[TELECOM] SMS rip-off in Australia

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Telco giants cash in on the great SMS swindle RICHARD WEBB With MARK RUSSELL January 24, 2010

AUSTRALIANS are being charged up to 10 times more to send text messages than mobile phone users in other countries, with the nation's telecommunication giants pocketing hundreds of millions of dollars for providing the virtually cost-free service.

But despite paying the highest SMS charges in the world, Australians - who will send a staggering 20 billion texts this year, up 20 per cent on 2009 - have to put up with one of the most unreliable mobile phone services, according to consumer advocates.

The standard flat rate for a text message at Telstra and Optus is 25 cents, the same as it has been for five years. At Vodafone, a text is charged at a nominal 28 cents.

That is more than 10 times what it costs in many parts of Asia and almost a third higher than in Europe and Canada, research conducted for The Sunday Age has revealed.

The British pay up to 19 cents per text, Americans 22 cents and in NZ the cost varies between 7 and 17 cents per text.

''Our analysis of SMS rates from a number of countries suggests that Australians do, by and large, face the costliest charges when it comes to text messaging,'' said Lanil Thalakada, analyst with MAP Research.

Allan Asher, chief executive of the Australian Consumer Communications Action Group (ACCAN), a new consumer body established by the Federal Government, said that if the mobile phone service Australians received was of a premium quality, then that would be a mitigating factor.

''But it's not - our service is amongst the worst in the world and our prices are amongst the highest. We are being taken for a ride by an industry,'' Mr Asher said.

He said the telcos were rorting Australian consumers. ''The mobile service providers are pricing texts at a vast profit margin and sadly it shows just how far from the competitive world market Australia is,'' he says. ''We are being abused by the Australian telcos.''

Despite the volume of SMS traffic in Australia soaring since the three major telcos set their charges for texting, none have dropped their rates.

The ultimate cost to the service providers of transmitting a text is practically nothing once the network has been established, so all the SMS charges go straight to the telcos' bottom lines.

Simon Curry, president of Mobility Vic, a not-for-profit organisation presenting the Victorian mobile data industry, said Telstra had ''probably one of the largest free cash flows of any telco in the world - they are making the fattest margins''.

Telstra's total revenue from messaging jumped 21.1 per cent to $896 million in 2008-09 from $740 million in 2007-08.

Paul Budde, of telecommunication consultant Budde Communication, said the recent introduction of EU legislation to more than halve the cost of international roaming SMS charges in Europe was ''a good step forward''.

But he believes it is unlikely the local carriers will budge on SMS pricing. ''The reality is that SMS is a phenomenon that is extremely widespread - a lot of people like it and are prepared to pay for it,'' he says.

The major mobile services providers sell a large proportion of their services in Australia on ''cap'' plans, the only country that does this. Under a cap plan, the user gets a certain number of calls and texts per month for a set amount of money.

On this basis, Telstra, Optus and Vodafone argue they are not charging

25 to 28 cents a text at all, and that the real cost is much less than their advertised SMS rate.

The Australian Communications and Media Authority Communications report for the 2008-09 financial year says the average revenue generated per text message sent in Australia was 8.6 cents, down from

9.1 cents in the previous year.

Greg Spears, head of public relations and corporate communications at Vodafone Australia, explains: ''Vodafone's $49 cap plan, for example, provides customers with $350 credit [a month]. So when a customer sends a text with a nominal cost of 28 cents, this is coming out of the $350 worth of credit they purchased for $49.

''So, in real terms, customers are not incurring a hard cost of 28 cents. If you want to take this example to the extreme, if a customer used their entire $350 worth of credit exclusively for texts, that customer could send 1250 texts per month, so each text has actually cost less than 4 cents.''

Both Optus and Telstra said their customers also got value for money under cap plans that were available for text messaging.

But consumer advocates say the mobile phone companies cannot have it both ways on this issue. If 25 to 28 cents per text is a notional price seemingly plucked out of the air and from which they then hide, why is it used as part of the $350 worth of credit customers apparently get with the Vodafone example?

Mr Asher said Australian consumers should not blindly accept the high rates being charged.

''There is no market in Australia or the world that operates on such flimsy self-regulatory principles. We have been so lax about this.''

Cost of an SMS

  Australia: 25-28 cents*   US: 22 cents   UK: 9-19 cents   New Zealand: 7-17 cents   Canada: 16 cents   Hong Kong: 3-12 cents   Thailand: 11 cents   Japan: 6 cents   Indonesia: 3-5 cents   Singapore: 4 cents   India: 1-4 cents   Malaysia: 2-3 cents   Philippines: 1-3 cents   China: 2 cents

MAP RESEARCH. * ALL COSTS ARE IN AUD

Reply to
David Clayton
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I doubt that many people really pay that much. Don't they have bundles like everyone else in the world?

US carriers typically charge for both ends of the SMS transaction. Lucky that most people have bundles.

R's, John

Reply to
John Levine

Yes, but the same SMS charges are included in the bundle.

In Australia only the SMS sender pays. Last year I set up web based SMS sending, for the business I was then working for, with Clickatel, and it cost us about A$0.065c per local (i.e. the whole of Australia) message, a lot less than the A$0.28c the carriers here charge.

The exact same functionality with a local SMS gateway provider would have still cost 2-3 times [more] per message than an international gateway service.

Reply to
David Clayton

I gather that the prices are just notional, e.g., they claim that they give you $300 of SMS as part of a $49 bundle or something like that. If so, the $300 isn't money, it's just tokens to count the SMS.

The SMS on my phone is charged in minutes, where each SMS costs 0.3 minutes. The translation from money to minutes is rather obscure, depending on coupons, bundle sizes, and whether your phone came with the double-all-credits feature, but it's not hard to buy minutes for

10 cents (US) each which means the real cost for an SMS is a not too excessive 3 cents. If you do similar arithmetic, what's an SMS cost in oz?

R's, John

Reply to
John Levine

Exactly.

Difficult to say now, a few years ago mobile calls were generally charged in per-second billing with a small flagfall, now most (every?) Australian mobile carrier now charges in 30 or 60 second increments with a far larger flagfall - but because of the bundles the charges vary so much it becomes really tough to work out the actual call/SMS costs.

I currently pay 15c for each SMS sent from my phone, and 39c/minute (no flagfall, per second billing) for calls in Australia on a "top-up" plan, and this is pretty good value. Smaller resellers (like the one I am currently with) who made the mobile market here more competitive seem to be disappearing. The reseller I am with was bought out by Optus a couple of years ago and is now being closed down by them - which means I have to find a new deal which will probably cost me twice as much as my current one.

Reply to
David Clayton

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