European lessons for Australia's telcos

Consumer pressure and new market entrants have forced traditional telcos in Europe and the US to simplify and streamline their business models, and this is where Australian telcos are failing their customers.

For a long time the dominance of two major players in Australia’s telecommunications market has deterred competition and hindered innovation in the telco retail sector.  There has been no incentive to disrupt the market, or to drive growth and it’s meant that consumers have little bargaining power to influence the terms of their contract and are settling for second best.

Where Australia has been a pioneer in so many technology fields, our lack of foresight in this arena means we have fallen a long way behind the rest of the world.

In Europe and the US, consumer pressure and new market entrants have forced traditional telcos to simplify and streamline their business models to keep consumers happy and remain competitive. This is where Australian telcos are failing their customers. Their business models haven’t changed in a decade and the industry is hamstrung by out-dated ways of working.

Hanging on to obsolete practices

Today we see far too much capital and operating expenditure is still tied up in traditional retail stores which the major telcos use to on board and service their customers. This model has kept the cost of doing business far higher than the rest of the world and made it near impossible for operators to offer good value packages to consumers.

The average Australian is using just 200 minutes of voice, 100 SMS and under 500mgbs of data per month which consumers can buy pre-paid for around $25.  Yet with their high in store expenses, the big players can’t compete with this price and instead use bundled Cap Plans to prop up their investment in expensive retail.

Where Cap Plan pricing models were once popular across the world, Australia is now one of the only developed markets to get away with these packages which are ripping off consumers.

Consumers remain unaware that telcos are profiting heavily from low utilisation of cap plans. They are confusing customers to think that they need these plans and disguise the high price through the offer of a device, when in fact they could be saving 50 per cent of what they are currently paying.

No one is being educated to understand what is going on here. Consumers think they are getting more than they actually are and the vast majority don’t need the plans they are currently on.

Calling for change

The industry is very ready for a shake-up. It’s time we disrupt the status quo in traditional markets with a new business model that empowers consumers to make informed choices, demand change and re-gain control over their consumption. We know that Australian consumers want a plan that meets their needs, they want the flexibility to change it and they don’t want to be locked in for 24 months.  

To hold on to their customers, the major telcos need a fundamental shift in the way they do business.  Telcos need to simplify their proposition and become more transparent so customers understand what they’re paying for and have the control to personalise their plan. This self-service system will in turn limit the need for people to contact customer service and reduce their overheads.

We need to stop the trend of Australian consumers paying for services they don’t need or use. Consumers need to demand a plan that meets their requirements, with the flexibility to change it and not be locked in for 24 months. Consumers need to shout more loudly in order to create the change which is so desperately needed in the Australian telco market.

Andy Taylor is the CEO and founder of Yatango

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