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Telecommunications companies are being asked to take steps to prevent customers from sticking with mobile plans that are more expensive than they need, after a Commerce Commission investigation found that a significant proportion of Nueva Zeeland are paying for more than what they use.
The Commerce Commission has written an open letter to Spark, Vodafone and 2degrees outlining its review of nearly 80,000 consumer mobile bills.
It found that two-thirds of consumers did not switch plans during the 12-month review period.
A quarter could save an estimated $ 11.60 a month if they switched to a cheaper plan that still covered their use.
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The commission said that 7 percent of all residential consumers spend a relatively high amount on wireless services given their use and that they could potentially save an average of $ 48.65 per month.
“Our work suggests that some consumers significantly overspend on their wireless plans due to transparency and market inertia issues,” said Telecommunications Commissioner Tristan Gilbertson.
“We want the industry to catch up with other sectors, such as electricity, where consumers and comparison websites are making good use of the ability to compare usage and prices. “We hope that operators will address these issues by increasing the usage information available to consumers and implementing measures to help keep consumers on plans that best reflect their actual requirements. This will improve transparency, allow consumers to make better decisions, and avoid overspending. “
In its letter, the commission said consumers should not pay more than they would reasonably require.
“It seems clear that some consumers overestimate their requirements when selecting a plan and, for various reasons, never review this decision again in light of actual usage.
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Tim Barnett, director of Fincap, said the move was welcome.
“There is currently no mechanism to correct for this inertia factor that can result in significant welfare losses for consumers and corresponding windfall gains for mobile operators.
“The absence of a mechanism to correct such ‘overspending’ contrasts with the position where a consumer is ‘spending less’ and various mechanisms, such as package charges, act to encourage the consumer to spend more.
“Our expectation is that operators take steps to address this imbalance by implementing ‘right size’ or ‘right planning’ measures to guard against overspending. To this end, we would like operators to more proactively manage the best interests of their own customers, including by tracking usage versus spending and helping to keep customers on plans that better reflect their actual needs. “
The commission has also encouraged the wider industry to initiate a work program on a “consumer data right” so that consumers can choose to share their use, spending and product information with competitors and comparison services to help inform your decisions. This would provide a mechanism similar to that available in the electricity sector.
The commission has asked the industry body, the Telecommunications Forum, to look at an industry-wide initiative in this area. “We have identified significant opportunities for the industry to improve consumer outcomes,” Gilbertson said.
“We will review the industry response in our Retail Service Quality work program, which focuses on addressing customer pain points across the industry as a whole, with a view to taking more active action if necessary.”
The mobile bill review showed that consumers who proactively managed their mobile plan were in a better position to match their usage and spending. The commission is working with advocacy groups to raise awareness and support consumer choice.
“Our work shows that consumers must ask themselves how much money they could be saving. Most mobile plans can now be changed monthly, so it can be helpful to shop around to see if you can find a better deal. “
FinCap, the coordinating body for financial capacity and budget services, welcomed the move.
“It is alarming to see that a quarter of mobile phone users are paying an average of $ 11.60 a month more than they need to use their mobile phone.
“Some people can absorb this additional cost in their household expenses, but for others, it may mean that they are behind on their payments.
“The consequences of falling behind on mobile bills could include bills being sent to debt collection or customers experiencing credit ratings drops. These measures can be very damaging to vulnerable consumers.”
The commission has asked individual operators to share their plans to address these issues, including implementation timelines and how they propose to measure success, by the end of November.
In a statement, Vodafone said the level of change between plans was higher than in the power sector.
“Customers choose plans for a variety of reasons, and it’s not as simple as looking at data allocations versus usage and price. Some people want free social data or calls to Australia, or the certainty that they won’t be without high-speed mobile data.
“We regularly contact our clients to inform them of the best plans available to them, for example we run quarterly campaigns to inform clients of old postpaid plans about our new offerings. “
