Assess possible reasons why many ‘landline-only’ customers do not switch to a cheaper telephone provider

Edexcel A-Level Economics Paper 1 June 2019 Extract

With reference to Extract C, assess possible reasons why many ‘landline-only’ customers do not switch to a cheaper telephone provider. (10 marks)

1. One reason customers might not switch to a cheaper provider is due to irrational behaviour.
2. Switching providers regularly is the most rational thing to do as it means that customers pay lower prices and can enjoy more consumer surplus.
3. One reason why this ends up being unlikely is because customers have computational weakness.
4. This is the idea that people find it difficult to figure out the best decision for themselves, as they might struggle with logical thinking or with gathering information.
5. Customers might not have attempted to find a new telephone provider, especially given the fact many have been with BT for decades, which has allowed prices of consumers to steadily increase without them being aware of

1. However, customers can benefit from stronger regulation.
2. Ofcom have pressured companies like BT to provide better value for money.
3. Prices are expected to "fall from £18.99 to £11.99 per month" meaning that they will not be exploited from not switching.

1. Another reason landline-only customers do not switch is a lack of information about alternative providers.
2. Typically, consumers are likely to select the cheapest alternative available in a market.
3. This is unlikely to be the case for landline-only customers as customers are usually sent automatic renewals to make it as easy as possible for them to remain with the same provider.
4. Customers will not be given information by their current providers about how to shop around.
5. It is also more likely to be elderly customers who are still using landline, and they are less likely to use the internet and use comparison sites to understand the options available through switching.
6. Customers have faced price increases between "23% and 47% in recent years".

1. However, Ofcom have said it will be helping people "shop around for better deals with more confidence".
2. This will make it easier for customers to be aware of options when it comes to renewing their landline services, making it more likely that they do end up switching.

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