of data and 1000 minutes of calls, originally a 199 yuan plan now discounted to 139 yuan," he said.

PART.02 Why Do Costs Rise with Tenure?

The recent online uproar over the Big Three telecom operators being accused of "overcharging loyal customers" continues to simmer. Many users have observed that the longer they stay, the higher their plan fees become, while new users enjoy discounts that seem unattainable for loyal customers. What commercial rationale underpins this practice?

Firstly, this is a classic case of third-degree price discrimination. What does this mean? Simply put, businesses categorize consumers based on their price sensitivity and charge different prices accordingly. In the operators' view, new and loyal customers are distinct groups. New customers are highly price-sensitive, and without substantial discounts, they have little incentive to choose one operator over another. Therefore, operators must allocate resources towards attracting new customers, even if it means initial losses.

But what about loyal customers? Operators are astute calculators. They understand that loyal customers are highly unlikely to switch because their phone numbers are deeply integrated into their lives, linked to WeChat, Alipay, bank accounts, and even access cards. The cost of switching numbers is prohibitively high. Since you're unlikely to leave due to these network ties, operators see no need to offer further discounts and instead use high prices to retain you.

In their eyes, loyal customers are not cherished relatives but assets to be exploited. Since you're unlikely to switch, why not extract more value? This strategy, while common among internet giants, appears particularly egregious when applied to essential communication services that impact people's livelihoods.

Secondly, in a saturated market, operators aim to maximize profits from existing users. After decades of infrastructure development and user penetration, the mobile and broadband user penetration rate in China has nearly reached its peak, leaving little room for significant new user growth. The era when operators could boost revenue and market share by acquiring new users has ended.

In a saturated market, the underlying business logic has shifted. During the growth phase, operators were willing to operate on thin margins and offer discounts to all users, relying on user scale growth for long-term returns. Now, with new user growth sharply declining and the costs of acquiring new users rising, relying solely on new users can no longer sustain revenue and profit growth.

In contrast, the returns from cultivating existing loyal users far exceed those from competing for new users. This has led the Big Three operators to a consensus: they no longer pursue user scale expansion but instead focus on extracting value from existing users. Compared to the high costs and uncertainties of competing for new users, relying on the high stickiness and low churn rate of loyal users to maintain high-priced plans and reduce benefits for existing users is a more cost-effective and certain business approach. In this industry landscape, loyal customers have become a stable profit base for operators, and high-price locking has become the industry norm.

Thirdly, operators exploit your "social entanglements." Take the author's personal experience as an example. For years, I've used China Mobile's services, starting with a basic plan and constantly being upsold to higher-tier plans by customer service, leading to steadily increasing fees. Whenever I inquired about more cost-effective plans, customer service would always recommend seemingly discounted but actually deceptive plans under the guise of "exclusive benefits for loyal customers." When I tried to inquire about the number porting process, I encountered numerous difficulties, including various plan bindings and contractual restrictions that made it daunting to proceed. I explicitly stated my intention to switch to the lowest-tier plan, but customer service would dodge the issue, claiming system upgrades or the need to visit a physical store. Why do operators dare to act this way?

Are they really unafraid of alienating loyal customers? They are simply emboldened! They understand that behind each phone number lies a vast, intricate social network. Your home broadband is tied to this number, your family plan connects your parents and children, and your work groups are all on WeChat linked to this number. One change affects the whole system. No matter how dissatisfied you are, do you dare to easily cancel your service? Even with the number porting policy in place, do you think you can easily leave? Naive. If you try to port your number, you'll immediately face various attractive number agreements, broadband contracts, and device subsidies that bind you layer by layer, like an invisible net trapping you firmly. The rules are designed to immobilize you, leaving you no choice but to accept the situation. This practice of leveraging users' sunk costs to coerce them is the very source of operators' confidence in overcharging loyal customers.

Fourthly, operators possess absolute information advantages that leave you defenseless. In the game between operators and users, information is completely asymmetric, with operators holding an overwhelming advantage. Think about it: when you open an operator's APP or visit a physical store, the most prominent plans displayed are always the flashy, high-priced ones. Where are the cheap, cost-effective plans? Sorry, you have to search for them like a treasure hunt in a corner, or they might not even be displayed online at all.

But that's not all. Even more frightening are the complex pricing algorithms in the background. They create profiles and tiers for each user. Your consumption habits, peak data usage times, and monthly phone bill budget are all clearly visible in their system. Once the system identifies you as a highly sticky user—someone who doesn't cause much trouble and pays on time—it will default to applying high-price strategies to you.

You have no idea how much others are paying for the same plan, nor do you know that the so-called "exclusive offers" pushed to you are actually traps for precise harvesting. This algorithmic price discrimination leaves you defenseless. You think you're being served thoughtfully, but in reality, you're being precisely calculated. Faced with such black-box operations, ordinary consumers are like running naked, with no means of defense.

Finally, we must confront the oligopolistic nature of the telecom market. The current communication market is a classic oligopoly, with a few giants dominating the vast majority of the market share. In industrial organization theory, oligopolies tend to collude or tacitly cooperate to obtain monopoly profits. Although regulatory authorities have repeatedly issued policies demanding "faster speeds and lower fees" and ensuring equal rights for new and existing users, these efforts often amount to little more than loud thunder with little rain in actual implementation. As long as the oligopolistic market structure remains fundamentally unchanged, the internal impulse of enterprises to pursue excessive monopoly profits will not disappear. As long as the cost of violations is far lower than the benefits of "overcharging loyal customers," such price discrimination leveraging information asymmetry and switching costs will be difficult to eradicate completely.

Therefore, my judgment is that as long as the market structure remains unchanged and the three oligopolies continue to dominate, "overcharging loyal customers" will not truly stop. It's not a moral issue of individual enterprises but a systemic problem of the entire market structure. What you can do is either regularly compare prices and actively request plan downgrades or muster the courage to port your number. But honestly, most people end up cursing a bit and then continuing to use the service reluctantly.

END