While Optus and Telstra battle it out over content ( something only 10% of people seems to really want), there is a pressing need which Australian phone users have which remains unaddressed.

Interestingly, the problem is self-exacerbating. The longer the companies fight over content, the worse the situation with their customers will become.

The real problem facing Optus and Telstra

People find it hard to anticipate exponential growth in any circumstance. That includes their mobile phone data usage. Few people realise the amount of data they’re using on their phone is growing, and growing fast. Many independent sources estimate mobile phone data growth as rising at around 70% CAGR. Because users don’t realise this is happening,  they expect their plan to cover all their usage. This mismatch in expectations can cause unexpected charges on customer bills and may fuel a lack of trust between user and telco.

I was involved in some primary research recently which highlighted the issue. I hadn’t considered the problem before.

: Only 30% of people think they’ll use more data in the year ahead.

Only about 30% of people realise they will use more data in the year ahead than they used last year. The question of data usage growth has been addressed by many. Our analysis on WhatPhone suggested that data usage has grown about 100% per year, every year, for the last decade and a bit.

When I was the BlackBerry Product Manager for Vodafone in the UK, average data usage on one of those devices was around 1MB per month. Ten years later, in 2015, average usage on a mobile phone was about 1GB. That’s a straight line doubling of usage every year for ten years. Interestingly, I heard a while ago that the total amount of data transacted over the Vodafone UK network when BlackBerry started was about 15GB a month. That’s the entire network! Now, you can buy that on a monthly plan and use it yourself! Today, in 2017,  the average usage is around 6GB which is consistent with the same growth.

There are sources more reliable than my personal experience, however. Below is the growth that Cisco and the ACCC predict on mobile phone data usage. Both estimate consumption growing at a compound rate of around 70%.

A number of independent sources suggest that mobile phone data usage is rising at around 70% per person per year. I think it’s closer to a 100% CAGR.


Cisco : Source : http://www.cisco.com/c/en/us/solutions/collateral/service-provider/visual-networking-index-vni/mobile-white-paper-c11-520862.html

ACCC : Source: https://www.accc.gov.au/media-release/demand-for-data-driving-changes-in-telco-market


: Do you know a single user, who doesn’t work in the industry, who realizes their data usage is rising like this ? I don’t.

The reality is, as we’ve shown on WhatPhone, some users will be fine. If people are prepared to stay on top of their inclusions and upgrade their plan now and then, they’ll be given the extra data they need. Unfortunately, there are a lot of people who don’t do that.

: Around a third of all users have been charged for extra data, on top of their plan allowance, in the last month.

Many are too busy to compare plans. As a result, many people are charged overage for their data usage each month.

The research and analysis we’ve done do not provide a causal link between this overage charging and the levels of trust we see in the industry. It could be a coincidence that 28% of people have been charged $10 or more for extra data (chart above) and, at the same time, 40% or so of them say they have ‘no trust at all’ in their phone company. (see chart below) Either way, levels of trust are clearly an issue for some users and should be a concern for phone companies too.

A large proportion of people don’t trust their telco. How come? Perhaps it is as a result of the extra charges they get hit with.

Self exacerbation

The maths of exponential growth means this is a self-exacerbating problem. As data usage rises over time, people stuck in contracts incur exponentially rising overage costs. I ran a couple of ‘simulations.’

Take a look at the charts below. The graphs I drew for each scenario look the same, but they’re not. I deliberately made the font of the axis big on both so you could see. The only difference between them is the usage level.

In the first example, the user starts with a usage pattern average of 6GB per month. In the second scenario, the user begins with 12GB. In both scenarios, data grows at the levels forecast by the ACCC (70% per year.)

This analysis shows that :

  • For a user with an initial level of data usage of the current average – around 6GB and a data bundle twice that, with a 70% CAGR in data usage, overage costs in a 2 year contract are about $300.

: In scenario 1, this individuals monthly usage averages 6GB per month and is rising in line with the ACCC forecast of 70% per year CAGR. By the end of their contract, despite starting with a data bundle allocation which is twice their initial usage, they pay $300 in overage. Many would consider this unfair.

  • If that same user left the contract they were under and moved to a new contract, with the same terms but began with a 12GB data bundle, their data overage charges for the 2 year period of a contract would rise to $600.

Remember, in both scenarios, the customer does what they think is smart. They buy a phone plan with far more data than they need just to be sure they don’t get hit with charges. And then they get charged $600. No wonder they think it’s not fair.


In scenario 2, the user starts with a data requirement which is twice as large as the last time they signed a contract. Their data allocation is still twice their average usage when they sign up. But the out of bundle fees they pay for data overage rise to $600 over the course of the contract.

Data usage is as confusing now as caps were then

It seems like phone companies don’t want to help people understand their data usage. When I came to Australia, most phone plans worked very differently here to the way they worked in England. In the UK, people tend to buy something ‘real’ in their plans like voice minutes. In Australia, everyone bought ‘Caps.’ Caps, started by the Three network, were a clever way of rolling up voice and SMS allocations into a single number which looked large. The maths behind it was actually very simple. Voice calls were then and mostly still are, within the companies which use them, charged at $2.36 per minute.

However, that said, people saw caps as confusing though and the people I know who bought them always suffered a sense of unease about exactly what they had purchased. They felt like they were being deceived with marketing.

I actually don’t think the phone companies have set out to mislead people about data. I doubt they’re doing the same thing now with their data allocations as they used to with their Caps. I just don’t think they’ve realised that there is a problem in terms of the fundamental lack of customer understanding about data.


I also don’t think they realise the impact of this sort of marketing, either. Below, Vodafone offers 42GB of data for $80 per month at the moment. Another $20 will get you another 8 GB. These are staggeringly high data allowances. Very few people – perhaps a handful in the whole of Australia, would use this much data each month. In a way, this is disinformation. The presence of bundles this size on Vodafone’s site – and it’s not just Vodafone who do it – suggests that some people need this much. There is very little usable content on any telco sites identifying how much data people actually use.

: I don’t think the telcos realise how misleading this sort of plan inclusion is. For the uninformed, it suggests that monthly usage could be 42GB. It almost certainly isn’t.

Summing up – there are actually two self-exacerbating cycles happening here

Optus and Telstra are fighting over content, something that, from the data I have seen, is not going to solve either of their problems (getting or keeping customers.)

In the meantime, their customer base stands to become increasingly frustrated with them for data overage charges, as data usage levels rise exponentially – something users just don’t understand.

Without gazing too closely into my navel, there are two overlapping, self accentuating features in this situation. First, the one I’ve described here, in which exponentially rising data usage gradually erodes trust in the telcos. Second, the addiction that the telcos have to the revenue they get from it. With millions of customers paying these $10 per GB extras each month, it’s only natural that the telcos would get hooked on the revenue from them, especially given the cost pressures and competition they’re under. All of which provides an opportunity for smaller and new phone companies – a subject I’ll consider in future blog entries.