Protecting consumers is an essential service
Good morning. I would like to begin by acknowledging the traditional custodians of the land on which we meet today, the Gadigal people of the Eora nation.
I pay my respects to elders past, present and emerging, and I extend that respect to any First Nations people joining us here today.
I would also like to thank Grahame and the team at CommsDay for the invitation to speak. And as always, for putting on an informative and well-run conference.
Well, here we are in early May. Always an interesting time of year. Not least of course because of the CommsDay summit. But with the RBA Board meeting yesterday and the Federal Budget being handed down next week, economic issues are front of mind for many people, and not just for the policy wonks.
For many Australians, the first Tuesday of the month has overtaken the first Tuesday in November as a key date pencilled in the calendar, when we all tune in (if that’s still the right term) to hear the news about the latest interest rate announcement.
And not without good reason. Every incremental change to the cost to the household budget, positive or negative, is another one to be weighed up and managed. And this is especially so for those working within the tightest financial margins.
People have to take account of the smallest everyday purchase.
And while inflation is coming down, the ABS data released last week reported CPI was at 7 per cent for the year to the end of March.
The telecommunications sector
In that context, the most recent results released across the telecommunications sector make for some interesting reading. Noting that the earnings here are before interest, taxes, depreciation and amortization:
- In its half year results to the end of 2022, Telstra reported total income up 6.4 per cent to 11.6 billion dollars. The company also reported underlying earnings up 11.4 per cent in comparison to the first half of the previous financial year.
- Aussie Broadband announced a record result in the six months to the end of 2022. With revenue up 27 per cent and earnings up 86 per cent.
- TPG’s earnings for the 2022 calendar year was up by 23.6 per cent.
- In contrast, Optus’s earnings fell 6.3 per cent in the 9 months to December 2022.
Of course, there are many and varied reasons for these individual results. But I don’t think it’s controversial to say that on the whole the telco sector is in a more robust state of financial health after navigating through the COVID headwinds.
And with many of the economic and social impacts of COVID dissipating, international travel has made a welcome return in recent times.
It has certainly helped mobile network owners, with Telstra, Optus and TPG all reporting significant revenue improvements in areas like international roaming.
TPG reported that the return of international roaming has added $2.20 per month to its post-paid average revenue per unit (or ARPU) in the second half of 2022. This compares to 20 cents per month in early 2021.
Credit Suisse analysts called TPG’s full year mobile results ‘more positive than expected’.
In its most recent results, Telstra reported a $100 million increase in international roaming and said it was now at 70 per cent of pre-COVID levels.
In a dynamic environment rebounding from the effects of COVID, each of the major network operators have set their priorities in:
- divestment around areas like property and passive tower infrastructure
- diversification, with an increased focus on developing business streams in areas like data, cloud storage and the Internet of Things, including into potentially huge growth areas in the automotive and industrial sectors
- investment in their network capacity and in their 5G coverage.
Investment naturally comes at a cost and last month Telstra announced that to help it continue to invest in its services, it would be increasing the price of its pre-paid plans, commencing in July this year.
This includes a 20 per cent increase in the cost of its cheapest pre-paid plan, an increase of over 16 per cent for its second tier plan, 12.5 per cent for its third tier, and so on, to a near 7 per cent increase to its 12-month plan.
This follows an extensive pricing review and sits beside its ambition in finding $500 million in savings and efficiencies over the next three years.
To date TPG and Optus have not revealed their plans for mobile pricing.
While these may be the three major players, the telco sector in Australia continues to be highly competitive and diverse.
This is particularly the case in the mobile market with its low barrier to entry, where there are now close to 50 mobile virtual network operators offering alternative plan options.
In the broadband market, while the major telcos have felt the pressure of NBN migrations and other external market factors, mid-tier telcos have benefited from the growing demand for telecommunications services.
JP Morgan analysts observe that this has been in part due to smaller telcos offering lower prices and more competitive products. The analysts note the NBN re-selling marking is now driven by churning customers rather than new connections.
Coinciding with the rise of remote working, content streaming and gaming, consumers are also prioritising faster internet speeds.
Smaller telcos have also increasingly entered the enterprise and government market, which has typically been heavily served by the major telcos, leading to increased competition.
So, we have a competitive, vital and commercially robust market with a range of players from the very largest telcos who offer scale and support, to smaller players who operate with lower overheads.
We have companies investing in infrastructure and diversifying their products and services.
This all sounds like good news for the customer.
The consumer experience
So, what do consumers think about their telco services? No doubt many would be pleased with ongoing improvements in coverage, in speed, in lower latency, in access to unlimited data and a choice of plans.
And also no doubt some here would point to a trend in declining numbers of complaints to the Telecommunications Industry Ombudsman as evidence of a well-functioning and responsive consumer industry.
But the TIO has said itself that its quarterly reports don’t provide the full picture of the consumer environment.
The TIO also consistently reports that consumers are frustrated with no or delayed action from their providers in response to their complaints, and of telcos’ failure to meet agreed complaint resolutions.
The ACMA’s own research enhances that picture even more. And time and again, we hear the same story from customers – that they expect clearer communications from their telco, they want more efficient customer service, they must have improved billing accuracy, and it is absolutely necessary to have better answers for vulnerable customers and customers dealing with financial pressures.
The limited picture we have of telco customer issues and its opacity does little to engender trust. And consumer trust is something the telco industry should set as a premium.
Early last month Roy Morgan research announced that the telco industry had overtaken social media as the most distrusted industry in the Australian economy.
It should be noted that Roy Morgan does point out that the results were heavily driven by the Optus data breach in September 2022. However, if you go back to 2018, this is not the first time that the industry has been identified as the most distrusted in the Morgan annual survey.
I know in the past that Comms Alliance have questioned using this data as a valid input for policy considerations.
I agree that we need to take all evidence, data and research into account when looking at the consumer experience in the telco environment.
As the saying goes, sunlight is the best disinfectant.
So perhaps we should look at what other telco consumer matters have come to light in recent times as an indicator of consumer satisfaction.
In March this year, Circles.Life paid a penalty of more than $250,000 for not uploading customer details to the Integrated Public Number Database. Amongst other things, the IPND is used by police and emergency services to contact people who may be in life-threatening situations.
In November last year, we found that Telstra improperly took credit action against 70 customers who were on financial hardship arrangements.
Telstra was also found to have delayed payment of over 11 million dollars in compensation between July 2017 and June 2021 owed to more than 67,000 thousand customers.
In 2022, between them TPG and Optus had to refund more than 6.5 million dollars to customers who were unable to receive the maximum internet speeds promised in their plans.
And across 2021 and 2022 Optus and Telstra had to pay hundreds of thousands of dollars to customers for overcharging and other billing errors.
There have also been substantial Federal Court rulings against telcos in recent years. With the three major operators being penalised more than $33 million for making false or misleading representations to customers about their internet plans.
Last July, the Federal Court set penalties totalling $565,000 to the company formerly known as Red Telecom and to its sole director for failing to comply with decisions of the TIO.
And Telstra was penalised more than fifty million dollars in May 2021 for unconscionable conduct in its sales to more than one hundred First Nations customers.
Now some of these issues have been put down to legacy IT systems, which we expect the companies have addressed and rectified as a priority.
Financial hardship customers
However, what is most troubling is when customer service and protection of the most vulnerable in our community fails to meet adequate levels. Generally, it’s a good measure of how things are working by looking at how the most vulnerable are treated.
This is why in May last year, the ACMA released its statement of expectations to the telco industry in dealing with vulnerable consumers.
These expectations include parameters around responsible selling, giving adequate suspension and disconnection notice, and having appropriate credit management and debt collection processes.
Following the release of those expectations, and with protecting telco customers who are in financial hardship as one of our compliance priorities for this year, yesterday we published research into the experience of those customers.
The consumer research we commissioned indicated that 25 per cent of Australians experienced payment difficulty or concerns in the previous 12 months for at least one of their essential services bills, that is, telco, energy and water.
Forty eight per cent of those people had difficulty with their telco bills.
This represents just under 2.4 million Australian adults finding it financially difficult or experiencing concern managing their telco bills.
In contrast, industry data from the main telcos reported just 4388 residential financial hardship customers as at 30 June last year. This represents point zero three two per cent of all residential customers.
Clearly there is a vast discrepancy in this data between what customers are experiencing when in financial difficulty and what telcos are doing or how they are recording financial hardship concerns when contacted by their customers.
And our consumer experience research found that just under 50 per cent of the general Australian adult population and almost a third of those who experienced financial difficulty were not aware they could contact their telco provider for help their managing bills.
Consumers who did report financial difficulties found it was rare for telcos to initiate contact, especially human contact.
Telco providers were also generally seen as being less well-equipped to help people, less flexible and offered fewer assistance options than service providers in the energy and water sectors.
The TIO’s review into financial hardship complaints, while looking at different aspects of the issues, reinforce our findings that more and more people are finding it tough to pay their telco bills. Again, this is something that is not reflected in the data provided by the telcos themselves.
So it appears we have a problem of people not approaching their telco for help, and when they do, of not receiving the service they expect or deserve.
This is a problem that must be addressed by the industry, and swiftly. Increasing cost-of-living pressures are likely to result in more consumers encountering financial stress and needing support from their telcos to pay their bills and remain connected.
It is critical that telcos have financial hardship policies and practices in place that are flexible, transparent and able to assist customers in need to meet their financial obligations and stay connected.
And that is the fundamental point – without a reliable internet connection and access to a phone it is increasing difficult to participate in our digital economy, especially for those striving to make ends meet under tough circumstances.
It makes it more difficult to work, to look for work, to undertake education, to seek medical help, or to contact your bank or government services.
Telcos as essential services
As we all know, consumer demand for and reliance on communications services and products is only growing.
The ACMA’s most recent research, which will be published later this month, found that:
- In June 2022, there were 32.4 million mobile services in operation.
- Almost half of Australians reported working at least one day at home.
- more than half of Australians reported attending at least one telehealth consultation in the 6 months to June 2022.
- And nearly a third studied online from home at least one day a week.
Consumers are moving to faster broadband plans with NBN aiming for 94 per cent of premises to be 100 Megabits per second capable by December 2025
Research from the Department of Infrastructure, Transport, Regional Development, Communications and the Arts found that an average home will require 420 gigabytes of monthly data by 2026, which is more than four times the demand in 2016.
After the experience of the last three years, and the integral part that communications services and the telco industry has played in keeping people and communities connected, I don’t think it is up for debate any more than telco services are essential services for all.
However, what is now up for debate is whether and to what extent the industry is regulated like an essential service.
As we are reminded frequently, section 4 of the Telecommunications Act 1997 states that the industry: ‘be regulated in a manner that promotes the greatest practicable use of industry self-regulation and does not impose undue financial and administrative burdens on participants’.
But the telco industry has experienced rapid and evolutionary technological change since the 1990s.
While limited competition has been allowed since 1991, at the time of the introduction of the Telecommunications Act, Telstra remained a virtual monopoly in the fixed infrastructure market and there was only nascent competition in mobiles. And for almost all customers a voice product was all they could access.
Naturally, the 1997 legislative framework was directed towards fostering a competitive telecommunications market that would enable it to harness technology to deliver strong consumer benefits.
The goals of the 1997 legislative framework appear to have been largely met. It is estimated there are now over fifteen hundred providers on the TIO’s books, with the sector achieving significant innovation and decreasing costs to consumers over the decades.
The framework emphasised the use of industry self-regulation so that rules could be developed as real-life issues emerged. In effect, however, as the codes and standards developed under the Act fall within the ACMA’s remit, it is much more of a co-regulatory arrangement.
But there are substantial differences between the telco sector and other areas of co-regulation such as broadcasting.
In particular, there is a substantial difference between the broadcasting and telco environments in the number of providers in each and their relative size to each other which can impact on the effectiveness of co-regulatory models.
As I mentioned earlier, there are more than fifteen hundred telco providers in the country, ranging from some of Australia’s largest companies to individual owner-operator businesses.
Unlike essential services in sectors such as banking, energy and electricity, there is no need for retail carriage service providers to register or otherwise be authorised to provide their services.
And combined with the low barriers to entry, this creates heightened risk of harm to the consumer.
This can happen due to opportunistic players entering the market with little intention to comply with the rules. Or because of providers ignorant of their obligations to consumers. Or both.
Without appropriate levels of visibility available to the regulator, it is difficult to mitigate risks to the consumer before it is too late. A registration scheme is something that the ACMA as well as the TIO and the ACCC have been advocating for since 2020.
Companies regularly insist that regulation imposes additional and heavy burdens that pass costs to consumers and threaten competition.
This regulatory burden doesn’t appear to affect other industries like energy. In fact, some telcos have also entered the energy market as service providers. In the energy sector, consumer protection is prescribed in legislation with heavy penalties for non-compliance.
I would suggest that whether an obligation is in a code or in direct regulation should make no difference to the effort a company needs to put in to meeting those obligations.
Turning back to telco consumer protections, it is useful to reflect on some of the commitments set out in the Telecommunications Consumer Protections Code.
These include that:
- Consumers will enjoy open, honest and fair dealings with their supplier, and have their privacy protected.
- Consumers will receive clear, accurate and relevant information on products and services from their supplier; before, during and, where appropriate, after the point of sale.
- Consumers will have disputes resolved quickly and fairly by their supplier.
- Promotion of products and services by suppliers will be clear, accurate and not misleading.
- Disadvantaged and vulnerable consumers will be assisted and protected by appropriate supplier policies and practices.
Considering some of the examples I spoke of earlier, do we think that these commitments are being properly fulfilled by the industry and meeting the expectations of consumers? Or do we need to look at alternative measures to ensure basic consumer protection needs are being met by all telcos?
Comms Alliance will soon commence a process to review the TCP Code.
It can be the default position of any industry to baulk at regulatory reform or review.
However, the ACMA and the telco industry has worked together in the past on regulation to address consumer issues.
This includes the introduction of the Complaints Handling Standard in 2018, which has seen a marked improvement in complaint numbers, albeit an area where we would like to see further improvement.
And more recently, the telco industry has made great inroads into reducing the amount of phone and text scams reaching consumers. Hundreds of millions of these scam messages have been blocked because of industry effort and investment in consumer protection.
The TCP review will be another opportunity for industry to step up and in good faith move towards a consumer framework that is fit-for-purpose, addresses current inadequacies and works to everyone’s best interests.
In December last year, the Minister for Communications publicly set out the government’s Statement of Expectations for the ACMA.
In this document, the government explicitly encouraged the ACMA to be more directive in setting our expectations for the development of industry codes.
In the coming weeks, the ACMA will provide its detailed advice to the telco industry, through Comms Alliance, of our expectations for improvements to the telco consumer protections framework.
We have already taken this approach with our What Audiences Want paper on our expectations for broadcasters’ codes of practice and our position paper on misinformation and news quality on digital platforms.
I can assure everyone here today that we view consumer protections in the telco industry as being of the highest priority.
So, in closing, despite some setbacks over recent times, the industry is in good shape. It’s competitive, it’s innovative and it’s profitable.
Unfortunately, for many of its customers, times are tough and may be so for some time.
They rely on your services to help them get through each day. And they need to trust that you won’t let them down.
The evidence is, despite the protections already in place, not enough is being done to support telco consumers, particularly those facing the greatest financial challenges.
As we have seen with both complaint-handling and scam reduction, when we work together, there can be benefit for consumers and industry.
The upcoming TCP Code review is an opportunity for industry to commit to genuine engagement that will result in consumer safeguards commensurate with your position as essential services.
With that ambition, I look forward to working with you all as we create a framework that shields consumers from harm and supports industry to innovate, invest and build for the future.