Why telecom 'loyalty pricing' that charges old customers more is a consumer-literacy and regulation lesson

Public discussion has intensified around a practice dubbed "killing the familiar" (杀熟) by China's three state-backed telecom operators — China Mobile, China Unicom, and China Telecom. The pattern: long-term subscribers on older plans pay significantly more for data and voice than new customers who sign up for aggressively discounted promotional plans. Despite widespread complaints, the operators have issued no substantive response.

Knowledge point: the economics of 'loyalty penalty'

What consumers experience as unfairness is, from the operators' perspective, a standard price-discrimination strategy. Telecom services have high fixed costs (network infrastructure, spectrum licenses) and low marginal costs (serving one more subscriber costs almost nothing). This creates a strong incentive to segment the market: offer low prices to price-sensitive new customers while extracting higher margins from less price-sensitive existing subscribers who face switching costs — changing phone numbers, reconfiguring devices, or losing bundled services.

The "loyalty penalty" exists in many industries: insurance, banking, utilities. But it is especially visible in telecom because plans are publicly listed and easily compared.

Why regulation matters

Several countries have addressed this through regulation. The UK's Financial Conduct Authority banned loyalty penalties in insurance in 2022. The EU's electronic communications code requires operators to inform customers about better available tariffs. China's approach is still evolving — but consumer pressure may eventually force transparency rules or plan-portability requirements.

The knowledge lesson for consumers: checking your plan against current offers at least once a year is basic financial self-defense. The lesson for policymakers: in subscription markets with high switching costs, transparency alone may not be enough — portability mandates (making it easy to switch while keeping your number) can be more effective than price controls.