The idea in a nutshell: Optus claims it is Australia’s battler telco, fighting for the people against Telstra. Each of the ‘tier 1’ phone companies (Optus, Telstra and Vodafone) spend $billions maintaining and growing their 4G networks. They are about to spend $billions more on 5G. In my view, the best thing we could do to stimulate the right sort of competition between Australia’s major telcos is to burn down Optus’ and Vodafone’s networks. The same principal is being applied in banking with some interesting results.
What I do mean is….
Obviously, I don’t literally mean burning the networks down. Vodafone, a challenger brand in the Australian market, now match Telstra for 4G coverage. They’ve overtaken Optus with the proportion of the country they cover with a 4G signal. That must have been embarrassing for Optus because they have made some very public claims about their intention when it comes to growing their network coverage.
Vodafone achievement is no mean feat. It’s 6 years since Vodafone had a network meltdown. They’ve spent a fortune getting back to good coverage. So have Optus and Telstra. Each has invested over $1bn on their 4G networks. Unfortunately, large areas of Australia remain uncovered by a signal from any of them. If we’d have spent the $3bn that, together, cumulatively, they’ve spent – but we’d spent it all on a single network, we’d have covered more ground.
And that’s the insanity. The current telco policy is like building 3 motorways next to each other each of which has a slightly different toll boothing arrangements. The costs of the infrastructure has to be passed on to people. It is consumers involved who end up paying those millions of dollars to build the 3 motorways / networks. It inflates the price of the phone plans we buy and we should stop doing it.
There is hope in the form of network resellers
When I was more involved in running WhatPhone, we wrote a lot about MVNOs – Mobile Virtual Network Operators. We covered what they are, how they work and how they save customers money. My intention is not to revisit those ideas here.
Suffice it to say MVNOs are network resellers. They’re the famous telco companies you’ve probably heard of – like Amaysim or Kogan Mobile. They resell other people’s networks. In the case of Amaysim, if you get a SIM from them, they will provide you access to Optus’ 4G network. Kogan provide access to the Vodafone 4G network.
Amaysim’s coverage is identical to Optus. Their network coverage is just as good as Optus’. They are using the same network ! Kogan use the whole entire Vodafone network. Amaysim, Kogan and the many MVNO companies (there are more than 20 in Australia alone) like them are good example of where, in my view, we need competition.
Where we need competition when it comes to telcos
Instead of competing for who can build the biggest network, the telcos could compete on these things:
- Price: I don’t know many people who think they pay about the right price for their phone bills. Phone companies could compete more and offer better discounts or more inclusions at the same price. Having removed the cost of the network from their calculations, they could pass on the benefits. We’d get phones with better features and drop what we pay to use them at the same time.
- They could improve their services: Vodafone’s approach to roaming, as an example of service improvement, has been exemplary. In the last 3 years they have completely reinvented their roaming proposition. They have provided a solution to the problem most people felt they were facing when they were out of the country : That they could get home to a huge bill for using their phone overseas. Vodafone’s $5 a day roaming proposition gives customers fairness and predictability.
- Customer Service: Customer Service is not something the telcos excel at. Instead of competing on networks, Optus, Telstra and Vodafone could share a network and compete with each other on the quality of their customer service interactions. In fact, Industry best practice for customer service comes from MVNOs. Amaysim regularly win prizes for their performance in the area and literally set the standard for the industry. 95% of Amaysim’s customers would recommend the company to a friend.
- Billing systems: The ‘tier 1’ telcos’ back office systems were built 20 years ago now. The technology and our expectations have risen since then. It’s terrible that, if you are using your data quickly, the telco will not even tell you you’ve exceeded your allowance until the next day – because their billing service takes that long to work it out. A massive upgrade is required simply to get these facilities to the level customers need and have every right to expect.
Is suggesting a single network as impossible as it seems ?
Changing the subject only slightly to banking, there are some useful parallels.
In Europe, legislation called PSD2 (Payment Services Directive) has been drafted, agreed and released. By the end of 2018, banks will be required to open their APIs to competitors. Banks like Starling are being created which will resell the current account, loan and mortgage services of some of the bigge, better known high street financial brands. You could have a current account from Starling which is branded Starling but the banking service itself is provided by Barclays (to Starling.)
The banks which will win (perhaps like Starling) are the banks which offer the best Digital Experience, the best customer service, the lowest price or the highest interest rate for savers.
It’s hard to motivate big banks to change their behaviour and try new things. They are making so much money they don’t need to. It’s challengers which have the hunger to try new things. Improving service levels, prices and product range involves not creating new banks – but new banking service resellers. That’s exactly what I am proposing here for telcos.
You already have more choice than you think
People already have more choice than they think they do when it comes to the phone company which is best for them. The MVNOs – these network resellers – that exist in the market offer many of the things I’ve covered in ‘where we need competition’. They offer lower prices, better customer service and use (in some cases, for example OVO Mobile) newer billing systems to the benefit of their users.
That’s the wrong type of competition. Alternatives like Vaya with their price match guarantee (but bad customer service), Amaysim which have great customer service and big data inclusions, Kogan and Lebara and on the Telstra network Boost and TeleChoice really do offer something unique. Amaysim’s customer service is the best in the industry.
As phone manufacturers increasingly seek more direct relationships with their customers, the telcos are being left to be ‘dumb pipes’. They hate that, they’d like to charge more for their services. But consumers love it. The shame is that the pricing for plans could be much lower if they didn’t have to support the build and maintenance of 3 parallel networks.
One network, lots of resellers is the model for the NBN
This (one network, multiple resellers) is the model proposed by the NBN for broadband, after all. There will be one fibre (plus satellite plus a bunch of other technology to cover the whole country) broadband network and a bunch of companies reselling it. Again, they will compete on price, customer service etc.
The question for us all is how you get the benefits of monopoly (no wasteful duplication of infrastructure, for one) without paying the price of ‘unfair’ profits. Deregulation of the sort proposed by PSD2 is a good answer towards that goal.
Get the pitchforks ready and light a torch
If they can do it in banking in Europe, we can do it in telco. Lower fees, better customer service and more coverage seem like good reasons to burn vodafone’s and Optus’ networks down and to first pump up but then share Telstra’s between who’s left.