Capped mobile phone plans

CHOICE shows you how to avoid the “capped” sting that tricks consumers into paying higher bills.
 
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01 ."Capped" plans

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Approximately half the readers of this story are likely to be signed up to a “capped” mobile phone plan. The hook is an expectation that you’ll limit your monthly expenditure and have certainty around your bills. In reality, capped plans create anything but certainty. They’re simply a marketing trick, described by Australian Communications Consumer Action Network (ACCAN), the peak consumer body for telecommunication issues, as a scam consciously perpetrated by companies to exploit consumers and extract more money.

CHOICE asked staff and members for examples of how these tariff plans work in practice:

“I'm on a $19 cap and one month the bill was $130,” said one consumer. “At least Optus asked if I wanted to change to a more suitable plan.”

“Capped plans are a rort,” said another. “To allow easy comparison between telcos and plans, caps should be offered by airtime minutes and not dollar value.”

And this comment really hit the nail on the head: “The cap means nothing – it’s just a minimum fee. ‘$19 Minimum Plan’ would be a much more accurate description.

Capped mobile plans chartExposing the ruse

These supposed limits are known in the industry as “soft caps”, because they’re limits that can be exceeded – and research shows this happens very easily and frequently. A 2010 study by the Australian Communications and Media Authority (ACMA) found that more than half of those on a capped plan paid a bill that was higher than their cap in the previous 12 months.

According to the report, “despite 59% of mobile capped plans users reporting cost-related factors as their main reason for that choice, 58% of users in Australia aged 15 years and over reported that they had exceeded their capped expenditure limit at least once in the last year.”

Doug Purdie of the comparison website Phonechoice says the way companies structure their phone plans is unhelpful to consumers. “You might be offered $300 of ‘value’, but they crank up the call rates so that you reach that cap quicker. And most major providers have switched to 60 second billing, so a 61 second call costs the same as a two minute call.”

CHOICE has previously reported on this widespread reliance on “confusopoly”, where incomparable and complicated tariff structures are intentionally designed to bamboozle consumers. Famously, Teresa Gattung, former CEO of NZ Telecom, once referred to the use of confusion as the telecoms industry’s “chief marketing tool”.

Image source: ACMA-commissioned consumer survey, April 2009

 
 

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The solution

ACCAN wants telcos to introduce “hard caps” that stop consumers going over the monthly spend for which they’ve signed up. “If the telco industry is serious about fixing their customer service problems and looking after their customers’ interests, they should put an end to ‘soft caps’ that mean nothing,” says Elissa Freeman, director of policy and campaigns.

The consumer group sees capped plans as part of a wider problem of misleading behaviour, and recently made a series of formal complaints to the Australian Competition and Consumer Commission. “The wall-to-wall deception that seems to pass for marketing in the telco sector is out of control,” says Allan Asher, ACCAN’s CEO. “The industry trades on the fact that no reasonable consumer can compare different mobile or internet plans because they simply can’t make sense of them.”

Finding the right mobile plan

  • Contact your telco to move to a more suitable plan if you regularly exceed your cap, or consider switching providers.
  • Compare plans and find tips on how to avoid unnecessary costs at Phonechoice.
  • Watch for high excess data usage charges with iPhones and other internet-enabled smartphones.
  • Contact the Telecommunications Industry Ombudsman if you have any complaints.
  • Contact your state or territory’s fair trading department, or the ACCC, to report misleading advertising and behaviour, a telco’s failure to honour your statutory warranty rights, or for other general complaints.
  • Avoid bill shock with our data usage guide.


 

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