Imagine you are the CEO of a newly founded network operating company called “Sensaphone”. What can you do to increase the customer’s utility from switching to your network?

This is true. Increasing the quality of a good can in fact increase the utility of customers switching to this good.

This is correct. Such a free feature would increase the utility of customers because the phone costs decrease. Hence, customers will be more likely to switch to Sensaphone.

This is right. The service (e.g. SMS flat on top for free) can increase the customers utility and make more people switch to Sensaphone.