Vodafone stalls for time, screws customers

If you were ever under any doubt that the two main teleco’s were ripping off consumers by running a virtual duopoly on mobile charges, then Vodafone’s latest “procedural” manoeuvre to delay Government intervention should make it pretty clear what’s going on.

Like Telecom has done for so long, Vodafone is fighting to the last lawyer to drag out the juicy profits they make by over charging consumers for so called ‘termination’ rates. These are the charges Telecom and Vodafone levy each other for putting calls through from each other networks, they then naturally pass these on to consumers.

Vodafone should think carefully before going down the track Telecom has done. For years Telecom treated consumers with contempt, obviously figuring their monopoly position would protect them from consumers wrath, and deciding it was better to abuse their position and take the cash, than treat their customers with respect and develop a long term relationship.

vodafone-sucksLike a couple on a one night stand the level of commitment from both parties ensured that when a better option came along, consumers took it. And they have increasingly deserted Telecom as time’s gone on.

Vodafone has developed a fan base as such with their hip advertising and portraying an image that they ‘get’ what consumers want. This relationship is increasingly on shaky ground and it becomes clear that true to form, Vodafone is yet another large teleco trying to wring every last cent out of it’s customers even if it means doing deals with it’s competitor to maintain a system of charging that is morally reprehensible.

Sure, this is capitalism at work, but because consumers don’t have any choice in the matter because there are only two mobile phone networks, it’s taking customers good will for granted to assume we are stupid enough not to work out what Vodafone is up too.

You’d think Vodafone would see that there is going to be an end to this price gouging and break ranks and just drop the rates and make Telecom look stupid, there’d be plenty of mileage in that sort of move. But a company that tries to hold onto a model of pricing that is ripping off it’s customers looks desperate and arrogant.

Once the Commerce Commission has sorted out termination charges, they need to start looking at the prices charged for data. Vodafone really must be out of touch when they promote 3G networks and mobile internet usage and then charge so much for data usage – especially for roaming. The roaming data charges are reminiscent of the old toll charges when we used to pay $4 a minute to call overseas. 

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  1. Hi there,

    My day job is as Vodafone’s external communications manager and I’d just like to leap in here and point out a few things.

    You can read the letter we sent on the Commerce Commission’s website. You’ll see we didn’t call for any delay. None. We called for changes to the order of events and, to their credit, the Commission staff agreed. There is no delay from our actions.

    We don’t want a delay – this kind of regulatory uncertainty isn’t any good for business. We want it sorted once and for all (and indeed we thought we’d done that 18 months ago when we signed a five year deal with the Crown).

    If you want, I can explain what mobile termination rates are and why we have them but it can be deathly dull and tedious. Happy to if you want, though. Just let me know.

    I see you’re pointing to the NZ Herald article – today they printed a correction pointing out that we didn’t call for a delay. I’m not sure if that goes online or not but I can’t find a link to it either way.

    As for data rates, I have good news. We launched $1/day mobile data charging last year (that gets you 10MB of data, good for casual use by anyone with a 3G phone). Then we launched Broadband Lite, which offers 100MB for $10/month. That’s good if you just need some casual data for a one-off project or want to buy a block but don’t need data in large amounts regularly.

    This week we’ve launched Broadband Surfer which gives you half a gig of data for $40/month only on Prepay.

    You can mix and match them as well. So if you hit your limit on the half gig plan you can add in another half gig, or just 100MB, or just 10MB if that’s all you need.

    International roaming is a different matter and one everyone in Vodafone wants to do something about. Kiwis love to travel so for us it would be great if we could lower the rates. Unfortunately, the countries we’re dealing with tend to have an excess of incoming visitors rather than outgoing roamers, so they want to keep the prices high… which doesn’t help anyone.

    But we’ll get there, I’m confident.

    Thanks for the post – and if you want to contact me I’m at: paul.brislen@vodafone.com.

    Cheers

    Paul

    • Hi Paul,

      Thanks for the comment!

      No I can’t find it online either in the NZ Herald. You can see why one would get the impression there is some foot dragging going on from both Teleco’s (to be fair). Why not just accept it’s going to change and get on with it?

      I have read up about the termination rates, and I’m afraid I feel they are too high hence my frustration with Vodafone – can’t you guy’s show some initiative here? I appreciate your’e in the business to make money, but on the other hand you’re surely trying to build a long term relationship with your customers, this kind of thing looks – on the face of it – like Vodafone is trying to make every last cent it can before in inevitable happens and the regulators step in, or at the 11th hour you guy’s all suddenly come up ‘with the goods’ and an agreement is reached – meanwhile we have been paying for this.

      What irks me about roaming data charges is that this is on Vodafone’s networks overseas, it isn’t like your’e dealing with another company or competitor. Surely I should be treated as a valued customer of Vodafone Inc where ever I roam – one of the reasons I use Vodafone is that it is a global company.

      It’s Telecom’s historical behavior that’s helped (along with hard work) Vodafone get such a big market share, it would be unfortunate if Vodafone started to head down the same path and repeat the mistakes.

      I might be being harsh, but I have been a ‘loyal customer’ since Vodafone took over from Bell South!

      Cheers

      Consumist

      BTW, nice blog 🙂

  2. Hi there,

    I know there’s a lot of focus on MTRs as some kind of miracle way of reducing retail prices in the mobile market. This simply isn’t true. MTRs don’t influence retail pricing (other than setting a bare minimum and even then it’s not often a factor) – it’s competition that changes retail pricing.

    The European regulators have been the most aggressive in the MTR space. The European Regulators Group (ERG) publishes its data (hideous website but it’s http://www.erg.eu.int – select the “documents” tab and then have a look at MTR snapshot. It’s a PDF). It works out what each country in Europe charges for MTRs and standardises them (different countries have different regimes – eg charge a full minute then by the second, charge second plus second, charge different rates for on peak or off, charge a flagfall and then by the second and so on).

    Currently NZ MTRs are 15c/min – which puts us comfortably in the better half of the European rankings.

    I’ve got a slide that shows all the MTRs for Europe and adds in NZ and Australia and superimposes OECD retail prices (the same figures the Commerce Commission looks at). There is absolutely no correlation between MTR and retail price. Countries with low MTRs (the US for example) are regularly the worst performing for retail price and the country with the best retail rates in the world (I want to say Denmark but I may be wrong) has MTRs higher than NZ.

    There’s a good reason why we have MTRs in the first place.

    When I make a call to you from my landline to your mobile, I pay my landline provider so many cents per call. You receive the call but your telco doesn’t get any money at all for that call. Yet your telco has exactly the same amount of cost as my telco for the network usage.

    Most customers like this because it’s called Calling Party Pays (CPP). It makes sense – you initiate the call so you pay, but it means the telco that is receiving the call is now out of pocket because its rival is being paid and it isn’t. So telcos agree to share the revenue made from the CPP.

    The alternative is for the receiving telco to charge the customer to receive the call either directly (Receiving Party Pays) like they do in the US, or indirectly, through some kind of minimum monthly spend limit. I don’t know about you but I do not want to see that kind of regime introduced in New Zealand.

    So we share the revenue using mobile termination rates.

    The reason we’re fighting is simple – without that source of income we end up having to make up the shortfall from some other source. Guess where that is.

    There’s another reason as well. We signed a Deed of Undertaking with the government after the last MTR regulation round (two years ago). The govt accepted our deed because of one important factor: Telecom and Vodafone agreed to pass on the savings directly to the customers. The govt liked that and accepted our offer. In the 21months its been running we’ve reduced our retail price for fixed to mobile calls (which is what was being regulated at the time) each year on April 1. 21 months sees $21million in savings.

    Pass through, as it’s called in the industry, is critical because what’s the point in regulating if it just passes money from one telco to another. This is what’s happened in Australia – the govt introduced dramatic reductions in MTRs and Telstra pocketed the savings instead of passing them on to consumers. The ACCC says only about 25% of savings were passed on, and we estimate Telstra earned an extra A$715 million over the five year period.

    We don’t want to see that kind of thing happen here – if you’re going to regulate us, make sure the customer gets the money. The Commerce Commission cannot regulate retail prices so it has to tackle wholesale rates and hope the telcos pass on those savings.

    In Australia, where they’ve realised that Telstra’s just putting the cash in its back pocket, they’ve decided not to regulate MTRs any further for the next few years. In fact, the ACCC says:

    “The Commission considers that the approach adopted in New Zealand may also be appropriate. In New Zealand any reduction in mobile termination rates by any MNO is required to be passed through to fixed customers in full under voluntary deeds made between MNOs and the New Zealand Government”

    which says to me we’ve got a good system.

    Have a look at the exec summary of our submission – it’s got all those figures I was talking about earlier (the charts etc) and can be found here:

    http://www.comcom.govt.nz//IndustryRegulation/Telecommunications/Investigations/MobiletoMobileTermination/ContentFiles/Documents/VF%20sub.pdf

    haven’t worked out how to make that into a link, sorry…

    cheers

    Paul

    • I don’t like government regulation because it always ends up distorting the market, and like you say, companies end up scouting around for ways to make up the profit. I would have thought the steady increase in business from the likes of iphone and other smart phones would be making up for this (I whinge about data rates because I managed to run up over $500 worth on a trip to Aussie recently – learnt my lesson from that!).

      I would suggest that $152 million profit isn’t small change however so it isn’t like VF is scraping around for cash is it! 🙂

  3. Oh! Automagic from WordPress…. sweet.

  4. And I’d say you’ve doubled my readership… you and Mum!

    • Lol, join the club, I edit my mum’s comments – at first she didn’t realise they would be published 😉

  5. Heh, that’s true enough… but the idea of taking all that money off us (and more) and giving it to Telecom in the hopes that they pass it on to the customers… something about that gives me the willies.

    All I can say about international roaming data rates is watch this space. Good things will happen.

    Cheers

    Paul

  6. It will be interesting to see what impact VOIP has on mobile calls. Traditional landline telco’s are already losing heaps because of Skype and other apps. It wasn’t just Telco’s that created this situation, Hotels and other accommodation properties used to charge like wounded bulls. It’s not that long ago that I used to get charged more in American hotels for my phone and fax bill, than for more room and f&B. Hunger for profit (being polite) lead to alternatives being found. Now of course Skype has come to iPhone and other devices in a WiFi environment can also take advantage. Telco’s need to get smart and I have to congratulate Vodafone for going from maybe 6% marketshare when they bought Bell South to 56% marketshare today. The new pricing for mobile data was a good start, but don’t stop there. There are plenty of other places where Voda and Telecom are still being greedy.

    • VOIP isn’t something I’ve tried on iphone, must give it a go.

      I think the pricing for mobile data was a given anyway, if teleco’s want to be in the game with how things are going they know they need to encourage ‘net use on their handsets (just in case something else comes along) and the data costs weren’t encouraging a lot of use, and there’s still a way to go, plus they need to improve 3G coverage – it’s cute to say VF cover 95% of where we work and play, but I work in my car a lot and I am always getting cut off!

      Things change so fast now, take Apple’s dramatic in roads into mobile phones, not something anyone would have thought possible a couple of years ago, then the app’s store which has been belatedly picked up by RIM for Blackberry, but possibly they’ve missed the boat as Apple has a solid lead and if their next offering is good, they’ll pull further ahead.

      Any company that clings to a old model of pricing or service is running the risk of being left behind. I’m not saying VF is about to disappear or lose it’s market share overnight, but clinging to an old pricing model is a worrying reaction in an unforgiving market.

    • David
    • April 17th, 2009

    Actually this statement doesn’t seem logical and could be borderline FUD (imho). Don’t MTR’s apply equally for Mob to Mob calls and Fixed to Mob.

    Given that the market shares of mobile are reasonable close (acknowledge VF is larger) but the net benefit would be slightly in Telcom’s fav assuming everything equal (ie more VF mobiles, therefore more calls to Tel mobiles, thefore more MTR to Telecom).
    BUT Telecom have the lion’s share of the fixed market, so this is massively distorted to VF (greatly more fixed lines calling more VF mobiles = more MTR to VF)
    So the net washup of MTR’s in going to be in VF favor surely?

  7. Hi David, not quite… Mobile to mobile could be considered to cancel each other out, but Telecom has the vast majority of the fixed line numbers so most of the mobile calls will either be to another mobile (cancelling out) or to a fixed phone (ie Telecom). So any reduction in MTRs is, in effect, a big boost for fixed line operators (eg Telecom, Telstra) in the market. Whether they chose to pass on those savings is another matter – in Australia the ACCC has noted that Telstra has passed on only 25% of the savings. In NZ Telecom passes on all of it 100% because of the Deed… that’s now in jeopardy because the Commerce Commission says it wants to regulate, in which case the Deed ceases to have an effect.

    Cheers

    Paul

  1. April 16th, 2009

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