news The nation’s biggest telco Telstra has broadly increased its charges for fixed-line telephony services, a move that comes on the back of similar price increases unveiled at the beginning of this month for mobile customers.
In a blog post late last week, the company’s executive direct of customer service (Telstra consumer), Peter Jamieson, wrote that from 1 October, the company would be increasing monthly access fees on half of its HomeLine plans. The company has previously offered customers price points from $22.95 to $69.90, but will now broadly increase its prices (apart from its entry level $22.95 plan), with the top-range plan now topping out at $89.90, for example, and a new $49.90 plan introduced as a $41.95 plan exits its range.
In addition, Jamieson noted, the price of local calls would increase by 2 cents per call, calls to 13/1300/1345 numbers would increase from 30c to 35c, and monthly access charges for not-for-profit and charity customers will increase.
In early July, Telstra revealed that a number of its mobile capped plans would change, with the costs broadly increasing. For example, the company abolished its $29 plan in favour if a higher value $40 plan, and most of its other monthly plans up to $130 received price increases of around $10 a month, although some usage inclusions were also included. This week, Jamieson noted that Telstra’s Member, Phone and Casual mobile plans would also start billing customers in 60 second instead of 30 second blocks, as Telstra’s other mobile plans already do, and there are also changes to some of the company’s fixed, mobile and ISDN business plans.
The telco attempted to placate annoyed customers by noting that it had invested significantly in its network infrastructure over the past few years — especially in its Next G mobile network, and by noting that some charges hadn’t changed in around a decade. “We know there’s never a good time to make changes to prices but, like all companies, we need to periodically review our prices to ensure they reflect the cost of running our business,” Jamieson wrote. “Some of these fixed line prices have been unchanged for nine years, meaning they’ve fallen by more than 19 % in real terms (when adjusted for CPI).”
“At the same time, we’ve invested billions of dollars in what are recognised as Australia’s best networks. For example, we’ve spent more than $3.5 billion on our Next G mobile network, plus our investment in upgrading to 4G, at the same time as traffic doubles each year. We completed about 5,000 capacity upgrades in 2011/12 and upgraded over 1,000 sites with 4G technology. We plan to do about 50% more again (1.5x) in 2012/13, recognising the need to continue to increase the investment to ensure our customers maintain access to a world class mobile network.”
However, the majority of customer responses published on Telstra’s blog were negative. “Is that a 100 percent increase for a 20 second call?” asked one customer with respect to the new 60 second rule. “Outrageous – so much for technology driving prices down,” wrote another. “I see this rise as nothing more than a profit grab. Compared to other places in the world we pay ridiculous prices for basic telephony services & data. The sooner there is real competition in the sector the better. It really is time to look for another provider methinks.”
And a third added: “What a load of crap, Telstra. First you cease on the misfortune of Vodafone and grab as many customers as you can, lock us into contracts then amend your charges.”
Despite Jamieson’s comments, Telstra continues to enjoy high levels of profitability. In the six months to 31 December 2011, for example, the company booked revenue of $12.42 billion, with profits being $1.47 billion. Telstra is also currently adding around 900,000 new mobile connections to its flagship Next G network every six months, especially taking market share from ailing competitor Vodafone and signing up customers to its new 4G network.
Great. After years and years of falling telephone costs, now that most of its competitors have exited the market and the remainder of its rivals in fixed-line and mobile telephony (Optus and Vodafone in mobile, Optus, iiNet and TPG in fixed) are seeing only small amounts of growth in those areas, Telstra has decided it’s time to tighten the noose around Australians’ wallets and take some fat profit while it’s ahead.
In my opinion, this month’s price increases is the start of a long process which will see Telstra to continue to tighten its stranglehold over the Australian fixed and mobile telephony markets for some time to come. In mobile, as I’ve previously noted, Telstra is far ahead of its rivals and getting further ahead, while adding a huge number of new customers. The company can afford to do whatever it likes with respect to pricing in mobile — as for many customers, it has the only realistic network and easily the fastest and most capable.
In the fixed segment, Telstra has more competitors — companies like iiNet, Optus, TPG and even Primus and Dodo. But I don’t view most of those companies as having significantly differently priced PSTN fixed-line telephony services than Telstra. Most of the real competition in fixed-line telephony is coming from fixed to mobile substitution and Internet telephony.
I guess Telstra figures that if people are prepared to pay it for fixed-line PSTN telephony and switch to a company like iiNet for Internet telephony instead, it might and well charge them more for the privilege while the PSTN still exists. Because unless those customers are willing to test out Internet telephony, they’re not going to find significantly different PSTN prices from rivals, meaning they’re disincentivised to switch, despite Telstra’s price increases. And there’s a good reason for this. Most of the non-Telstra PSTN telephony services sold in Australia are just resold Telstra lines anyway.
To be honest, this month’s Telstra price increases aren’t actually all that bad. In some areas they’re overdue and in others the big T has delivered increased value to customers as well. However, if we see another round of price increases from Telstra within the next six months or so, I think quite a few people might start to question the company’s prices. It will be interesting to wait and see what happens next.