Why are NZ business's being ripped off by Telcos?

By Steve Biddle, in , posted: 6-May-2007 19:57

With all the discussions lately in regards to mobile pricing in NZ and the claims by numerous industry commentators and MP's that we're paying far too much in NZ to use a mobile phone it struck me as surprising that while we seem obsessed by the pricing of mobile calls and termination rates for landline to mobile calls nobody seems to be concerned about landline call prices as a whole.

TelstraClear have just launched a new Business product into the marketplace called BizLine which gives you the option of "flat rate" calling available on two of their plans.




These rates represent significant discounts over what many small to medium sized business users may already be paying. Why however should business users be paying such a huge premium compared to residential users?

Slingshot offers residential line rental for $42.95 per month and a $19.95 monthly charge on top of that gives you unlimited calling anywhere in New Zealand or Australia.

Telecom offers residential line rental for  $43.60 per month and a $25 monthly charge gives you Talk It Up Downunder which gives 6000 minutes per month to New Zealand or Australia.

ihug offers residential line rental for $41.00 per month and a $20 monthly charge gives you talk2 which offers unlimited calling anywhere in NZ or you can pay an extra $5 ($25 total) for talk2-nz+aus which gives unlimited calling to New Zealand or Australia.

It's obvious if you're a residential customer you're getting all the deals while anybody running a business (including those with a home business) are being ripped off for receiving exactly the same service.

Should business users be paying similair rates to home users for receiving exactly the same service? Why are business users not complaing about the high rates they are paying? Are business people making so much money they simply don't care about being ripped off? Why are TUANZ not raising this issue? Ernie Newman seems to love being in the media splotlight, I'm sure he could get some distance with this.

The move towards VoIP is going to seriously hurt telco's who being that price gouging is a perfectly acceptible business practice. Gone will be the days of paying inflated prices for line rental and calling. That can only be good for the economy.


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Comment by PaulBrislen, on 6-May-2007 21:05

Allow me to don my Vodafone hat for a moment... you've missed us out of the list. http://www.vodafone.co.nz/business/industry-solutions/at-work-tolls/ There are two new fixed-line toll calling plans for businesses. Rather than spam you with the details, just go to the site and have a look. Savings of up to 60% on mobile calls, 40% on national tolls and 20% on international (based on one of Telecom's standard business plans) look a lot better than prices listed above. And yes, I am getting paid to say that (:-)) Cheers Paul Brislen Vodafone External Communications Manager


Author's note by sbiddle, on 6-May-2007 21:19

But those rates still don't compare to what Vodafone can offer residential customers who have an ihug package where you can have a $25 flat rate plan for all calls to NZ/Aussie.

Offer those rates for mobile originated calls on a typical corporate $30/month base plan however and you'd be very popular! :-)

Anybody paying more than 5c per minute for NZ toll calls and 15c for untimed flat rate for calls anywhere in Australia is getting ripped off.




Comment by timestyles, on 6-May-2007 21:32

Residential people expect a lower quality of service than businesses.  Similarly, they want to pay less.  When I had broadband installed, someone must have forgotten to plug back the cable into my lines socket because phone line access stopped for about 5 hours, until I complained.  That would be totally unacceptable for a business, but well, I shrugged and went out.

Its the same for rental properties.  Businesses pay more than families, as a consequence the business market for leases is about 75% at capacity.  For families, its about 97%, and much more price sensitive.  When you're paying $2000+ a month for a salary, $10 difference is stuff all.


Author's note by sbiddle, on 7-May-2007 09:34

But the phone service provided to a residential customer is identical to that provided to a business customer so the quality of service is identical.


You don't see car companies charging business customers more for the same car as a private individual, Mitre 10 charging a tradesman more for a piece of wood than your DIYer. You don't see Telecom or Vodafone saying that if you want to use a mobile for business calls then it'll cost you more - why should a landline phone connection be any different?


Comment by Grant17, on 7-May-2007 10:29

"You don't see Telecom or Vodafone saying that if you want to use a mobile for business calls then it'll cost you more - why should a landline phone connection be any different?"

That's a very good point Steve, and one that Telcos would be well advised to take note of.

For example:  Telecom quoted me $58.42 + GST per month to move my business line back to them from TelstraClear (who are currently charging me $39.95 + GST per month).

$58.42 + GST per month = $65.72 per month.  Compare that with $43.60 per month for residential.

Why the difference you ask?

Telecom charge this extra cost because they can and in most cases there is no competing provider.

Well, all of this has already changed since April 1 with VoIP and number portability, and it is set to change even further once Naked DSL comes in.


I agree 100% with you that NZ businesses have been the victims of price gouging for more years than anybody cares to remember.  The $58.42 + GST business line rental has been in force since the 1st of December 1997 (I have an old Telecom rate card to prove it).


During those almost 10 years, the price of everything else in Telco land has plummeted beyond belief.  Why not the line rental?


Because in most cases there is no competition, but not for much longer


Comment by juha, on 7-May-2007 12:35

"Why not the line rental?" Grant17 asks... there's an easy answer to that: Telecom is entitled to, by law, to increase the line rental in line with inflation.

And, it does - why would it not?


Comment by Grant17, on 7-May-2007 13:56

"Telecom is entitled to, by law, to increase the line rental in line with inflation.

And, it does - why would it not?"

Fair comment Juha.  You would have to agree it's interesting though, that the Business Line Rental has NOT increased in 10 years, whereas the Residential Line Rental has increased every year in line with inflation as you say.

Kind of tells you that Business has been ripped off BIG-TIME at the start of that period, whereas now we are just being ripped off.

I take your point that Telecom is entitled to increase the line rentals every year, but that doesn't mean it is justified, or that it should continue to do so.  The dimwits who sold Telecom on those terms should be blamed for that...


Author's note by sbiddle, on 7-May-2007 14:21

"I take your point that Telecom is entitled to increase the line rentals every year, but that doesn't mean it is justified, or that it should continue to do so.  The dimwits who sold Telecom on those terms should be blamed for that..."

The Kiwi Share was a very important agreement when the NZPO was sold. I just don't think anybody expected it to stay in effect for so long in an unchanged form. Even the TSO that replaced it was essentially unchanged.


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Steve Biddle
Wellington
New Zealand


I'm an engineer who loves building solutions to solve problems.


I also love sharing my views and analysis of the tech world on this blog, along with the odd story about aviation and the travel industry.

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*VoIP (Voice over IP). I work with various brands of hardware and PBX's on a daily basis
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