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New Telecom boss takes shock-and-awe approach as he slashes global roaming rates

UPDATE Dec 10, 2.30pm: Facing a regulatory threat and lost mobile market share, Telecom's new CEO has taken an axe to global roaming rates - big time.

Telecom is introducing a $6 a day flat rate for data roaming in Australia, for postpaid (contract customers).

The new rate kicks in December 22, and will be reviewed mid-2013, and represents a radical saving for contract customers who can today easily clock up hundreds of dollars in charges, or more, during a few days intensive smartphone use in Sydney (assuming they don't want to lose their regular number and swap in a local SIM card).

A $10 a day flat rate for data will apply to those travelling in the UK, USA, Canada, China, Hong Kong, Macau, Taiwan, and Saudi Arabia - with a fair use provision applying (The fair use provision is, "If you use significantly more data while roaming than you do at home, you may be in breach of this policy. If this is the case, we will alert you, and if you breach the policy again, we reserve the right to suspend your account.")

Data roaming charges will be slashed by 83% to 92% in other markets, although charges will continue to be on a usage basis, the company says.

Voice calls from Australia have been cut by 35%.

Save hundreds of dollars
Neatly illustrating the high cost of its current rates (and those of competitors), Telecom gives the following examples: "A customer who spent five days in the US and consumed 86.6MB of data would have saved $325.50 on the $10 per day flat rate (a 87% saving). Another customer away for three days in India with stopovers in Singapore, consuming a total of 113MB, would have saved $2,380.96 (a 82% saving) on the new per MB rates."

On a conference call, Jo Allison, acting head of Telecom's IT and telco services division Gen-i, said the move would save some corporate clients tens of thousands of dolalrs a month.

Great day, but will it last?
"This is great news for travelers and closes a very unfortunate chapter in the telco story – for one provider at least," Institute of IT Professionals NZ chief executive Paul Matthews told NBR.

"As is often the case, I suspect charging a more reasonable rate will end up in greater profit at the end of the day, with lots paying $6 a day rather than just a few getting caught and paying hundreds.

"However I suspect this isn’t likely to last long if Vodafone and possibly 2degrees don’t follow suit, so here’s hoping it marks an industry change rather than a temporary offer by one provider"

On this point, new Telecom CEO Simon Moutter says the Australian roamiing flat rate move from $6 to $10 when it is reviewed next year, but that it wouldn't go back to the previous per-megabyte charges.

As a civilian, he felt ot pain
Mr Moutter said that as a Telecom customer, before he rejoined the company, he personally felt the pain of high data charges. They were a "pain poiint" for travellers, many of whom were so scared of bill shock they turned off data altogether rather than using travel apps and other tools that made a smartphone useful on the go.

When he became CEO, Mr Moutter made it a priority to renegotiate the wholesale rates that underpin roaming charges.

The Telecom boss told NBR ONLINE that the June 2013 could see the Australian roamiing flat rate move from $6 to $10, but that it wouldn't go back to the previous per-megabyte charges.

Revenue impact?
The Telecom boss refused to answer NBR's questions about existing roaming revenue or the impact of the new charges. But he did say the company calculated they would be revenue-neutral over time as they stimulated more activity. The modelling did not include any customers lured from Vodafone or 2degrees by the deal.

Investors seemed leery, with Telecom shares [NZX:TEL] down 1.09% in the hour or so after the announcement. The broader market was down 0.37%.

Enough to head off regulation?
The cuts are a move that will catch the eye of international travellers and (more nervously) investors.

Will it be enough to head off government intervention?

(All carriers have been cutting their rates, and adding more safeguards against "bill shock" for international travellers as the Australian and New Zealand governments consider joint regulation; see below).
 
No. The price investigation is trans-Tasman - so not just Vodafone and 2degrees but all the big Aussie carriers would have to make a similar move.
 
And while Telecom's new roaming rates are keen, they are not guaranteed beyond June next year.
 
Let's hope they are, and that Mr Moutter takes a similar shock-and-awe approach to other Telecom services when he announces his strategic plan in the new year.
 
If he does, we'll be in for some very interesting times ahead.
 

ckeall@nbr.co.nz


Enough to head off regulation? Vodafone extends bill shock service to international travelers

UPDATE Nov 5: In what some will see as an attempt to head-off roaming regulation, Vodafone has extended its domestic "Data Angel" service to international use.

Under the blanket scheme, a customer is warned when they have used 80% of their data bundle – and again when they’ve used 100%.

Once the bundle has run out, their data session stops and they’re redirected to a free website where they can choose to buy more, or simply stop using data. There is no casual rate.

NZ ICT Minister Amy Adams – and her counterpart across the Tasman, Senator Stephen Conroy – have said trans-Tasman roaming charges are too high, and information about them too confusing.

Early last month, the pair announced they were accessing seven possible remedies (below), six of them involving regulation.


Best trans-Tasman roaming reform? Scrap all charges, say Tuanz, InternetNZ, EMA

Oct 4: The best reform to transtasman roaming reform would be to scrap all charges says the Telecommunications Users’ Association (Tuanz).

InternetNZ offers a second left-field idea: only let phone companies here purchase spectrum in the Australian and New Zealand government's "digital dividend" spectrum auctions if they pledge to do away with international roaming charges.

The EMA also picks up on a scrap-the-charges theme, noting that in many areas, Australia and New Zealand are treated as a single market. Tuanz notes a single mobile roaming market is already mandated in the European Union.

Both governments recently mounted a joint investigation into sky-high tran-Tasman roaming rates for mobile phone users.

Seven possible reforms were proposed on August 23 (see RAW DATA, below).

Overnight, the Ministry of Business Innovation and Employment (MBIE) published submissions on the seven alternatives from the major phone companies and industry groups.

Tuanz's response is the most front foot.

The lobby group, which represents corporate telecommunications customers and smaller users said it favoured none of the seven options but “simply doing away with the concept of roaming altogether".

"If an MNO [mobile network operator] sells a service (minutes, TXTs, data) then it is up to the MNO to provide that service, regardless of where the customer is in the world”.

If it had to choose one of the seven options then Tuanz favoured option 2 of unbundling (letting a visitor choose, say, one phone company for a voice plan and another for data, at a local price) or option 3, which would let a roamer act as a local mobile customer without having to swap in a local SIM card and lose their regular phone number.

Option 3 would also help get around One of the biggest problems with roaming, Tuanz CEO Paul Brislen told NBR ONLINE. That is, the "tromboning" of data.

“I take my device to Australia, data I send from that device – say, an email across the room – travels back to New Zealand before coming back to Australia to its recipient.”

Yet options 2 and 3 are fraught with technical complications, Mr Brislen says. “Ultimately, however, we would prefer that roaming cease to be a service.”

Want 4G spectrum? Play nice with roaming
InternetNZ also supports options 2 and 3 “or the Tuanz alternative solution – doing away with roaming”.

The lobby group also offers its own alternative solution: “Requiring those in the industry wishing to purchase digital dividend spectrum meet a time frame for either unbundling, a local access regime or doing away with international roaming.”

Our government is due to auction 4G-friendly 700MHz spectrum, freed up by the analog TV switchoff, in December or early next year. The Australian govenment has a similar 4G auction scheduled for April 2013.

Such a set-up would meet InternetNZ’s aims for phone companies to be incentivised to reduce the cost of trans-Tasman roaming without the need for government to impose “granular” regulations.

EU: one roaming market
A submission from the Employers and Manufacturers Association (Northern) notes its members’ concern about the price of phone services when travelling to Australia and notes inconsistencies in pricing that point to room for improvement:

“When it is possible to call one direction to Australia for a matter of cents per minute but charged roaming rates in dollars there is clearly an indication that where competition exists the rate is able to be reduced,” the EMA submission says.

The group also notes the inconvenience of swapping in a local SIM card, hassles connecting to different wi-fi networks as you travel and scurry to avoid cell charges.

The EMA falls short of a call for regulation, but says there has been a “market failure” that warrants more investigation.

And at one point the EMA makes a tilt in Tuanz scrap-roaming direction, noting “In most other senses the Trans-Tasman market is often treated as one by most companies and use of mobile technology should follow similar treatment”.

Mr Brislen notes the one-market approach is taking off elsewhere.

“In Europe, the EU is mandating this kind of approach and Vodafone is beginning to offer services along those lines within the European Union. Data bought in the UK can be used in Germany or Spain,” the Tuanz boss told NBR.

Telcos: we've got it covered
Telecom, Vodafone and 2degrees submissions strike a familiar theme: trans-Tasman roaming costs have been reducing steadily over the past 24 months, negating the need for regulation.

Mr Brislen is unimpressed. The situation is a mess, he says, and it needs to be fixed.

While costs have come down, he notes you can buy 1GB (1000MB) of mobile data locally for around $30.

Roaming to Australia, the price has dropped from as high as $30 per MB to as little as $1 or 50c on some plans – but even that is a dizzying $500 to $100 per gigabyte, or 15 to 30 times the domestic price.

And the EMA notes that if you can’t connect to your desired network (say, Vodafone Australia) because of cell coverage issues, then your phone defaults to Telstra or Optus – and you get whacked with a $30 per megabyte rate. There is confusion, and overcharging.

What next?
Pack a lunch.

The Austalian-New Zealand joint government investigation into global roaming rates has been under way since 2010. 

Submissions now have to be chewed over by the MBIE in New Zealand and the Department of Broadband, Communications and the Digital Economy (DBCDE) in Australia.

Then Communications and IT Minister Amy Adams – and her oppostite number in Australia, Senator Stephen Conroy – have to agree on which of the seven proposals, if any, to adopt (or, indeed, whether to pay heed to Tuanz and InternetNZ's alternative proposals).

Assuming both governments can reach a consensus in the coming months there will then have to be applicable regulatory changes on each side of the Tasman.

In the meantime, look to Telecom, Vodafone and 2degrees to elevate their efforts to head off regulation. They have more room to move on pricing. And they also have to address Ms Adams' critique that plans, and alerts, are confusing.

Most people have no idea about megabytes and gigabytes, the minister says, or how much data is consumed various web pages, multimedia, email and email attachments.

Vodfone NZ CEO Russell Stanners recently told NBR the Data Angel initiative had dramatically reduced bill shock on the home front.

Under the blanket scheme, a customer is sent a warning when they near their limit, then can't go over it until they make a choice between buying an extra data pack or going on to a casual rate.

Data Angel has reduced the number of people who use mobile data at a casual rate by 80%, according to Vodafone figures.

Mr Stanners says the scheme would be extended to international roaming shortly, once technical issues were ironed out.

See all the submissions here.


RAW DATA: The seven options

The below options were put forward in a joint report by New Zealand's Ministry of Business, Innovation and Employment (including the former MED) and Australia's Department of Broadband, Communications and the Digital Economy (see the full report here)

OPTION ONE is for the two governments to maintain a watching brief, and to launch a further investigation in future, if necessary. However, the high level of resources required for an investigation, combined with the uncertainty created for all stakeholders, militates against this option.
 
OPTION TWO would involve unbundling trans-Tasman retail roaming services from domestic retail mobile services, so that a trans-Tasman roamer could choose one operator (say, Telstra) to provide domestic communications and a different operator (say, Optus) to provide trans-Tasman roaming services.
 
OPTION THREE would involve requiring operators to provide mobile local-access services, which enable roamers to act as local users in their destination, without having to swap SIM cards and without becoming unreachable on their original numbers. Under one variant of Option Three, the roamer arranges the mobile local-access services through the home network. The impact of this variant will depend on the terms on which home networks are allowed to offer this service. Under a second variant of Option Three, the roamer establishes a direct billing relationship with the visited network. This would potentially have a materially positive impact on competition, as home networks would have to compete on a level playing field against the visited network’s standard domestic offer.
 
OPTION FOUR would see New Zealand and Australia adopt price caps. This would be a blunt form of intervention, unlikely to promote better competition. However, it would potentially be an effective way of ensuring prices drop over time.
 
OPTION FIVE is for New Zealand and Australia to introduce wholesale terms of access available to a home network seeking to provide trans-Tasman roaming to its customers. Potentially, this could be accompanied by a requirement on the home network to pass through to its customers any savings it enjoys from the new wholesale rates. However, unless combined with one of the other options canvassed, this option faces the issue of whether or not home networks would actually request the new terms of access.
 
OPTION SIX would require mobile operators to provide the New Zealand and Australian regulators with wholesale traffic and revenue information on trans-Tasman roaming, and for the regulators to report publicly on this. This would enhance transparency in the market, potentially putting downward pressure on prices.
Option Seven is to empower the New Zealand and Australian regulators, when investigating trans-Tasman roaming services, to choose from the regulatory measures set out in Options Two to Six, should they determine that intervention is warranted. This would ensure that the regulators pose an increased regulatory threat. In such a context, operators would likely feel constrained in their ability to set unreasonable terms of supply and, to the extent they did not, the regulators could intervene effectively.

More by Chris Keall

Comments and questions

I would expect to use significantly more roaming data than at home. Without home wireless F

That just might make me switch.

I will continue to turn off data roaming whilst overseas and rely on wifi

I will continue to turn off data roaming whilst overseas and rely on wifi

Nice work. Now we know how much of a complete RIPOFF telcos actually are when they can slash prices by many 1000s of percent and still make on it.

While I agree that previous charges were a rip-off, my pedant forces me to point out that they can't "slash prices by 1000s of percent". Once they reduce them by 'only' 100% they become free. You're not suggesting that they're now paying customers to use it, are you?

Well done Simon. Now he might like to offer Naked Broadband and VDSL......

Good to see Telecom follow Vodafone and bring the roaming rates down. Hope the war continues. Don't mind paying a little premium for roaming as there is alot more network complexity.

Thanks, Mr. Moutter; sir. For not gouging us, anymore.

@ #5 how do you know what Telecom is making on the new roaming prices? I would wager that given his indiscriminate slash and burn headcount reduction at Telecom (it doesn't matter if the employee is revenue generating, rather than a cost, they're still being laid off) combined with moves such as this suggest that Moutter is probably not intending to stay for long. Shortly Telecom will look a whole lot more competitive and sharper than it is now and that'll be when he departs. I pity the poor fool who next takes up the CEO role. There will probably be one hell of a mess to clean up.

Shows what a disgrace Telecom was and is. Profits before people...

@ #10 profits??? Telco? Yeah, right? How much do they need to plough into 4G? How much business are they losing? What has happened to the cost of broadband/mobile/fixed over the last five years?

Skype ... Vibr ... iMessage ... Facetime

$5 weekends were a revolutionary idea when Telecom offered them in the 1990s. This looks to be in the same league.

I think the calls for free international roaming - even to Australia - are a bit ridiculous. Telcos have to actually pay other companies when their customers are on another network - it ain't free. So, yes, you could go to free roaming, but all it would mean is that the additional cost would in some way have to be averaged out elsewhere. I think it is more reasonable for travellers - who are choosing to travel - to have to pay a bit more. I think the current proposal of $6 for Australia is something that most people would feel is pretty reasonable.

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