Sunday, March 16, 2014

Telcos gouging on SMS by up to 90,000%, says consumer group

How much do text messages really cost? Less than one cent per 100, says Macquarie Telecom. 
How much do text messages really cost? Less than one cent per 100, says Macquarie Telecom. Photo: Glenn Hunt

Australian consumers are being gouged by telcos for sending text messages on their mobiles, says a consumer group which has asked the competition regulator to take action.

In a submission to an inquiry by the Australian Competition and Consumer Commission, the Australian Communications Consumer Action Network said some Australians were paying unreasonable SMS prices because telcos inflate the price they charge one another to pass texts between networks.

"Consumers should not be slugged for simply sending an SMS. It's time the ACCC stepped in and set the scene for some real competition. Telcos are currently setting whatever outrageous wholesale price they want and then that gets passed onto consumers," ACCAN deputy chief executive officer Narelle Clark said.

In a submission to the ACCC's Domestic Mobile Terminating Access Service Declaration inquiry,

Macquarie Telecom said it cost telcos less than one cent to send 100 text messages.

While most major telcos offer unlimited text messages on a number of their plans, they still charge for them on many prepaid and some monthly plans.

Yatango Mobile charges 12 cents a text on some of its plans, while Virgin Mobile charges between 15 and 28 cents. On some Telstra packages the telco charges 29 cents an SMS. Vodafone also uses a 30-cent per text charge on some of its plans.

"This level of profit margin is astronomical," said ACCAN's Clark. "We're strongly encouraging the ACCC to take action on this SMS price gouge, as they have done in the past with voice calls to mobiles."

Macquarie Telecom said $0.000083 was the true cost for a telco to send an SMS. ACCAN multiplied this cost by two (to take into account the receiving cost) to arrive at $0.00016 as the total underlying wholesale cost of a single SMS to the telcos. If they then charge 15 cents for a single SMS it represents an almost 90,000 per cent mark-up for consumers.

In December the ACCC proposed to declare SMS termination costs for the first time.

ACCAN said that if the ACCC did that, it would be able to set a lower wholesale rate and foster competition resulting in cheaper prices for consumers.

Telstra said in a submission made public last week that it did not support this.

"There is no evidence of market failure in the provision of SMS termination services. Mobile service providers are offering a large number of retail plans incorporating different options for SMS as well as competitive SMS pricing and/or bundling."

It added making SMS termination costs public "would not be in the long-term interests of end-users". It said consumers continued to benefit from "strong competition in the mobiles market, including competitive SMS pricing and retail mobile service plans that reflect the changing preferences of consumers towards data-centric services such as internet, email and [over the top] messaging applications".

Telstra, Optus and Vodafone haven't revealed the wholesale SMS price that they charge each other, claiming commercial-in-confidence. However in its submission, Optus has called for wholesale SMS prices to be reduced.

According to joint ACCAN and Anglicare research, low-income earners, older people and people with disabilities are more likely to suffer financially from high SMS prices.

"Many of these consumers don't own a smartphone, so they're not able to take advantage of relatively cheap data messaging services like Whatsapp or Viber, leaving them stuck with these unreasonable prices," said ACCAN's Clark.

The same wholesale price declaration was made for voice calls to mobiles in 1997. Since then and with other factors considered, the cost of mobile services has dropped at least 51 per cent in real terms, ACCAN said. 25 Feb 2014

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