Telstra

Optus Identity

We here at Dog and Bone have felt for some time that Optus has a clear identity issue.

This is perhaps ironic for a company that strives so very hard to push its particular brand, from the venerable ‘Yes’ campaign that won’t stay dead, to the unfathomable wild animal campaigns of last decade, to that lethally cute little lemon drop guy they have now. Perhaps it’s not ironic, and the rebranding perfect illustrates the issue.

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. 

The Week: The End of Mobile Security

Story of the week has undoubtedly been the revelation – again courtesy of Edward Snowden – that the United States' National Security Agency (NSA) and the United Kingdom’s Government Communications Headquarters (GCHQ) in 2010 stole a very large number of mobile SIM encryption keys.

They did this by hacking into the IT systems of Gemalto, the world’s largest manufacturer of SIM cards, and monitoring and intercepting the communications of its employees. Gemalto produces about two billion SIM cards annually, supplying over 450 of the world’s top telcos, including US giants AT&T, T-Mobile and Verizon. Closer to home, Gemalto customers include Telstra, Optus and Vodafone, which means that pretty much every Australian mobile user could be affected.

Obtaining these keys enables the NSA and GCHQ to monitor large portions of the world’s mobile communications, including both voice and data. They can also access any personal data stored on the SIM. Furthermore, having these keys obviates the needs for complicated interception techniques, and removes the inherent limitations of wire-tapping.

SIM encryption is fairly simple, involving a basic key exchange. The key is kept on the SIM itself, and by your telco. These are checked against each other whenever the SIM is used for transmission. It is a system that remains secure only so long as the secret keys aren’t obtained by a third party, which of course they have been. 

It has of course been done without any form of warrant: since the keys were stolen in the first place, it’s not as though the agencies involved were particularly bothered with legality. Nor were they likely to be caught, since interception via these methods leaves little trace on the actual network.

In the event that a telco did detect traces of snooping, the leaked documents also revealed that GCHQ has the capacity to alter billing data to remove evidence of spying.

It is unclear whether all compromised SIMs will need to be recalled. Telstra and Optus have both said they are awaiting further advice from Gemalto. If the SIMs do need to be recalled, it will entail an enormous – if not unprecedented – disruption to national telecommunications. I will update this post as more news comes to hand.

[UPDATE] Vodafone Australia has issued a statement, saying that they "have no evidence that any Vodafone Australia customers’ SIMs have been compromised."

Gemalto meanwhile insists that its systems are secure. (Then again, it also said that it didn’t expect there to be any financial downturn following these revelations. Its share value plummeted to the tune of a half billion dollars following the revelation, and has not recovered.)

The full story first appeared on The Intercept, a website mainly devoted to properly publishing the documents leaked by Edward Snowden. We encourage you to read the full story. As it makes clear: “Gaining access to a database of keys is pretty much game over for cellular encryption.”

[UPDATE] Gemalto's investigation has concluded that while their systems were compromised in 2010, the size of the theft has been "greatly exaggerated." Meanwhile The Intercept has responded, quoting one expert that "This is an investigation that seems mainly designed to produce positive statements. It is not an investigation at all."

Staying with Snowden for the moment, he yesterday appeared in an AMA (Ask Me Anything) on Reddit, alongside journalist Glenn Greenwald and Laura Poitras, director of the Oscar winningCitizenfour. All three were articulate and forthcoming, and it really is a must read. So read it here.

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.

Optus Chases Telstra

Optus, no longer content with its clear second position within the Australian mobile telecommunications market, has reiterated its commitment to overtaking incumbent leader Telstra.

Optus currently had about 9.6 million mobile subscribers, while Telstra has around 16 million (Vodafone is a distant third with 5 million). Optus has committed to investing $1.2 billion dollars in the next financial year on both fixed line and mobile networks, in the process extending its LTE ‘4G’ coverage to about 90% of the Australian population by March 2015. That’s pretty soon, and thus pretty ambitious.

Optus hasn’t released investment figures for the following financial year, though one suspects they won’t be modest, given that they’ve targeted a 98.5% LTE coverage figure by 2016.

Bear in mind that Australia’s relatively low population density means that going from 90% to 98.5% is many times more costly than going from, say, 50% - 58.5%. That last 10% of the population has always been an issue for telco providers – or just about every infrastructure provider – since it exists well beyond metropolitan centres, and consequently provides no return on investment. It’ll be interesting to see precisely how much Optus is willing to spend. Certainly it’ll have to be a lot more than they spend at present.

Anyone driving between cities, or even regional centres, in Australia has probably noticed that coverage becomes a problem the further out you go. You eventually reach a point where Telstra’s network is the only one available. Then you reach a point where your phone doesn’t work at all (at least not as a phone – it still works as a clock). To put it another way, Telstra’s network services 99.3% of the population, but less than 50% of the actual landmass.

This provides a revenue and marketing advantage that Telstra certainly doesn’t care to relinquish. In the next financial year Telstra will spend over $1 billion just on maintenance, upgrades and extension to its mobile network. And you can bet they’ll respond aggressively to any move by Optus to encroach on their market share (mobiles account for over a third of Telstra’s annual revenue).

Still, let’s hope that Optus are as good as their word, since it’ll only be to the benefit of consumers.

Money Well Spent

The federal government this week formally tabled its response to the recommendations included in August's Vertigan cost-benefit analysis of the rollout and operation of the National Broadband Network.

Most of the Vertigan review's major recommendations have been endorsed, which isn’t especially startling given how diligently the review cleaved to positions already advocated by the federal government. Thus did a largely pointless exercise come full circle, forming a closed loop: the government endorses the review that endorsed the government. Money well spent.

The meatiest of the endorsements seem disproportionately designed to combat TPG’s foray into FttB deployment, a move that most analysts agree will only have a minor impact upon the NBN.

NBN Co is to abandon universal wholesale pricing.

You may recall that universal wholesale pricing was a core component of the original NBN design. This stipulated that users in rural or regional areas would pay the same prices as users in metropolitan areas, despite the fact that running infrastructure to remote areas is considerably more expensive.

Thus of course meant that metropolitan customers would effectively cross-subsidise other customers - a deliberate measure aimed at shrinking the crippling digital divide separating country and city. Such a mechanism is inimical to competition, but deliberately so. Competition is what created the digital divide in the first place; free markets are ill-equipped to ensure equitable delivery of services.

Such regulation was anathema to a conservative government, and it hardly proved surprising when the Vertigan review recommended it be changed. The goal is to enabling NBN Co to compete with alternative infrastructure providers (i.e. TPG) in lucrative (i.e. high-density) areas. It could only do this, apparently, by being able to sell services cheaper in the city than in the country.

There will be a ‘wholesale price cap’, which will legislate that the basic NBN service – a 12/1 Mbps service – cannot cost more than $24 per month (that is the wholesale price, not retail). However, there’s no price cap on higher speed tiers.

The upshot is that country users will continue to pay more than city users, especially if they want anything better than the basic NBN service.

NBN Co competitors must structurally separate.

Part of the original vision for the NBN was the removal of Telstra as the dominant infrastructure provider in Australia. For many years Telstra had retained a monopolistic position that was anything but ‘natural’, since it had been bequeathed to it as a former government owned entity (first as part of the Post Master General’s office, then as Telecom Australia).

Thus did Australia’s largest telecommunications retailer also own most of the infrastructure, which meant that its retail services inevitably had a clear advantage over competitors, even after Telstra was compelled to sell wholesale services to those competitors. Structurally separating Telstra’s wholesale and retail components in theory curtailed this competitive advantage. It also meant that Telstra would compete with NBN Co at an infrastructure level.

The Vertigan review recommends that this same condition be applied to any other NBN Co competitor. For argument’s sake, let’s call this competitor TPG. TPG, or anyone else who installs infrastructure that competes directly with NBN Co (such as the Australian mainland), will now have to maintain a wholesale division that is disconnected from the retail division. The wholesale division will have to sell services to competitors at the same rates as it sells them to its own retail division. Given that this would largely take away the commercial advantage of running your own fibre, this should effectively stop anyone from competing with NBN CO in FttB deployments.

The ACCC will be given new powers to police this.

NBN Co must get ready to separate itself, just not yet.

Although this wouldn't happen until the NBN rollout is compete, the goal now is that NBN Co will separate into various divisions, for satellite, fixed wireless, FttX, HFC and transit networks: "However, optionality for future restructuring or disaggregation should be retained, to provide future governments with greater policy and financial flexibility."

Reading between the lines - and reading the actual lines of someone who uses 'optionality' with a straight face is a harrowing task - it seems clear that the goal of this fragmentation - sorry,disaggregation - would be to make NBN Co more attractive when it is to be sold off. Thankfully there's no reason to believe the privatisation of a national telecommunications monopoly will have anything but positive ramifications. 

The Vertigan Panel's CBA also advocated the deployment of a Multi-technology Mix version of the NBN, instead of the original full fibre version. The government has of course already endorsed this. Indeed, they endorsed as vigorously as they could, by going ahead with it months before the CBA was even delivered.

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. 

Telstra to Raise Fixed Line Prices

In a move not calculated to inspire goodwill in the average citizen, Telstra has insisted that it has no choice but to raise the wholesale costs of fixed line services by 7.2 per cent.

It ‘must’ do this because of the anticipated churn of customers away from Telstra-owned copper services to the NBN. Telstra argues that although some of these losses would be offset by the decreased strain on the copper network (and as large parts of it are decommissioned), it wouldn’t be enough.

In its submission to the ACCC's Final Access Determination (FAD) inquiry, Telstra claimed that it expects demand for fixed line services to fall by about 62 per cent by 2019. They argue as that their network costs are largely fixed (this is debatable going forward), with fewer remaining users the cost per user must rise.

On the other hand, it could be argued – indeed it has been argued – that the payments Telstra is to receive from NBN Co already cover this churn. NBN Co is already paying both for the use of the last-mile copper (for FttN etc), and per customer that churns away from Telstra. Surely this last payment covers the issue over which Telstra is crying poor? Are Telstra just trying to double-dip on subscriber-loss payments?

Not so according to Telstra, and not so according to the Department of Communications, who concurred that NBN Co’s current payments (which are being renegotiated, anyway) are ‘irrelevant’ to his matter:

“Payments by NBN Co to Telstra are generally irrelevant to the ACCC’s determination of [fixed line service] FLS access prices because the costs these payments relate to are not included in the cost of FLSs provided by Telstra.

“Consequently, the costs of the Telstra assets used by NBN Co should be recovered separately from NBN Co (unregulated sale or lease proceedings), and the costs of the assets used to provide FLSs should be recovered separately from the access seekers that use the FLSs.”

The Department also warned that setting the fixed line access price too low, Telstra might inadvertently slow down the churn of customers to the NBN, which kind of sounds like an endorsement for Telstra’s price-rise. But given that fixed line services aside from those provided by the NBN are switched off two years after NBN services are installed in an area, I don’t see how this matters. You have to churn, anyway. 

It seems relevant to us, especially when the customers whom this will most effect are those who can least afford it.