Mobile Broadband

Australian Mobiles Vs The World

The Australian mobile telecommunications marketplace has matured to a point at which the stream of new customers has slowed to a relative trickle. Our telcos are increasingly obliged to poach customers from each other, with the result that they are being forced properly to compete.

This has seen the major players introducing new products, new services and otherwise trying to increase the value of their mobile offerings. Telstra this month has introduced new measures to combat bill-shock, whilst also reducing the price on many of its data packs. Optus has done the same. Virgin Mobile has introduced monthly data rollover.

It seems like a great time to be a mobile customer in this country. But how do we compare to other, similar countries such as the United States or the United Kingdom?

Data Rollover

Virgin Mobile recently released a data rollover provision whereby an unused data from a particular month will become available for use in the following month (but no later than that).

Seems pretty good, but …

T-mobile in the USA offers a similar service – called Data Stash – that stores unused data up for 12 months. (Other US telcos such as AT&T and Sprint offer a month-to-month service.)

Bonus Data

Vodafone Australia are great believers in giving you bonus data when you sign up, usually as part of ‘limited’ offers (though there’s almost always one of these one). For example, right now if you sign up to an $80 per month plan Vodafone will throw in an additional 4G of LTE data, on top of the 4Gb already included in the plan.

Seems pretty good, but…

Sticking with T-Mobile in the USA, they offer a 10Gb upfront buffer on their cell phone plans, which you have to get through before you even touch your included monthly allowance. This 10Gb is valid for 12 months after you sign up.

Vodafone UK, meanwhile offers three months of unlimited data on new SIM-only plans (one of which includes an attractive 6Gb for £27, with unlimited talk and text).

Automatic Data Packs

Both Telstra and Optus now automatically add a $10 1Gb data pack to your account as soon as you exceed your monthly data limit, ensuring that you won’t be slugged with exorbitant pay-as-you-go rates.

Seems pretty good, but…

A few telcos overseas actually offer unlimited data. For example, Three Mobile in the UK offers SIM-only, month-to-month plans starting at £17 (A$32.60) that includes unlimited data(capped at 50Mbps, and subject to their TrafficSense limitations). It is also important to point out that many overseas carriers do not allowing smartphone tethering.

Global Roaming

Vodafone Australia has sought to position itself as the best telco for those travelling overseas. For $5 per day you can access your domestic phone plan in 47 countries around the world.

Seems pretty good, but…

This is a bit of a confusing area, since so many international carriers have different ways of charging for roaming. In the scheme of things, Vodafone’s $5 per day is actually competitive.

For example, Verizon in the USA offers 100Mb of data for $25US per month, and 100 minutes or voice and 100 SMS for an extra $15 above that. Sprint, meanwhile, is set to introduce anInternational Value Roaming plan, which allows for unlimited roaming in 15 counties, but only at 2G speeds. T-mobile already offers a similar service which applies in over 120 countries. But roaming on 4G is still exorbitant.

Three Mobile in the UK, meanwhile, allows up to 25Gb of data usage overseas via its Feel At Home provisions, but it’s astonishingly complicated. There’s also a £5 per day Eurozone pass (and apparently bad things happen if the two are combined). Vodafone UK offers the same service as our Vodafone, but for £3 per day.

Issues of geography and distance will almost always mean that mobile plans in this country will be higher, because the infrastructure to provide them costs so much more to implement. Overall, Australian telcos are making steps in the right direction.

But we should not pretend that we’re getting world-beating value. There’s a good reason why overseas visitors are invariably shocked when they learn how much our telecommunications services cost.

Telstra vs Bill Shock

Here at Dog and Bone, it feels as though we’ve been writing about the scourge of Bill Shock forever. At last there is hope we won’t have to any more.

Telstra has announced new measures that it feels confident will eradicate Bill Shock, thus giving you 'unmatched confidence'. It is doing this by automatically activating a small data pack the moment you exceed your monthly data limit. You may recognise that as basically identical to the measure Optus introduced a couple of years ago.

Bill Shock, for those who’re unfamiliar with the term, is that wondrous phenomenon that occurs when you open your phone bill, only to discover that the total on the bill is many orders of magnitude larger than you were anticipating. This blowout should not be confused with a slight overcharge (this is Bill Startlement) or the discovery upon reading your credit card statement that your partner subscribes to a certain kind of website (this is admissible evidence).

Bill Shock is most commonly caused by excess mobile data usage or by using mobile data whilst abroad. Telstra’s new measure will address the first of these issues.

Now whenever you use up all of your allotted data, a 1Gb data pack is automatically assigned to your account for that month. Telstra has also reduced the price of these data packs from $15 down to $10. Thus the most you’re likely to pay for going over your data limit is $10.

$10 is also the least you’ll pay, which is an important point to bear in mind. For while Telstra’s pay-as-you-go (PAYG) rates were among the highest in the developed world, they have actually fallen in recent years. The rate is currently $0.03 per MB.

The upshot is that there are plenty of cases where it is cheaper to stay on PAYG and not get a data pack. Simply put, if you exceed your data limit by less than 333Mb, it remains cheaper to stay on PAYG.

Of course, it won’t be possible to make that decision on the spot. You have to nominate ahead of time whether you want your account flagged for the automatic data pack. You will be able to opt-in once the system goes live on May 12.

COMMENT

When Optus introduced their automatic data pack provision in 2013, their CEO Kevin Russell conceded that Australian telcos were ‘increasingly reliant on revenues from breakage fees’. In other words, telcos were banking on customers suffering bill shock, and (one must assume) structuring their plans in order to ensure this outcome. Russell’s admission wasn’t shocking because it was new information – merely by the fact that he made it. Naturally it was timed to imply that Optus’ new largesse resulted from them being no longer able to bear the crushing guilt of fleecing their customers for so long.

Telstra has apparently been able to cope with the guilt for a while longer; apparently with greater market-share comes more reasons to ignore those bad feelings.

Commendably, the last few years have seen a number of measures adopted by Australian telcos to reduce Bill Shock – admittedly at the behest of the regulator – including greater plan transparency, improved data usage tools, lower excess charge rates, and increased data allowances. These combined factors mean that customer misery contributes less to revenue than it once did. Being nice will now cost the telcos less.

But just how nice are they? How much will this putative kindness cost them? There are several factors to consider.

Firstly, those automatic data packs aren’t free. Telstra’s 1Gb pack costs $10, and as mentioned there are plenty of instances where this will cost the customer more than just staying on the PAYG rates. Sadly, we have no access to internal telco billing data, especially for residential customers. On the other hand, Dog and Bone's extensive data shows that business clients rarely suffer huge blowouts. It tends to be a few hundred megabytes, if that.

By linking the new provision with increased 'confidence' Telstra's intention is clearly to promote more carefree use of mobile data. What's the worst that could happen? Ten bucks? Pah! More surfing, less hassle! Perhaps we're just cynical.

Automatic data packs certainly ensure that Bill Shock is addressed. What would have been an enormous and potentially crippling phone bill – and government data suggests that this is a strong cause of personal bankruptcy – will now be reduced to a more manageable total composed of $10 increments. (One wonders whether it will have a greater impact than Virgin Mobile’s recent introduction of a monthly data rollover.)

It will address Bill Shock, but it won’t do much for Bill Startlement. In fact, it might even increase it a little. 

Telstra 4GX

Good news for particular Telstra mobile users – specifically those who own devices operating in the 700Mhz frequency band.

Telstra bought two 20Mhz blocks of this spectrum at 2013’s digital dividend spectrum auction – previously it was reserved for free-to-air television – and are currently rolling it out in certain areas, with more to come.

You’ve probably seen the new service advertised as 4GX, which basically means nothing. (I guess the ‘X’ stands for ‘Xtreme’? Let’s hope not.) Customers with compatible devices in upgraded areas will enjoy faster data transfer speeds, and better indoor coverage.

So how fast is it? Well, it’s kind of hard to say. Telstra itself quotes to virtually useless figures of 2Mpbs – 75Mbps, which is like saying the nearest shop is between 20 metres and a thousand kilometres away. For now your mileage will vary, though there's talk of speeds actually doubling.

The following top smartphones use 700Mhz:

  • iPhone6
  • Samsung Galaxy S5
  • HTC One (M8)
  • LG G3
  • Sony Xperia Z3

You should be aware that whatever speeds you currently enjoy on 4GX will drop as more users hop on board. On the other hand, 4G speeds will improve as more users move off that spectrum (currently 900Mhz and 1800Mhz), in much the same way that 3G speeds are now the fastest they've ever been.

Telstra Introduces Real-Time Data Alerts

Telstra will this month launch an important upgrade to their mobile data usage alerts, which for the first time will be delivered in real time. This is an excellent development.

Previously alerts would arrive within 48 hours, which is the time-frame stipulated by the TCP (Telecommunication Consumer Protection) Code. This meant in theory that customers could wait two days to discover they’d blown past their data limit, and had started accruing excess data charges at PAYG rates. These astronomical charges would then feature on their next bill, expressed in scientific notation so as not to take up too much space. The resulting coronary is what is known as Bill Shock! (The exclamation point is required by law.)

The Telecommunications Industry Ombudsman has revealed that excess data charges are the number one complaint they receive, and the only area to see a significant increase in the last 12 months. Complaints about coverage, international roaming and customer service all fell, while complaints about excess data charges rose by over 27 per cent. Optus last year as much as admitted that telcos have increasingly factored the revenue generated by bill shock (!) into their bottom line.

The key message here is that you never want to exceed your data limit, and finding out in real time where you are in regards  to that limit is an essential piece of information. As before, Telstra will send out alerts at 50, 80 and 100 per cent of your monthly allowance. For customers who do go over their limit, an SMS will be sent for every $50 of usage above the cap.

Neither Optus nor Vodafone have announced any plans to introduce real time alerts (they still take up to 48 hours), although they do have other provisions in place. Optus, for example, will automatically add a $10 data bolt-on to your account if you exceed your cap, thus ensuring that you’ll only ever be stung in $10 increments. (I’ve previously explained why it makes financial sense for them to do this.)

As ever, forewarned is forearmed. To ensure Telstra data alerts are switched on, you need to either:

So go forth, and be forewarned in real time. 

The Week: A National WiFi Network

Now here's an interesting one: Telstra has announced that it will spend $100 million to build a 'new' national WiFi network. It will be comprised of about 8000 Telstra-owned hot-spots, augmented - this is the interesting part - by nearly two million wireless access points provided by Telstra customers.

Coupled with this is the announcement that a further 12 million international hotspots will be available to customers through a deal with Fon. Telstra customers will be able to 'roam' onto both domestic and international WiFi for free, while non-Telstra customers will be able to for a fee.

But back to the interesting part: Telstra broadband customers will be invited to open up their home broadband connections via wireless modems, sharing a portion of their bandwidth with nearby mobile device users. It sounds like Telstra are expecting rather a lot of their customers, but there is merit here, and there are rewards for getting involved in this so-called WiFi community.

Members will be able to access the bandwidth of other sharers around the country. Those who have home bandwidth to spare, and who use their mobile devices out of the house a lot will see an obvious advantage here. Members will also be able to use the international network free of charge, which is obviously much cheaper than paying for roaming mobile data. Any data you use is deducted from your own broadband plan quota.

Clearly this service isn't going to be popular among heavy internet users, who demand every available drop of bandwidth from their connection. However, given the continuing transition to the NBN, there will be a huge number of home broadband subscribers who will never use more than a small portion of their available bandwidth (even those languishing on the crappier parts of the NBN)

Those wishing to participate will need a new gateway, and a WiFi range extender, both of which are now available from Telstra for $210. New customers will get these devices for 'free'. Apparently they're also better for in-home use than the existing ones. Here's hoping.

Telstra has given assurances that the gateways will be entirely secure. They will also monitor network performance in real-time, and by default don't activate if downstream speed falls below 3Mbps. Telstra insists users won't notice any impact on their connection. I suspect that'll depend on what kind of user you are: online streaming or gaming will surely see an impact.

So what’s in it for Telstra, quite aside from achieving their generous vision of Australia as "a truly connected country"? Telstra CEO David Thodey insisted that it wasn't intended to alleviate congestion on cellular networks, although his reasoning wasn't especially convincing: “The cellular network is great if you’re on the move, but if you’re sitting down watching a few videos, it’s a different type of access that you want.”

If you're walking down the street, texting, receiving emails or surfing the web while hopping from hotspot to hotspot, then that's all traffic your cellular network doesn't have to carry. Telstra insist the transition between mobile and hotspot, and from hotspot to hotspot, will be as seamless as it currently is when you lose a WiFi connection.

Depending on the access cost for non-Telstra users, it could make Telstra look that much more attractive as a provider, especially if you're constantly online while out and about, or overseas. This is also makes bundled mobile and home broadband services look more attractive for those who have one or the other. 

There are also strong advantages in terms of delivering location-based services and additional value-adds, thus providing further service differentiation.

The Week: Double No Time Flat

The news came through last month that Vodafone has staunched its haemorrhaging of mobile customers, potentially bringing to a close a trend that has now gone on so long that it had come to feel like an industry tradition. Last year's third quarter saw Vodafone lose about 600,000 more customers, but slowed that to around 150,000 in the fourth quarter, and actually managed to achieve growth in December.

Analysts declared that the stirring December result is due to a temporary offer in which new customers received a double data allowance. No doubt it played a part, but it shouldn’t be forgotten that the amount being doubled is far smaller than it used to be. Data allowances are down across the industry. That being said, it is a strong offer. It also ends on March 11, 2014, while the double data allowance lasts for 6 months after signing up. 

Also helping is the strong publicity around Vodafone’s LTE network, which according to some tests is out-performing rival networks from Optus and Telstra. Vodafone customers can thus burn through their paltry data allowances in no time flat. Those lucky customers who sign up before March 11 can burn through theirs in double no time flat.

If Vodafone’s recovery has caused Telstra any concerns they were careful not to let on. CEO David Thodey said today that Vodafone’s recent efforts have created ‘a little bit more noise in the market’. He also announced that Telstra added 739,000 new mobile customers in the second half of 2013, bringing the total subscriber base up to about 15.8 million. You can see how Telstra’s nonchalant tone might be merited.

This hasn’t stopped them taking Optus to court, though, over some ads allegedly implying that the geographical reach of the Optus network is comparable to Telstra’s. It’s debatable whether Optus is trying to imply this. They’re wrong if they are. 

The numbers shown in the ad reflect the respective proportions of the Australian population each network services, which in a country like Australia is a very different thing. You can service 98.5% of the population yet cover relatively little of the landmass. Telstra is right to insist that this difference matters. Any of the 98.5% of the Australian population who use Optus will be able to tell the difference once they venture into the bush, and notice their coverage drops out. The simple rule in this country is that if you have to operate a mobile phone anywhere beyond a sizeable regional centre, you’re basically stuck with Telstra.

But this isn’t to suggest that Optus is trying to dupe anyone into believing otherwise, and it is entirely their prerogative to build a network that effectively services the most people for the most competitive cost. (A more troubling aspect of their ads is that odious little lemon drop mascot in them.) Optus has responded that Telstra has previously used a similar graphic of its own.

Bad Scene of the week was Communications Minister Turnbull’s appearance on the ABC’s Q&A program, during which very little relevant to his portfolio was discussed, although when it was discussed nothing much was cleared up. Those who complain that election campaigns commence too long before Election Day were here provided with further evidence that they also extend for a perplexingly long time afterwards. We’re fast approaching the moment when they will join up at either end, and thus become perpetual. Perhaps we’re there already. It would certainly explain why, as regards broadband policy, the current government has placed itself in a kind of caretaker mode.

Turnbull was asked by a rural audience member to explain wbhy he cannot get a proper internet service due to overloading of the Interim Satellite Service (ISS). Currently there are about 300,000 people on the waiting list. The Minister, to no one’s surprise, blamed the previous government. David Braue at ZDNet has a reasonably good take on it, if you can pierce his thick veneer of personal affront.

Vodafone's New Roaming

Vodafone Australia recently announced a new initiative designed to curb international roaming mobile charges. Customers travelling to select destinations - The USA, Britain or New Zealand - will now pay $5 per day to access their plan as they normally would at home. This will hopefully limit the number and severity of excessive cost spikes for international travellers. 

As you’re probably aware, using your mobile phone overseas is astronomically more expensive than using it in your own country. Not only that, but it is often very unclear where the extravagant charges are coming from, and working it all out is rendered almost impossible by the fact that the charges often don’t all appear at the same time. For example, charges for the calls you make and the data you use might appear on your very next bill, while the charges for incoming calls might be held over until the subsequent month. Meanwhile, the ‘airtime fee’ – this is the fee the foreign network charges your local provider, who then passes it on to you – will often appear later even than that. The whole thing is basically a mess, one that is costly for travellers, and lucrative for carriers.

Vodafone’s announcement that it will limit charges to $5 per day for its customers travelling to Britain, New Zealand and the USA is therefore a very welcome one. The reason it can do this is because, as a global telco giant, Vodafone has networks operating in those countries (the US it will partner with AT&T). The better question is why it hasn’t sought to do this already.

The answer, sadly, is that until now it hasn’t felt it had to. But Vodafone Australia is not in a happy place. It lost a further 550,000 subscribers in first six months of 2013, and hundreds of thousands in the six months before that. Most of those left due to poor coverage and customer service. (Coincidentally, Telstra recently  announced it added 1.3 million new subscribers in the last financial year.) With their brand now tarnished almost beyond repair, Vodafone have been compelled to make significant changes, as opposed to the usual deck-chair rearrangement that passes for change in the telco industry.

There has of course been Vodafone's huge, heavily-advertised and ongoing network investment and the fairly successful recent launch of LTE services. There have been improvements to the customer service experience: the ratio of helpful staff to disgruntled clients is improving all the time, partly as a result of better hiring and training practices, and largely because so many disgruntled customers are leaving. As CEO Bill Morrow admitted: ''We are recovering a brand. We have to have points of difference.'' Addressing Bill Shock! is one of these.

Bill shock! – the blanket term for receiving a bigger bill than you expected, and legally requiring an exclamation point – is currently a pressing issue for telcos, whereas before it was merely a pressing issue for customers. It is further tarnishing an industry that was already mostly rust.

For its part, the ACMA forced through some fairly weak legislation in an effort to combat this: the rather grandly-titled International Mobile Roaming Standard. It mainly forces telcos to be more upfront about how charges are derived. But while Dog and Bone certainly subscribes to the idea that knowledge is power, it was probably always going to be the case that real change was only going to come when the market forced carriers to change their practices. Well, the market is forcing telcos to do all sort of things at the moment.

Optus recently launched a new range of mobile plans – My Plans – which limit excess usage to more manageable $10 blocks in an effort to curb Bill Shock! I’ve already argued that despite acting like martyrs about the whole thing, Optus probably stands to gain in the long term, and that it is no doubt perfectly aware of this. The new plans are a bit of a bait-and-switch, but they’re still a decent idea, and will certainly help to curb some of the more outrageous blowouts.

Vodafone’s new $5 roaming announcement is made in a similar vein, but are more unambiguously good for its remaining customers. Global roaming costs can get truly astronomical, and this measure, even limited to three countries for the time being, should really make a difference for some poor souls. Indeed, Vodafone has always been a decent carrier option for those obliged to traverse the globe, and this will only make them more attractive. For their sake, and the sake of decent competition in the Australian mobile space, we hope it helps. If anything, we hope they go further.

 

UPDATE August 21, 2013: Optus has now announced new flat fee global roaming provisions, similar to Vodafone's. Post-paid customers can obtain a Travel Pack for $10 per days, allowing unlimited calls and text, as well as 30Mb of data per day, to most commonly-visited countries.

Kogan Raises Prices

Distracted or inattentive customers of Kogan Mobile have today awoken to the disturbing news that their mobile plans, previously among the cheapest offered anywhere, have markedly increased in price.

Other users, including those who bother to read emails from their mobile service provider or peruse the fine print on their website, will have known for some time that this change was coming. They’re probably no happier about it, since in some cases the increases are significant. The lowest plan - $29 unlimited – has increased by 34%, to $39.

Side note: as ever when talking about modest values it is best to use percentages to illustrate your point. An increase of $10 per month sounds far less impressive than an increase of over a third. Most reports have understandably gone with the percentage figure. Kogan, understandably, hasn’t. Indeed, Kogan has been at pains to point out that their plans are still ‘among the cheapest’ available.

They’ve also been at pains to dismiss claims that they’ve engaged in a ‘bait-and-switch’ with their customers, luring users in with very low plans, only to drastically increase the prices once the users are ‘locked in.’ There’s probably something to this contention: after all, it is the principle that underpins all ‘special introductory offers’ and ‘grand opening sales’. (The new seafood burger place around the corner from me is offering half-price burgers for the first month. No one seems to be accusing them of cooking up a bait and switch. A bait sandwich, perhaps.)

The original pricing, Kogan claims, was nothing more than a special introductory offer, which could end at any time. This was stated on their website, although only for the last few weeks, and not a prominently as they’re now claiming. On the other hand, they’ve hardly endeared themselves to outraged users by coming out swinging. The attack on ACCAN was as unwarranted as it was metaphorically garbled. They refuted ACCAN’s claims of a bait-and-switch, and held that it “reflect poorly on the advice generally propounded by that organisation. Sometimes, the empty vessel makes the most noise”. Unpack that.

Anyway, let's test the claim that Kogan’s mobile plans are still among the cheapest available in the market. I’ll look specifically at the lowest 'Unlimited' plan, and compare it to similar plans offered by other budget telcos. All these plans are month-to-month, with no lock-in contracts.

 

A few notes:

  • All these plans include calls to 1300 and 1800 numbers in their 'Unlimited' allowance. This is essential.
  • Included Calls does not include international calls and premium calls. You know the drill. Standard stuff only.
  • Most of them have fairly draconian Acceptable Use Policies (AUP). For example, Kogan’s AUP permits only 400Mb of data use per day. Our advice is always to read the fine print.
  • The purpose of this comparison is merely to see where Kogan’s lowest 'Unlimited' plan sits within the market, not to provide advice on which plan is best. For example, most users do notrequire an Unlimited plan;
  • Several of these carriers also offer cheaper plans that aren’t 'Unlimited', but instead use the usual 'call credit' model. For example, Vaya has a $34 plan offering $850 in credit.
  • I have excluded TPG Mobile, as it has no Unlimited plan.
  • I've probably missed some other budget carriers. New ones seem to pop up every other week.

The upshot is that there is some truth to Kogan’s claim that their plans are still among the cheapest going around. They compare favourably with the most inexpensive ‘Unlimited’ offers from rival MVNOs (nothing from Layer One providers comes close). Aldi is $4 per month cheaper, but offers 1Gb less data, on the same network. As such, it is questionable just how many of Kogan's 110,000 customers will depart as a result of this price increase.

However, now that their plans aren’t clearly front-runners on price, certain other factors come to the fore when a choice is to be made, such as 4G (LTE) coverage (Kogan is 3G, throttled to 7.2Mbps max), and their historically stern enforcement of the Acceptable Use Policy. This will be for the market to decide.

The Limits of Acceptable Use

This week we're looking at some of the reasons why Acceptable Use Policies exist, and why they can be so draconian.

If you’ve ever browsed around the budget end of the mobile market, you might have noticed that there are some quite amazing deals, especially when it comes to mobile data. How does an MVNO (mobile virtual network operator) such as Vaya sell 10Gb of 4G mobile data for $33? How does Kogan sell 6Gb of 3G mobile data for $29 on an 'unlimited' voice and SMS plan? The truth is they can’t without suffering an enormous loss. Let’s look at the numbers.

Of course, I am not privy to how much, say, Kogan or Aldi pay for their data from ISPOne (who in turn buy it from Telstra), but industry estimates put the cost of wholesale data between 5c and 13.5c per megabyte (Mb). (I strongly suspect that Optus and Vodafone resellers pay a cheaper rate than Telstra resellers, although again I have no way of knowing this without seeing the agreement.) In any case, we can work with this number range (5-13.5c) and make some educated guesses.

The MVNO operators invariably calculate one gigabyte (Gb) at 1024Mb, which is standard. Thus we can say that 1Gb of wholesale data costs reseller between $51.20 (1024 x $0.05) and$138.24 (1024 x $0.135) to purchase10Gb of mobile data therefore costs Vaya between $512.00 and $1,382.40 to buy. They then sell this to the customer for $33. I’m sure you can see the problem here. How can such a model hope to turn a profit, when they are potentially losing $1,350 per customer per month?

The answer is that they rely on average usage. The average customer doesn’t use anywhere near their full data allotment. Indeed, Dog and Bone’s own Audit and Review figures show that the vast majority of mobile data services use less than 10% of their monthly allotment. We deal primarily with larger fleets of devices, and the usual pattern is for the vast majority of users to use little to no data, and for a few to generate huge blowouts. It is for this reason that aggregated data plans provide enormous value. (For more on aggregation, see here. The basic message, however, is that it is almost always beneficial.)

The MVNO’s know this, and they are banking on the average customer using less data than will generate a loss. They calculate their prices accordingly. It’s a tricky balancing act, and there are serious consequences if the carrier gets it wrong. If the average data usage exceeds a certain breakpoint, then the carrier makes a net loss. The Acceptable Use Policy (AUP) is there to prevent this from happening.

For example, let’s say Vaya is paying 6c per Mb. In order for their $33 10Gb plan to make any money, the average monthly data use cannot exceed 660Mb ($33 / $0.05). If the data costs them 13.5c, then this data limit drops to about 244Mb per month. And this merely looks at the basic cost of the plans, and ignores any operating costs. In reality, Vaya will have set the breakpoint lower than that in order to make a profit. The margins in this sector remain extremely tight, and many MVNOs post losses until they've built a substantial customer base.

But what happens when some heavy users notice those great prices – 10Gb of 4G data at $33! – and decide to hop on board? These people are usually savvy, and use most of their data allowance without going over (excess usage at astronomical PAYG rates is a real windfall for carriers). Sudden those hair-fracture margins have disappeared entirely.

This is why Acceptable Use Policies exist for these carriers, and why they are enforced more stringently than they are by Layer One providers. Dog and Bone has dealt extensively with both Telstra and Optus on this matter, and they rarely ever enforce the AUP on business clients. We’ve had clients running multiple Unlimited SIMs through a GSM dialler – effectively slashing their fixed line spend to almost nothing – and the telco has told us they’re fine with it. But MVNO’s are operating at different economies of scale.

This explains why Kogan’s new, more explicit, AUP has such strict measures around data usage. The $29 plan might include 6Gb, but you’re certainly not allowed to use it however you want to. Indeed, the policy states that a customer will violate the policy either by using more than 1Gb in a single day, or by using more than 400Mb for three consecutive days. That’s pretty strict, and mostly explains the recent troubles that have been reported extensively. About 200 Kogan customers were unable to renew their service as a result (although Kogan insists the decision was made by ISPOne). Many users are also claiming that the speed on the service has now been throttled (to about 1.8Mbps).

Here are Dog and Bone we are broadly sympathetic to the view that anyone advertising 6Gb of data should provide 6Gb of data, and not stipulate how you’re allowed to use it. Nonetheless, these very cheap plans would not be possible if everyone used their full allowance. They are possible only because the average usage remains below the point at which it is no longer cost effective for the MVNO to provide it. If pricing was based on the idea that everyone uses all of their data allowance each month, then a $33 plan would provide 660Mb of data at best. I don’t think anyone wants to see that. Indeed, it is the power users that would be most affected by such a change.

It is the power users that have the biggest impact. According to ISPOne's own AUP (see section 8. Traffic Management Policy), 5% of users tend to use about 70% of the data. Removing the heavy users, or limiting their usage, frees up an enormous amount of resources. Those 5% of users are well within their rights to complain, since they are justified in feeling they’ve been misled.

Of course it is necessary for any business to assume that not every customer will do a certain thing. ISPs can only offer 200Gb download limits so cheaply on ADSL plans based on the knowledge that not every will use that much each month. An all-you-can-eat buffet assumes that not every customer will be a Sumo wrestler. Of course, this analogy is not perfect – I understand that, and as I say, I agree that imposing small print conditions in the Acceptable Use Policy is a bad way to go about things. But it’s also worth bearing in mind that the 200 customers that Kogan lost – although they’ve since been gifted a $50 voucher each – represented only a tiny proportion of their entire customer base, and most users will never come up against the AUP at all.

In summary: MVNOs certainly indulge in misleading advertising, and offer a service whose limits aren’t properly made clear, and in many cases aren’t provided at all. Some users come up against these limits while acting well within their rights, and are summarily penalised. The limits should be made much clearer (and terms like 'Unlimited' certainly don't help). Nevertheless, these limits – hopefully defined in the AUP – are necessary for the cheap plans to be available at all, for anyone. 

The Future of Wireless

It isn’t merely NBN-detractors who claim that wireless internet is the way of the future. Everyone loves wireless. But does it have a future?

You’ve doubtless seen the figures. Wireless usage is increasing nearly exponentially and by 2020 could reach 1Gb per day per user. One report estimates that roaming wireless usage will generate $80bn in annual revenue by 2017. Sales of smartphones, tablets and phablets - there’s still a slight chance that name won’t catch on – are roaring along unchecked. We’re constantly told that the ability to work while on the move is just the thing, although I’d like to see some figures on how much productivity is lost through mobile workers suffering injuries, if only from colliding with each other.

Anyway, I’ve spent some time working as a writer at the Australian Open throughout the tournament this last week and a half, and mobile working has been great. I can’t imagine how journalists covered such events in the olden days (like ten years ago). Actually I don’t have to imagine it, since the constant failure of wireless data on the AO grounds recreated it perfectly. It was less fun than I'd hoped.

Anyone who has visited the Australian Open tennis in the last few weeks will have obtained a firsthand demonstration of the fundamental shortcoming of wireless data. When lots of people are trying to use the same network, performance is affected, because wireless is a shared medium. At peak times there were 40,000 people on the grounds at Melbourne Park, and although only a small proportion of those would have been trying to access Telstra’s mobile networks at any one time, the number was still high enough that data performance was either hopelessly slow or non-existent. Twitter was unusable, which was a real problem for those keen to tell hordes of near-strangers precisely what they were thinking or eating at any given moment. iMessaging on iPhones was spotty at best. The Australian Open’s own app, which provides allegedly real-time updates to scores and schedules, was basically useless.

However, those lucky enough to have a media accreditation to the event are able to use the tournament’s dedicated Wi-Fi service, which links directly in to the fixed network. Now, I won’t claim this service was perfect. Wi-Fi went down for an hour or so yesterday, leaving a very large number of foreign journalists in a sorry state, since their option was to remain silent for a while (unthinkable) or run up roaming data costs (sacre bleu). Last year the Wi-Fi went down for an entire day. But in both cases the issue wasn’t one of congestion, but a technical problem on-site. Unsurprisingly, the fixed network had ample capacity – it is the premier sporting event in Australia, and Melbourne Park has some pretty fat pipes running into it.

I’m not going to into the shortcomings of wireless solutions here, and why fixed data connections will remain fundamental for many years to come. I want to look at the idea of whether the wireless networks can even support the amount of customers determined to use them in the near future. After all, if your smartphone or phablet (honestly, is there a petition I can sign to have that name banned?) can’t access the internet, it becomes considerably less useful. The experience of users at Melbourne Park is one commonly experienced by users in capital cities around Australia and the world. Congestion is having a serious impact on network performance. Early LTE adopters on Optus and Telstra have noticed that performance after only a year has shown noticeable degradation as more subscribers have joined.

According to a new report by Deloitte, this isn't a temporary issue that will be fixed by building more capacity, but a fundamental issue caused by everyone trying to wirelessly connect at the same time, and it’s only going to get worse. The average smartphone drives 35 times more data than a regular mobile phone that simply makes calls and sends SMS, and as more and more people switch to the more powerful devices there will be an increasing ‘spectrum shortfall’.

They predict that global roll-outs of LTE will only delay the issue by about a year, and argue that because wireless data is now an increasingly scarce resource, it should be priced accordingly. By that analysis, the recent reserve price set by the Australian Government for its spectrum auction makes a lot more sense. (On the other hand I'm probably being generous to assume Senator Conroy based the price on anything more complicated than a directive to generate revenue.)

Anyway, what does this mean for the increasingly mobile work force, who (we’re told) needs all that data in order to conduct business properly? What can you do to change it? The answer is nothing. There’s nothing you can do. It’s just the way it is. Wireless spectrum is a limited resource, and the idea that an unlimited number of people could access it was always flawed. 

There are of course ways to game that system, such as by running more fixed capacity in to service more base stations. Not unlike the media Wi-Fi at Melbourne Park.

UPDATE: CNet has released figures revealing that 4G data speeds have dropped by about 28% since October 2012, due most likely to an increasing number of users moving on to the network. 3G speeds have remained fairly stable, which is to say uniformly low.