Full throttle: can slower speeds save us from bill shock headaches?

12 March 2014

Fees for excess usage of mobile services has been a contentious topic of debate between telco service providers and their customers ever since phones became a mainstay of modern living. It’s become such a common problem we’ve given it a name, Bill Shock, and it is the number one reason for customers making complaints to the Telecommunications Ombudsman in Australia.

In years past, phone users would experience bill shock after spending too much time on phone calls, or after sending too many SMS messages. These days, most providers offer unlimited messages and generous call inclusions so our bills tend to shock only after we’ve used too much data.

In the past 12-months, several of Australia’s major telcos have made significant changes to the charges for excess data use. Optus overhauled the way it bills for excess use entirely, opting for automatically billing for extra data after a customer surpasses their monthly limit. Telstra recently slashed its data rate by 70%, from $0.10 to $0.03 per-MB used over post-paid plan inclusions.

But is this enough? Should customers be charged automatically when they exceed their limits, or should other measures be put in place?

Putting on the brakes

The problem with the current system is that customers rely on imprecise data and guesswork to make important decisions about how they use their phones. Telcos are obliged to give customers info about data usage, and most send an SMS when a customer reaches 50%, 85% and 100% of their limits, but this information can come too late to avoid excess charges, especially if the customer has difficulty assessing the amount of data they are using on different online tasks.

US telcos offer an arguably fairer way to handle excess usage where, like home broadband here in Australia, a customer’s account speed is slowed down, or throttled, until the end of the month, once they reach their limits.

T-Mobile, for example, advertise ‘unlimited data’ on all plans, but indicate that there is a limit to fast 4G data on its cheaper plan options. Once a customer reaches their monthly allowance (500Mb or 2.5GB) they are moved to a 2G-only data service until the end of the billing period. This much slower speed is adequate for simple online tasks only, like sending and receiving simple email messages, and some web browsing or using maps, but it is far too slow for network hogging activities like streaming video.

This would be a great model for Australian telcos to consider moving to. It is fairer for customers, and it would work wonders towards building confidence in the relationship between telcos and network subscribers.

Unfortunately, the big losers in a system where data speeds are throttled will be the telcos, who would stand to lose a large chunk of revenue if a more transparent approach was to be implemented. And if the telcos stand to lose money, it lessens the likelihood of them taking an approach like this.

But it needn’t just be a straight loss for telcos, there is also an opportunity here too.

It’s polite to ask

At the end of the day, the problem with bill shock isn’t the bill so much as the shock. Most people would freely admit that they have used the extra data, usually without knowing it at the time, but being given a huge bill after the fact seems underhanded. Especially when the per-megabyte price of data is so much more expensive for excess use.

Rather than simply charging unsuspecting customers extra when they reach their data limits, why not ask them if they want more data? Imagine if you got a text message from your telco when you reached your data limit with a one-click option to add another 1GB to your account for the remainder of the month. We’d certainly hit that button more often than not.

Customers would even accept a slightly higher per-MB data rate for these bolt-ons, we think. There is an understanding that the data bundled into a contract plan should be discounted, and that a stand-alone bolt-on will cost extra.

Hats off to Optus

We may never see throttling used to avoid excess usage charges in Australia, but at least we have Optus leading the way in trying to find a fairer approach.

In case you missed it last year, Optus introduced a new system where you are automatically charged a fixed amount for extra calls or data when you reach your plan’s limits. In doing this, Optus is automatically bumping you up to the next plan level for that month only. If you are usually on a $60 plan, you’ll be bumped up to having the same inclusions as an $80 plan — split out into additional call minutes and data which are billed separately.

What’s clever about this system is that there is no penalty for choosing a cheaper plan at the beginning of your contract. This is how it should be with mobile phone plans. We shouldn’t need to make precise decisions at the beginning of a two-year plan, and we shouldn’t be afraid of being punished for a poor decision each month. Flexibility is the key that the Optus My Plans offer, and that gives Optus an edge in our Australian mobile landscape.

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