An end to telco bill shock?

Optus' decision to abolish bill shock could revolutionise the local telco scene. But is it too little,too late for an industry that has become accustomed to punishing its customers.

Is this it?

After years of being locked into plans which almost guarantee that you paid more than you bargained for, an end to excess data charges and telco bill shock may be on the horizon.

The catalyst of this hope is Optus boss Kevin Russell's declaration of war on excess fees and charges associated with telco plans. Last week, Russell said he wanted to “eliminate” bill shock in a bid to turn around poor consumer sentiment towards his brand and the telco industry, in general. Apparently, we hate telcos more than we hate banks, which just goes to show how far the industry has fallen 

Optus’ spruiking isn’t all talk either. Surprisingly, even after Russell outlined how telcos now rely on fees and charges to balance their books, Optus has followed through on its pledge by releasing data plans designed to minimise the risk of racking up a large sum on excess charges.

The good news for customers is that there are already calls for other telcos to follow Optus' example. But on the flipside - while its efforts are laudable - there are claims that the telco could go further if it was truly genuine about “eliminating” bill shock.

Bill shock by design

Perhaps the most potent argument against Optus’ efforts is that - as with every other major telco -  bill shock through excess data charges is really a product of their own design.

“The whole problem with bill shock is that it starts at the beginning of the cycle; with product design,” Australian Communications Consumer Action Network’s CEO Teresa Corbin explains

“If you don't get the product design right, then you're not going to get the advertising right... and then you get sold an inappropriate product.

“Whereas, if the industry had the consumer in mind first, rather than their bottom line, then ultimately, you wouldn't have bill shock you'd have satisfied customers.”

Corbin adds that bill shock-driven plans and products are often at their worst when it comes to newer services introduced by the telcos.

For instance, consider Optus’ latest 4G data plans. Russell said last week that 4G technology is pushing data use up considerably, yet the telco’s cheapest plan only allows for 200mb of mobile data per month - the same amount as the minimum on 3G plans.

It may be too early to condemn Optus’ efforts and it may still have a few aces up its sleeves when it comes to propagating its new anti-bill shock agenda.

But as for its two recently announced initiatives - a $200 cap to local excess data charges and a raft of new mobile data plans - Corbin says they are still “tinkering around the edges” of the issue.

Indeed, there’s plenty more that can be done, including:

  • More prompt notifications. The current system means that if you exceed your data limit you won’t hear from your telco for up to 48 hours.
  • Tighter caps on excess charges. $200 is a good start but the Canadian telco regulator just introduced a $50 cap for such fees.
  • And even introducing plans that allow customers to pay for what they use, rather than what they don’t. Optus’s latest data plans are again a move in the right direction, but this idea can be pushed further.

And these points don’t even tackle the even bigger, and possibly more complex, issue of international roaming charges.

Again, keep in mind that Optus is just at the beginning of its campaign to end bill shock and the other telcos are yet to comment on their plans, so we may see more on these initiatives in the near future.

Keeping consumers happy or keeping telcos afloat?

Of course, all this raises the question of why the telco industry, and Optus in particular, would be keen to try and slaughter its biggest cash cow.

Well, there are a couple of theories. According to Optus’ Russell it's all about staying competitive. Australia’s telco market is reaching saturation, and if players like Optus want to hold onto their existing customers they need to get consumers on their side rather than attempt to rort them. Russell also believes that his customers would be willing to pay more over time, provided they have an affinity with the brand.

However, founder and independent analyst of The Full Circle Group Tony Simmons says that there may be another reason behind the telco’s strategy.

He contends that technological advances in tools like public Wi-Fi, as well as future innovations in smartphone hardware and software could lead to a situation where consumers don't’ actually need a telco's services.

We’re already starting to see this phenomenon with the rise of over-the-top (OTT) players - companies that offer telco-like services over the internet. To give you an example, more consumers are now choosing to send messages over WhatsApp for free rather than use a telco's SMS service.

Simmons says that offering additional media content and services along with their existing plans will be crucial in keeping consumers from further embracing OTTs. But there’s also an argument that good customer service and a brand affinity towards the telcos may help slow or cushion this transition.

So perhaps this really is the beginning of the end for telco bill shock. Both Vodafone and Telstra have expressed their desire to re-engage with their customers and if Optus starts to make headway with its plan, you can bet the other two will follow suit.

So one can only guess what magnanimous gestures are yet to emerge from Australia’s telco industry over the next couple of years. But, don’t be fooled into thinking that the telcos have changed their stripes. 

The real challenge lies in whether the Australian public will forgive the sector and begin to treat it as an ally rather than as a necessity. As seen with Vodafone’s ongoing challenge to rehabilitate its brand, the road to redemption in the eyes of the Australian public is an arduous  one.

As Russell probably realises, it starts with admitting fault. But where it will end, nobody knows.  

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free