Upwardly Mobile Mobile
Sydney Morning Herald
Saturday December 1, 2001
Less competition in the mobile phone industry could mean headaches for customers, writes Matthew Wade.
PUT that phone down. It's costing you money. And it could soon cost you a lot more. A telecommunications advocate, Teresa Corbin, is just one mobile phone expert who is warning the good times are over for the 11 million Australians with a mobile.
``For the past few years some cheap mobile deals have been coming onto the market, but now I think we are going to see prices moving in the other direction," said Corbin, a policy adviser at the Consumer Telecommunications Network. ``It's very frustrating from a consumer perspective."
After a year of turmoil in the mobile phone industry, including the collapse in June of cut-price provider One.Tel, the major carriers are flexing their pricing muscle. In the past fortnight, Telstra and Optus have both lifted charges for using mobile phones and Telstra has begun phasing out handset subsidies, sending prices skyrocketing.
Most industries have traditional, time-honoured excuses for price rises and the adolescent mobile phone trade is developing its own trusty explanation the perennial need to ``upgrade the network".
Telstra trotted out a version of this rationale when it increased fees for sending SMS (text messages) and lifted its mobile call ``flagfall" by 5 last week. ``It's costing more because more and more are using our services, putting increased load on our network," said Telstra's corporate relations manager for mobiles, Chris Newlan.
Telstra's SMS market has grown by 1000 per cent since April last year and an estimated 70 million messages are sent on its network every month. Consumer groups said the price increase will add about $5 a month to the average mobile phone bill and reap the telecommunications giant an extra $100 million a year in revenue. The price increase came less than three months after Telstra announced a record $4.1 billion profit for the last financial year. Telstra in turn claims to be spending $200 million a year enhancing its mobile network.
With One.Tel gone and the third major mobile player, Vodafone, under a financial cloud, some industry analysts believe competition has dried up. They also highlight another ominous development Optus is now a subsidiary of the Singapore Government-owned Singapore Telecommunications, meaning Australia's two largest telcos are majority government-owned companies well versed in monopoly pricing.
``It's back to a duopoly with Telstra and Optus," said independent telco analyst Paul Budde. ``This will be good for shareholders but bad for customers. The sharemarket loves monopolies and duopolies because the companies can reap big profits." But the Australian Competition and Consumer Commission (ACCC) chairman, Professor Allan Fels, is less pessimistic and has resisted calls to take action against Telstra over the price rises. ``I am hopeful that a fairly high degree of competition will continue," he said.
Nevertheless, Fels has concerns about the local mobile market and he acknowledges competition may not be as hot as it used to be. ``It is too early to reach negative conclusions but [the mobile industry] is coming on to the radar screen to be looked at. We can't be complacent about this market." Fels said the introduction of mobile number portability introduced in September to allow customers to switch companies without losing their phone number could counterbalance the forces putting upward pressure on mobile prices.
But so far the vast majority of mobile users have stayed put. The Australian Communications Authority revealed this week that just 90,000 subscribers had switched providers since the number portability regulations were introduced less than 1 per cent of all users. This went against expectations, it seems: mobile phone companies were braced for significant customer turnover and some industry analysts forecasted a price war as providers were forced to fight to keep exiting customers and lure new ones. But, so far, this has not eventuated.
One factor in the relatively small customer ``churn" rate is that the majority of mobile phone users are on long-term contracts, meaning they would face a stiff penalty to swap. There have also been some technical teething problems with switching since number portability was introduced, which may have discouraging some customers.
Corbin also believes the demise of One.Tel, which left about 1 million mobile subscribers in the lurch, has made people less inclined to shop around.
And, of course, the confusing range of options and complex pricing structures confronting mobile users is an ongoing disincentive to change. According to Optimiseme.com a Web site to help mobile customers choose a cheap plan there are nearly 700 mobile phone plans on offer. A team of researchers at the Australian Consumers Association (ACA) was recently tied up for about two weeks, reviewing all the mobile phone plans on the market.
But even though a relatively small number of people have switched carriers since the number portability rules were introduced, Fels is confident this change will prove to be a big positive for consumers in the long run.
``We think mobile number portability is a very important pro-competitive factor and will quite likely offset concerns about the market that we might otherwise have," he said.
Those concerns, within the industry, include Telstra's decision to phase out mobile phone subsidies by January which will be a watershed for mobile phone consumers. ``The end to subsidies will bring a big shift in the way mobile phones will be marketed," Hamilton said.
A Nokia 3310 handset, previously free with a Telstra Communic8 Mobile plan 45, has already jumped to $69 while a Nokia 8250 on a FrontRunner 40 plan has jumped to $319, from $249. On the other hand, the ACA's Charles Britton said the end of subsidies should see call charges fall because the companies will no longer have to recoup the implicit cost of equipment in the cost of calls. ``Otherwise it will just be a major price gouge," he said.
Fels also believes that if equipment subsidies are lifted, call charges could be expected to fall. ``If there were some reduction in handset subsidies we would want to judge the market by what happened to call charges," he said, adding that the ACCC would be keeping an eye on mobile charges if subsidies continued to be phased out.
But even if Fels is right and the existing competitive pressures limit price rises for the time being, the longer-term prospects for mobile customers is uncertain.
The introduction of the next generation of mobile technology, the so-called third generation or 3G network, will be risky for providers and users. This technology, which is expected to be launched in Australia in the first half of 2003, represents a big investment for mobile firms at a time when the global telecommunications industry is under pressure.
Even though Australians have taken to mobiles so far there are more mobile handsets than people with paid work (about 9 million) providers are taking a gamble.
They hope attractive new applications using the phone to buy goods, play sophisticated video games and access the Internet will woo customers to upgrade. But there is a good chance many users, happy with what they have, will not want to pay more for a complicated new system. Given the financial stakes, companies are likely to press customers to switch and consumer groups are worried those who want to stay as they are will be penalised.
``It will be interesting to see if they phase out the mobiles we have at the moment and push us into getting onto 3G," Corbin said. ``There is no doubt third generation mobiles will be another huge outlay for consumers." Standby for more telco spokesmen and women talking about the cost of ``upgrading the network".
WAYS TO CUT YOUR MOBILE PHONE BILL
1. The obvious use a landline wherever possible.
2. Carry a payphone card and look for a payphone before you use your mobile. Chances are there will be one nearby.
3. Use SMS (text messages) for short messages to other mobiles.
4. Clear the message envelope from your screen so that when it does appear your call will not be wasted on an ``old" message.
5. Clear the voice messages from your network provider for the same reason.
6. Call into your message service from a landline during off-peak. (Your service provider can tell you how to do this.)
7. Check for off-peak call specials on your plan. There are often free or very cheap calls between numbers on the same networks at night or at weekends, so it's worth knowing which network your friends and family are on. You may need to ring your service provider to make sure you are registered for specials.
8. Run your existing bill through one of the online bill calculators offered by consumer groups (eg, infochoice.com.au or optimiseme.com) to see if you can save money by being on a different plan. It's worth checking every month or two as plans and specials can change quite quickly.
9. Check whether you are on per second or per 30-second charging. With some networks a simple phone call can get you per second billing which can save you big money. For example, if you are being charged per 30 seconds and you speak for 31 seconds, you will actually be charged for 60 seconds.
10. Stay on top of your plan don't just forget about it after the initial purchase. Source: infochoice.com.au
How our costs compare
MOBILE phone pricing varies widely across the globe, making it difficult to compare Australia's charges with those in overseas countries.
The Australian Competition and Consumer Commission 's Professor Allan Fels says the local market has relied heavily on free or heavily subsidised handsets to attract customers, and this has pushed up call charges relative to other markets.
In the US, most companies charge mobile customers for receiving calls as well as making them. This means American consumers tend to be more selective in their mobile use and leave them turned off more than in Australia.
Some analysts believe this is why text messaging has not taken off in the US as it has in other countries, including Australia.
Telstra claims that even with its recent rise for text messages to 25 from 22, its charge is still lower than the OECD average of 31. But when the Productivity Commission compared Australia's mobile phone charges with those in nine other countries in mid-1999, it found local prices were at the ``high end" of the group.
Access charges were relatively low but call charges were the highest in the study. When the access fees and call charges were combined in a ``total mobile service index", Australia was ranked the most expensive.
However, there have been significant shifts in pricing across the world since this research was completed.
© 2001 Sydney Morning Herald
