Cow’s Blog

September 1st, 2008

photo: William Hook

In July, I wrote about the iPhone 3G on Pay As You Go. O2 have just released details on the iPhone 3G Pay As You Go release and it differs slightly from the previously leaked information.

From the O2 Website:

Pay & Go customers can now enjoy the iPhone 3G without a monthly contract. The new iPhone 3G 8GB for Pay & Go will be available for £349.99 and the 16GB version for £399.99.

This also includes unlimited browsing and Wi-Fi for the first 12 months after you activate your iPhone 3G*. At the end of the 12 months you can continue to receive unlimited browsing and Wi-Fi for just £10 per month.

So the 8GB model costs £50 more and the 16GB model costs an additional £40 compared to the previously leaked prices. However, you’re now getting an additional 6 months of data for free (worth £60).

It still looks very attractive to me. The total cost of ownership over 2 years on PAYG is £470 (£19.60 per month) assuming no spend on calls and texts. I’ve made this assumption because O2 will give you 300 free texts or 500 free minutes every month when you spend £10.

The cheapest contract is £30 and you’ll still fork out £100 for your phone. The total cost of ownership on contract over 2 years is £820.

The iPhone PAYG will make the iPhone 3G affordable for many more people. But £350 is still a lot of money to pay for a phone - probably £250 more than what you’d pay for any other phone. But It is a premium I’d consider paying because the iPhone is such a fantastic platform.

• Apple , Mobile , UK
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August 20th, 2008

photo: burge5000

I’m going to Reading Festival this weekend which 80,000 music fans are expected to attend. It’s my second music festival and I can’t wait! Reading Festival certainly isn’t cheap. For many teenagers of my age with only part-time jobs, the cost of Reading Festival (£155 + p&p, other spending) is at least a whole months wages. £155 could buy a lot else. So are music festivals a big rip off? Well, obviously it’s a personal and a subjective opinion. I’d argue that at £155, it’s great value. Here’s why.

Two facts: Tickets for Reading Festival sold out very quickly - less than two hours. Tickets on the black market (eBay) have gone as high as £300 each. A friend of mine was offered £500 for his ticket.

As an economist, this indicates to me that, in fact, music festival tickets are under priced. In economics, we have something which is called the equilibrium price. This is the price for which supply equals demand. For example, if 80,000 people want a ticket at a price and 80,000 tickets are available at that price, the market is said to be in equilibrium.

photo: Ian Wilson

In the case of Reading Festival, it is obvious that at the price of £155, more people want tickets than the number of tickets which are available. So the organisers could increase the price of a ticket and still sell out to capacity.

Why is that a problem? Surely the fact that tickets are “too cheap” is good news for festival goers such as you and I. We’re saving money after all aren’t we? Kind of.

Firstly, it’s a waste of everybody’s time to queue up overnight for tickets, or to have to keep refreshing a website to buy them.

Secondly, there is the problem of the black market. People are buying tickets for £155 and selling them on the black market (i.e. eBay) for double that. That means £150 of profit has gone towards a ticket tout, who has served no useful purpose at all, as opposed to towards the organisers who could put the money into improving the festival for everyone.

photo: Stig Nygaard

The black market is also a dangerous and difficult place to deal. Many fans bought tickets on unofficial sites such as SOS Tickets and never received them. They’re now disappointed they can’t go and may have difficulty in getting their money back. And the sole reason why people had to turn to the black market in the first place is because they can’t get them from legitimate agents, so it’s as a direct result of below equilibrium prices.

There are several reasons why Reading festival may have been under priced. It’s possible that the organisers wanted publicity from queues outside stores, and being able to announce that it sold out within 2 hours on the news headlines. Or they simply didn’t expect demand to be so high.

Reading Festival tickets are cheaper than they should be. For the lucky ones amongst us who were at the front of the line to get tickets, that’s great news - we’re getting a bargain. But for everyone else, it’s bad news. It leads to a secondary market, and that’s a recipe for being ripped off, scammed and paying vastly over-the-odd sums: most of which doesn’t even go to the festival organisers.

• Economics , Music , UK
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June 25th, 2008

photo: apesara

This post is for the benefit of all my British readers on the T-Mobile Pay As You Go network.

You can get £5 of free credit by registering and logging in to My T-Mobile by the end of June. You can use the credit for free calls, texts or picture messages but you might have to wait up to 28 days to recieve it.

Do check out the terms and conditions on the T-Mobile page.

Incidentally, T-Mobile has a nice “Text Appeal” tariff which allows you to send a text for just 3p. The downside is that calls cost 20p to T-Mobile and 40p to other networks. But with so many people now getting free calls from their landlines, this could be a great deal: you’ll get 333 texts from your £10 top up rather than 100 as you might on Orange Pay As You Go or O2 Pay As You Go.

I hope this post saves somebody some money!

• Mobile , UK
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June 16th, 2008

I received an e-mail from the team at AMV BBDO about the THINK! Driving Challenge which I wanted to share with all of you.

It is a website which demonstrates just how difficult it is to talk on the mobile phone whilst driving: an issue which is quite close to my heart. Last year I was crossing at a crossroads: opposite was a stationary car. The driver was obviously distracted for some reason and moved off harshly whilst we were crossing. Thankfully she stopped the car a few inches before she knocked us out.

Anyway, give it a go before you proceed any further down the post so it’s not spoilt for you!

Nicola Davies writes:

Just over a year on from the introduction of the tough new penalty of three penalty points and a £60 fine for using a mobile phone whilst driving, the Driving Challenge directly builds upon a film made by the University of Illinois 10 years ago which demonstrates the psychological principle of ‘inattentional blindness’.

I wrote about a gorilla/basketball video several years ago which demonstrated this inattentional blindness.

Credits:

Client: Department for Transport
Agency: AMV BBDO
Creative: Gary Hoff, Stuart Woodall, Sean Vrabel
Account Management: Kate Gault, Giovanna Cucchi, Olivia Browne
Digital Producer: Nicola Davies
Web Production: iCG
Film Production: Brick and Pin
Director: Richard Topping
Exposure: Online

• Science , UK
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May 28th, 2008

photo: kalleboo

In the past I’ve always recommended O2 as the best pay as you go network in the UK. O2 Online tariffs offer you tons of free minutes and texts when you top up and I’ve found it even better value for money than being on a contract. I currently send about 200-250 texts a month and use my mobile to check my email occasionally for no more than a fiver a month.

However, I think the new package from Orange is even better value for money.

On the pay as you go Dolphin package, when you top up £10 you get the following for a month for free:

• 300 free texts
• 20 minutes daily Facebook access
• Orange Wednesdays (2 for 1 at the cinema)

Orange is currently offering a free SIM card worth £10 which also includes 1,000 free texts (worth £100, apparently).

It does cost 20p a minute to make a call on the Dolphin package so if you call a lot, it’s something to consider.

O2 Text Anytime is also worth considering - you get the 300 free texts or 500 minutes to O2 phones and landlines when you top up £10. You used to get 1MB data for free too but it looks like this isn’t available to new subscribers. If you’re already on O2, customer services can switch you to this tariff for free. Otherwise, if you’re a one of those people who use their mobile a fair bit but a contract wouldn’t be price effective, check out the Orange tariff!

Hope this saves somebody some money!

• Mobile , UK
• Comments(1)

May 27th, 2008

photo: B a m s h a d

As a student currently embarking on a university degree, I’m looking forward to the freedom university will offer and meeting a whole bunch of new people from across the world. But one major worry is the finance: the cost of going to university.

Many people only look at tuition fees when they think about going to university. In the UK, university tuition is roughly £3,000 a year. For a 4 year masters degree course, this adds up to £12,000.

Tuition Fees: £12,000

But there’s the cost of accommodation, which is typically at least as large as the tuition costs. The cost of accommodation varies. In some of the larger cities, a room will typically cost £120/week. In some smaller town universities, £80/week might be closer to the norm. A 40-week let on university accommodation will set you back £4,000 a year. However, in later years of university, most students will live outside of university halls and this will be more expensive. Assuming an average accommodation cost of £4,500 per year, this adds up to £18,000 over a 4 year degree course.

Accommodation Cost: £18,000

photo: paolo màrgari

There is a much bigger cost which most people don’t even think about. Because studying at university and getting a full-time job are mutually exclusive options, by choosing to go to university you are actually saying “I will not be going to work” as well as “I will be going to university”. Economists call this the opportunity cost.

By choosing to study at university, you are foregoing 4 years of salary which you would have earnt otherwise. The typical starting salary for somebody leaving school with A-Levels but no university degree is £15,000 a year. By working, you’d potentially have earnt £60,000.

Opportunity Cost: £60,000

The other significant cost which needs to be considered is housing. Over the last few years, house prices in the UK have been rising by about 10% a year. What this means is that a house which will cost £100,000 today will cost £110,000 this time next year. Leaving university with £30,000 of debt and without £60,000 of salary means that university graduates must wait even longer before they can put together a deposit and get a foot on the housing ladder. On top of that, graduates may have to take out a larger mortgage on their first home because they cannot make a large upfront payment. Obviously, the appreciation in housing value depends on market conditions, but I think £10,000 is a reasonable ballpark estimate.

Housing Appreciation Cost: £10,000

So to sum it all up, when we take in all the costs of university:

£3,000 a year for tuition X 4 years = £12,000
£4,500 a year for accommodation X 4 years = £18,000
Direct Financial Costs: £30,000

£15,000 a year could have earnt in basic non-graduate job X 4 years = £60,000
Opportunity Cost: £60,000

House price rise in the additional time you must wait before buying = £10,000 (obviously this depends on whether house prices are rising)
Housing Appreciation Cost: £10,000

Total Cost of going to university: £100,000

It’s pretty depressing reading. University is a very, very expensive enterprise. It’s easy to see from these calculations why so many lower income families find it very difficult to send their children to university.

photo: Thiru Murugan

But I think it also calls into question whether it’s worth going to university to study certain degrees. According to the government’s graduate prospects website, graduates in humanities earn £51,549 more in their lifetime and graduates in arts earn £34,949 more. Are the real costs of going to university greater than the benefits?

On average for all degree courses, those who graduate from university earn on average £160,000 more over their lifetime. This would still seem to indicate that going to university is good value for money. But the net benefit is probably less than people would think.

I really don’t want to put anybody off studying at university and I don’t think money should ever stop anybody from pursuing their dreams. But what is true is that going to university is an extremely expensive enterprise these days and students may be getting a bit of a raw deal.

• Economics , Politics , UK
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May 15th, 2008

photo: 708718

Congestion and pollution are two “external costs to society” which are associated with driving. When you take your car out of the garage and take a trip down to the local supermarket or pick up the kids from school, you are imposing costs on other people: exhaust fumes which others must breathe and you take up space on the road contributing to traffic jams.

To correct for social costs, governments use taxes to make sure the individual pays for the costs they impose on society or to “internalise the external costs”. There are three taxes which are used to try and discourage driving:

• VAT on Buying a Car
• Road Tax
• Fuel Tax

People hate taxes. People remark that death and taxes are the only two certain things in life and I think that fuel tax is one of the most hated (in the UK, fuel tax is 64p for every litre). The government argue that this fuel tax is to correct for “external costs” but I will argue that the fuel taxes is unfair and are targeting the wrong people.

The Costs of Driving

photo: Pro-Zak

Urban motorists impose greater external costs on society. City roads are full to their capacity and that means traffic jams everywhere. An extra car on the road is only going to make it worse. Congestion wastes everybody’s time. Secondly, population density is so much higher in cities meaning that the exhaust fumes produced will affect a lot more people. And not to mention noise pollution…

In contrast, rural roads are much quieter and less congested. Because there is so much spare capacity on the roads, an extra car on a rural road isn’t really going to add to congestion or effect anybody else. And although exhaust fumes are still emitted and noise pollution is still produced, it effects a lot less people: there are less people for it to affect.

So the external costs imposed by drivers in cities are greater than the external costs imposed by drivers in the country.

The effects of taxes

photo: kevindooley

When you buy a car, you pay value added tax on the vehicle. To keep the car on the road, you must also pay road tax. Both of these taxes will discourage people to own a car because they increase the cost of owning one. But once you own a car and it’s licensed to drive on the road, these taxes will play no part in your decision about whether to use the car to drive to work or not: whether you use it or not you’ve already paid the tax. And whether you live in the city or the country you pay the same amount of VAT and road tax.

The other tax is fuel tax. This affects people’s decision on whether to drive to work or school. If it costs £2 to drive to work you might choose to do it every day but if it cost £8 you’d probably only drive if it was raining or for some reason the trains weren’t operating.

As I’ve mentioned, the external costs of urban driving are greater. So a fair tax which “internalises external costs” should penalise urban drivers more. But the taxes on urban driving are actually lower than taxes on rural driving. Places in the city are situated much closer to each another and so less fuel is needed to drive between them. As the amount of tax paid is directly linked to the amount of petrol used, this means urban motorists are paying less tax than rural motorists. This is unfair.

Is it essential to drive?

photo: fabbio

Another factor that economists must consider is “how necessary is it to drive?”

In the city, there are a huge range of alternatives to driving. In London, there is a flat rate 90p charge on all bus journeys, where ever in London you go. Buses are also very frequent: you shouldn’t have to wait any more than 10 minutes. I’ve found that I rarely have to wait more than a few minutes.

When I’m in the country, it often costs £3 for a single bus journey and the bus only comes once an hour or sometimes even every 2 hours. And there is about a 20 minute window for the time that the bus arrives.

In the city, everything is also much closer to each another. That makes cycling or walking a much more viable option.

So in the country there is often no choice except from to drive because everything is so far away from each another and there are no viable public transport options. In these areas, motorists must pay extortionate amount of taxes. Meanwhile urban city drivers, with the luxury of viable alternatives such as the bus, escape with lower amounts of tax. I think this is the fundamental unfairness of fuel tax.

Solving the problem

photo: billjacobus1

The problem is that fuel tax penalises the wrong people. The solution is to tax urban drivers more to account for the greater amount of “external costs” they impose by driving.

In London we also have the congestion charge zone (£8 to enter Central London per day) and the low emission zone (£200 per day for heavy polluting vehicles to enter London). I think this somewhat solves the issue but it’s only restricted to London.

A few years ago the Labour government floated plans for a national road charging scheme.

Motorists will receive regular bills, possibly monthly, charged at variable rates by time and geography: rural country lanes would likely be charged at the bottom of the range, around 2p a mile, with inner city rush hour roads attracting the top £1.30 rate. The government hopes motorists will change their driving habits - by staggering journeys, sharing cars or switching to public transport - to the extent that there could be a 50% cut in congestion.

From a point of view of an economist, I feel that this is the perfect solution to the problem. It would reduce congestion which would lead to time savings for everybody and stop country motorists from being unfairly penalised.

In 2007, 1.7 million people signed a petition against the national road charging scheme. The idea seems to have fallen from the agenda. Because of the inherent unfairness in fuel taxation, I hope the government will reconsider a national road charging scheme.

• Economics , Environment , Politics , UK
• Comments(2)

May 14th, 2008

photo: World Economic Forum

In what must be the strangest news I’ve heard in a while, British Prime Minister Gordon Brown wants to star in his own Apprentice-style TV reality show

The email from producer Margaret McCabe pitched the show, which would feature aspiring politicians as contestants, as being targeted for the “Apprentice meets Maria/Strictly Come Dancing audience”.

The memo added that the show was “not stunt TV” and as a judge, Brown could become “more popular than Alan Sugar”.

A spokesman for Blears confirmed that a reality show was in the works: “It is a very worthy programme idea. These young people would engage and have some kind of competition, and then there would be a way of electing a young prime minister for a day.

“The idea is to get more young people interested in politics. But it hasn’t been commissioned yet. It is very early days.”

It has been documented before that Gordon Brown is a big fan of the X Factor.

I think it’s interesting how Gordon Brown is such an unpopular prime minister that he now feels like he needs to be a judge in a television reality show. There will of course be worries that this show could cheapen politics. I can’t remember whether it was just an idea which was floated or an idea which actually happened in some country, but people talked about having a reality show to determine a candidate who would stand for Member of Parliament. Of course, the problem is the winner of the show has had an unfair amount of publicity and would probably easily win election based on the fact they were once on TV, regardless of whether their politics were actually any good.

Anyway, the “Junior PM” project is still in the very early days so it’ll be interesting to see whether it gets any further.

• Politics , UK
• Comments(1)

May 3rd, 2008

I stayed up last night to follow the results of the mayoral elections in London. I had quite an interest in the election being somebody who will be living in London over the next few years but also as someone who had previously met Boris.

Both Boris and outgoing mayor Ken Livingstone gave really good speeches when the results were announced. I was quite impressed at how Boris planned to work across party differences, and it almost seemed like he offered Ken and Liberal Democrat candidate Brian Paddick a job in his administration.

It’s an important job and I believe this appointment makes Boris one of the most senior Conservative politicians in the country. The BBC has a short biography of Boris which I felt was really interesting. I really recommend “Boris: The Rise of Boris Johnson” by Andrew Gimson as a more complete biography of our new mayor.

I met Boris at a networking event last year. In typical Boris style, he turned up about half an hour late but nobody seemed to mind. He was the main attraction of the evening. Boris spoke about his political career and about some of the controversies he has been involved politically. He was the friendly personality that you see on television and I think he’s a genuinely nice guy. People have publicly wondered whether he is competent for the job because of the number of gaffes he has made. I gained the impression that he was just very upfront and much more willing to have a laugh than most politicians were. It is true that the way he acted on the London campaign trial could be described as “new Boris” so it’d be interesting to see what happens when he starts on Monday!

I think the Boris Versus Ken contest has given the Barack Versus Hillary contest some competition for most interesting political battle of the year.

• Politics , UK
• Comments(1)

April 26th, 2008

An interesting article in the newspaper today about the extortionate costs of sending SMS text messages.

A typical SMS text message contains up to 160 characters and costs 10p. As each character takes up one byte, the SMS message costs 10p for 160 bytes or £625 per megabyte. Of course, most people don’t use the full 160 characters most of the time so the cost could be closer to £1,000 per megabyte.

To compare this, NASA pays just £84 per megabyte to receive and process data from the Hubble Space Telescope which is located 600km above the Earth. This means UK consumers are paying roughly 10x as much to send our SMS text messages as it costs NASA to receive some fantastic images from outer space.

To be fair to the phone companies, you can transfer data for £2 per MB (capped at £1 per day on some networks).

You can also save absolutely shed loads of money by shopping around. I recommend O2’s Online Tariff which offers free texts or minutes. I’ve sent about 240 texts so far this month for absolutely free (worth £24) and the customer service with O2 has been absolutely fantastic. By switching to the online tariff, I now manage to send about 400 texts before having to top up £10, meaning each message costs 2.5p. I also get 1MB of data for free each time I top up which is really handy for checking cinema/train times/emails on the move.

One of my friends also recommends an O2 Pay Monthly contract which offers you a free phone and unlimited texts for £15 a month. You need to take out an 18 month contract though. However, as an O2 customer you could get 8mbps broadband for £7.50/mo. so you may find the total cost of your contract and broadband is cheaper than your current broadband package alone.

• Mobile , UK
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