Telstra, Australia’s largest telco, cops a lot of media flack. They present an easy target, as a firm that sets the pace for both wholesale and retail telecommunications in Australia, and also as a company that is happy to charge a blue-ribbon price for a service that hits and misses about as much as most of its low cost competition. But for the last few years, there’s one area where Telstra has been able to clearly demonstrate their superiority – mobile.
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Under the reign of its last chief executive Sol Trujillo, Telstra started building a world beater of a mobile network. With a network of towers that touched even the most remote corners of the land, and using a 3G data standard that ensured better speeds and greater penetration through walls and weather, Telstra steadily destroyed the opposition, despite plan prices that were overall vastly more expensive.
Telstra’s surge in the mobile market was as much Telstra’s doing as it was the competition’s undoing. Optus began wholesaling out its mobile network to resellers who were happy to promise all sorts of things, including data plans that were unsustainable. One presumes that offering people 5 GB on a mobile plan starts as a marketing gimmick and ends up as a nightmare, when so many people can find plenty of places to exhaust that 5GB (including mobile video, big gaming apps and full mobile web browsing). Optus’ network has been groaning under the strain.
But Vodafone takes the lions share of the responsibility for putting Telstra way on top. For a while there, Optus customers went Optus and Vodafone and Telstra customers would choose between each other. Optus’ plans and mobile offerings were unique, while Telstra and Vodafone shared a bit of DNA. It’s like Optus was Pepsi, and Vodafone and Telstra were Coke and Diet Coke. And 3 was…I dunno, maybe Slades Pine Orange drink.
Moving on – around the time Vodafone acquired 3, something went badly wrong. Vodafone was fond of giving away iPhones for the lowest price, and it started to take an effect – the ease with which iPhone users can rack up data started to kill Vodafone’s network. Vodafone has always insisted that the integration of 3 was not the catalyst for their spectacular network failure in 2010. But whatever the cause was, the result was pretty stark – Vodafone has lost over 500,000 customers since then, while Telstra has piled on that many (and more).
With the emergence of Telstra’s 4G network, the situation is ripe for Optus and Vodafone to run out of money before they have a chance to catch up to Telstra where they need to- in the strength and viability of their mobile network. So today’s announcement should come as no surprise – Vodafone and Optus will share the cost of expanding their networks, by sharing towers.
Collusion
Vodafone has been converting its 2100Mhz network to the more powerful 850Mhz standard favoured by Telstra, in a $1 billion expansion that has definitely improved things, but still hasn’t reversed the trend of people walking away. Optus’ has been in neutral with its subscriber base, but has commended testing on a 4G network, ahead of a launch later this year.
The agreement announced today would see Vodafone entering a roaming agreement with Optus from April 2013, and the expansion of 500 new towers across the country which would carry both networks.
The move would increase Vodafone’s footprint from 92% to 96% of the Australian population, and would allow Vodafone to engage in Optus’ 4G rollout without having to build their own network.
Though far from a merger, the co-operation of Australia’s 2nd and 3rd largest mobile networks will probably attract some attention from the Australian Competition and Consumer Commission (ACCC). Optus’ pledge to wholesale their 4G network at reasonable rates to their current 3G wholesale customers (ie. everyone who isn’t Telstra or Vodafone) will deflect some ACCC concerns, but there will presumably need to be plenty of differentiation in the plans offered by Optus and Vodafone.
Other avenues
Vodafone has also recently expressed interest in becoming a fixed-line phone and broadband provider under the NBN, and Optus has made their own pledge to return their attention to fixed-line broadband, in which they’re the overall 2nd biggest provider. It’s good to see both companies avoiding the placement of too many eggs in too few baskets. Both companies have been continuing their attack on the other part of the equation- price and phones.
In Telstra's favour is the argument that for something to be good value, it must first be good – no point in going with Optus or Vodafone if the service doesn’t work, regardless of how much less you pay. But the recent improvements to both Optus and Vodafone’s network, and the promise of more to come, will eventually get customers to look at price again – and there, Telstra has less to offer in comparison.
Comparison
Apple iPhone 4S 16GB (handset costs included)
Telstra - $69/month, 24 months ($1656 minimum)
$550 call credit (90c/min + 35c flagfall; MMS 50c)
Unlimited Text
1.5GB mobile data
Vodafone - $57/month, 24 months ($1368 minimum)
$750 credit (98c/min + 40c flagfall)
SMS 30c each. MMS 55c
1Gb mobile data
Optus - $65/month, 24 months ($1560 minimum)
$500 included call value (90c/min + 35c flagfall; MMS 50c)
UnlimitedText
1 GB mobile data
The difference in deals gets even more stark on Android handsets. Same plan details, with the Samsung Galaxy S2:
Telstra - $64/month, 24 months ($1536 minimum), those this is a 4G version
Optus - $49/month
Vodafone - $49/month
And that phone is free on plans as low as $29 on Vodafone.
Conclusion
For people still getting decent service with Vodafone or Optus, now’s the time to upgrade. Service will improve, and by the time the 4G is up and running, you should be in a good place to upgrade yet again.
For those with Telstra, hold where you are unless you otherwise know you’ll get good coverage with the other two. There will likely be a drop in service quality that will leave a bad taste in your mouth, though Vodafone offers a 30 day Network Guarantee.
For those with Optus or Vodafone who just can’t stand it anymore – call and speak to them. Now’s the time to get something out of both of these providers.