When you sign up to a 24 month contract with a phone company, you kind of expect the contract to remain in tact for the whole period of time. But what happens when the phone company changes it? This is a situation all Telstra customers now find themselves in, with the company announcing that they are transitioning their mobile and fixed line charges from 30 second blocks to per minute billing.
Reader Josh was just 45 days into a 24 month contract with Telstra when he received a letter from the Telco announcing their proposed charging changes. He wasn’t happy. The letter, which followed a full page ad in The Australian earlier this year, outlined the fact that the carrier was changing its pricing structure from March 20 to per-minute billing. As the letter states:
We will now bill national voice and video calls in one-minute blocks of time, which means the charge for the call is automatically rounded up to the nearest minute.
For example, on a $49 Next G Cap Plan, a national voice call is currently charged at 40 cents per 30-second block. This is changing to 80 cents per one-minute block. So, for a call of two minutes and 15 seconds, the new cost (including call connection fee) is $2.77 instead of $2.37.
It’s understandable that, having signed a contract for 24 months, Josh would expect to be charged that amount for the life of the contract. But Telstra see the change as a necessary step to simplifying the billing process and bringing the Telco into line with the other carriers, who all charge in 60 second blocks already.
Telstra believe that 90% of customers won’t even notice the change, as the value of the cap plans will remain the same, and 90% of their cusomers currently don’t come close to using their total included call value. Of the remaining 10%, their research shows that 3% already exceed their monthly cap before the billing changes, and the remaining 7% will still be better off remaining in their current cap rather than moving up to the next level.
But that does little to pacify upset customers like Josh, who has turned to the recent changes in consumer protection laws as a defence against the changes.
Thankfully we have a new leglisation in effect from the beginning of this year that relates specifically to consumer law and unfair terms in a contract. (Competition and Consumer Act 2010 (the Act)
Specifically: Examples of the types of terms in a standard form consumer contract that may be unfair:
· A term that permits, or has the effect of permitting, one party (but not another party) to avoid or limit performance of the contract13,
· A term that permits, or has the effect of permitting, one party (but not another party) to vary the terms of the contract18.
I was on the phone to Telstra for a good hour this morning and they seemed unaware of the new legislation. It seems cut and dry that they are in clear breach of the new consumer protection law let alone existing contract law which they are arguably in breach of as well. The new legislation was specifically introduced to inhibit unfair terms in mobile phone contracts among other things.
But even if Telstra’s call support aren’t aware of the law, Telstra’s lawyers certainly are, and they are confident that they are acting within their legal right. In a statement addressing the question of whether or not the billing change contravenes the Competition and Consumer Act 2010, a Telstra spokesperson told us:
We are permitted to vary the terms of our contract provided that we give customers reasonable notice of the change. The amount of notice we need to give customers is determined by the impact the change will have on the customer. For these price changes we provided public notice of the change two months in advance and customers will be given 30 days notice of the change by individual letter, which complies with our legal requirements. It’s worth noting our analysis shows that less than 5% of our mobile base will see any change to their monthly bills as a result of the price change and the average increase for HomeLine customers will be less than 2% (which equates to an average of approximately $1.10 per month).
Given Telstra haven’t changed their mobile rates since January 2007, it’s not unreasonable for them, as a company, to put prices up to account for inflation (as much as the consumer in us hates the idea). But should they be allowed to change the specifics in a fixed contract when the customer can’t do the same? Regardless of whether or not 90% of customers will or won’t notice the change, it does seem a little unfair. What do you think?