Original URL: http://www.theregister.co.uk/2010/11/16/giffgaff_comes_clean/

Giffgaff says some subscribers yakked for 9 days a month

Financial reality hits Web 2 network

By Bill Ray

Posted in Mobile, 16th November 2010 12:50 GMT

It was harsh economics, not popularity, that put the kibosh on the unlimited tariff from giffgaff, as some customers were costing the company £500 a month.

Not that giffgaff was keen to admit the obvious motivation behind the shelving of its £30 "goody bag" which allowed unlimited calls and text messages as well as the unlimited data common to all the bundles. When the removal was announced The Gaffer said it was because the bundle had proved unpopular, with less than 5 per cent of giffgaff customers taking advantage of it.

Customers were quick to point out that limited appeal is no reason to pull a profitable tariff, and The Gaffer's arguments that it still cost the company in terms of promotional activity and web space fell on deaf ears. It was pretty obvious that the unlimited goody bag should remain on offer if it was making money for giffgaff.

Which, of course, it wasn't. In an updated blog The Gaffer admits that some customers were using more than 13,000 minutes a month (that's more than nine continuous days of conversation), and that the average was over 5,000 minutes (three and a half days). Assuming a termination rate* of four pence a minute (to mobile numbers) then 13,000 minutes costs giffgaff £520, obviously unsustainable for a £30 bundle.

This is why most operators have a fair use policy, so they can cut off customers taking the piss. But giffgaff is ideologically opposed to fair use, so pulled the tariff instead.

The problem, for a network that wants to be open, is that those figures are worth a lot to the competition; any operator considering a similar offering now knows the average use and can price appropriately, which is why giffgaff didn't mention them earlier.

The Gaffer has now opened a discussion on whether the company should start offering a bundle with capped minutes, but being forced to reveal your hand to your competitors is going to make life even harder for the network run by its customers. ®

* The amount the caller's operator has to pay the callee's network for routing the call.