Kogan Mobile has just announced that Telstra succeeded in it’s attempt to break it’s contract with ISPone and thus end the Kogan Mobile business [1]. Over the last few years there has been a trend for all Australian telcos to increase mobile phone costs. There are some pre-paid companies that offer reasonable deals for people who don’t make many calls, but for people who make any significant amount of calls or use any significant amount of data transfer the prices have mostly been going up.
The big exceptions to the trend of increased prices were Kogan Mobile and Aldi who offered “unlimited” contracts at affordable rates. Kogan’s deal was initially $299 per annum (it was later increased a bit) for “unlimited” calls and SMS and 6G of data transfer per month (but not more than 1G in one day and not more than 3 days of more than 400M in a month). 6G per month is much more than most people could use in a month and 400M is enough data transfer that most people won’t be at risk of doing that 3 times in a month. While Kogan did impose some limits on calls and SMS they weren’t going to affect most people. So when I switched to Kogan I removed the apps that tracked bandwidth use and talked for as long as I wanted without bothering about cost. I don’t think I used much more data transfer or spoke for much longer, but it was good not to bother about such things.
Now it seems that Aldi Mobile [2] is the best remaining option for affordable mobile access in Australia for anyone who wants more than the basic use. Aldi’s option is $35 for 30 days of “unlimited” phone calls and SMS within Australia with 5G of data transfer, $420 for 360 days of “unlimited” calls and 5G of data per almost-month isn’t as good as $299 per 365/366 days and 6G of data per month. Only having 5G of data per almost-month isn’t a problem for me, but the significant increase in price is.
A big problem with Aldi is the limitations on “acceptable use” which aren’t as clear as for Kogan, Aldi gives “downloading gigabytes of data in a short period” as an example of unacceptable use, this isn’t nearly as good as Kogan’s daily limits of 3*400M or 1*1G in a month which can be tracked by software to avoid accidental breaches.
But I’ll use Aldi in spite of this risk. All the other telcos charge too much for plans which involve 2G of data per month. The 1.5G quota I had before Kogan was a real problem for me, I need a quota of at least 2G with no serious penalties for accidentally exceeding it or a quota that’s at least 3G.
Australia needs proper competition in the mobile phone market or significant government action. Forcing the current telcos to stop colluding would be one good option for the government but another option would be to create a government owned telco with a mandate to serve the public – much like Telstra was before John Howard sold it off.
Kogan were a retailer of ispONE who were a reseller of Telstra. Aldi are a retailer of Medion who was a reseller of ispONE who was a reseller of Telstra. Medion and Telstra have come to an arrangement, details unknown, future prices unknown.
Note that Kogan lacks standing to negotiate on behalf of the ispONE services which it retailed. That’s the downside of a too-clever contract which moved all risk from Kogan by establishing a customer-ispONE contract.
The first tranche of Telstra was sold by Keating and that’s where the poor decisions were made (lack of structural separation, etc).
The attempt to create another government-owned telco — NBNCo — is likely to be halted by the next government.
The telcos don’t collude — in some ways it would be better if they did (less towers, etc). They don’t need to collude as the oligopoly gives revenue to all three mobile firms simply by Telstra setting a price, Optus charging 10% less than that, and Voda charging 10% less than that.
If you want to alter the nature of Australian telecommunications then you need to alter the high barriers to entry. That means using class-licensed bands, picocells, IP backhaul over consumer internet services. Even then that’s not a product which all consumers will find acceptable.
What makes you confident that Telstra won’t now do its best to get rid of Aldi mobile? (They’re doing well at creating FUD and getting people to move back to the major players, aren’t they?)
Glen: I don’t think that Kogan was being “too clever” in regard to it’s agreements. However it does seem that the exclusive arrangement between Aldi and Medion (Aldi is the only store in Australia to sell Medion electronic products) has given Aldi some benefits in this regard.
Currently the Liberal party plans to greatly diminish the NBN even though all the core infrastructure has been built and some contracts have been signed for significant amounts of money. I think that more than half the construction cost of the NBN has been committed already and most of that would be wasted if the NBN was to be stopped. I think that’s clear evidence that the Liberal party could have done something about Telstra and they obviously weren’t limited by what Keating had done.
The Telcos don’t always share infrastructure (although they do that a lot as well, consider “Three” as an example). But their collusion is on prices, taking prices from Telstra and being able to rely on Telstra not competing on price is a way of colluding.
Stuart: Telstra already tried that and failed. Also it’s worth noting that Aldi is significantly more expensive which will remove some of the incentive for shutting them down.