Bill shock ... only a third of those surveyed reported using all of the inclusions in their phone plan.
Australians spend $1.5 billion more than they need to each year on mobile phone bills, something new rules aim to prevent by ensuring plans are worded more clearly, that the word "cap" is avoided, and that consumers are warned before they go over their data limit.
The Telecommunications Consumer Protection (TCP) code, announced today by telco regulator the Australian Communications and Media Authority (ACMA) and put together by the telco's Communications Alliance industry body, will act as a rulebook for telcos, such as Telstra and Optus, on how to engage with their customers in a way that will eliminate "bill shock".
This ACMA chart show's a timeline of when new rules in the code will be implemented.
The ACMA warned earlier this year that it was prepared to reject the industry-drafted code and install its own standard, if the code was too lenient. But today it agreed to register it, written over two years of "tense, tough battle" between industry, consumer groups and the regulator.
"[We] are hopeful that its adoption will result in clearer advertising, easier comparison of products, better information about contracts and better tools to help consumers avoid bill shock," said Teresa Corbin, CEO of the Australian Communications Consumer Action Network (ACCAN), which proposed the code.
A public inquiry conducted by the ACMA estimated that collectively Australian consumers spend $1.5 billion more than they have to every year because they choose the wrong mobile plan. Telcos and their customers spend a further $108 million resolving complaints, while telcos write off up to $113 million annually in bad debts incurred through bill shock.
Accompanies story on changes to telco laws, July 12, 2012
Under the new 102-page code, which will be enforced by the ACMA from September 1 this year and progressively phased in over the next two years, customers will receive warning messages when they have reached 50 per cent, 85 per cent and 100 per cent of their monthly allowance for calls, messages and data.
But there's a catch: telco's data notification warnings won't have to be sent in real-time and could be received by customers up to 48 hours after reaching a certain limit, apparently due to some telco's billing systems being incapable of alerting customers of their usage in real-time.
Kath Silleri, an ACMA spokeswoman, said requiring all telcos to make available real-time information regarding customer accounts was something she would like to see implemented by all telcos but stopped short of saying the ACMA would enforce it.
"Look, we think that the notification at 85 per cent should give most people the opportunity to modify their behaviour so as not to experience unexpected bill shock," she said.
"Clearly the notification at 100 [per cent] being 48 hours delayed could result in people spending more than they had anticipated but given the current technical requirements - and the span of the industry - we considered 48 hours as appropriate..."
A timeline of the phasing in of certain parts of the code shows that larger telcos will have until September 2013 to ensure "spend management alerts" (i.e. data, call and message notification warnings) are sent to customers in a prompt manner, while smaller telcos have until September 2014.
Misleading terms like "cap" banned
As well as data notification usage warnings being enforced, the use of the term "cap" will be banned unless plans have a definitive limit that cannot be exceeded, and other potentially misleading terms will be more tightly controlled.
Telcos will also be required to offer customers a "Critical Information Summary", which details pricing and minimum spend information across all products in a standardised format. Most advertisements will have to include the cost of a two-minute national call, a standard SMS and 1MB of data.
"The code will apply to every service provider in Australia," said ACMA chairman Chris Chapman. "Compliance with the code is no longer an option."
A new compliance monitoring body named Communications Compliance, headed by Ms Deirdre Mason, a former Telstra executive and director of the Telecommunications Industry Ombudsman, has been established to monitor companies and refer breaches of the code to the ACMA. Ms Mason will be joined by a former federal Communications Minister, Michael Lee. A third director nominated by consumer groups will soon join the board.
The ACMA, unlike the Australian Competition and Consumer Commission, can issue directions to telcos to comply with the new code, but cannot actually fine or penalise providers for not adhering to it - though it can still take them to the Federal Court, an option that was not available under the existing code.
Similarly, Communications Compliance will require non-compliant telcos to submit an "action plan" outlining how they will better perform, but no fines or penalties will be issued.
ACCAN expressed concerns that customer service problems would continue unless the ACMA was given more power to enforce the code.
"[The] ACMA does not at present have strong enough powers to enforce the code," said Ms Corbin. "Enforcement powers are essential in getting industry compliance."
But Corbin said the code was much better than ever before and could stimulate growth in the telco sector.
"Informed consumers are good consumers. At this point in time consumers live in terror of big bills and live in terror of being caught in a long term contract," Ms Corbin said.
The network said it would release a guide to the new code, highlighting key points and consumers' rights. It has also written to the Communications Minister, Senator Stephen Conroy, asking him to increase ACMA's disciplinary powers.
The telco industry initially resisted change but the regulator made it clear it was not going to "roll over", AMCA chair Chris Chapman said.
"My own discussions with the chief executives of the major telcos have convinced me that they get it. I think they know that in this increasingly technology driven environment ... there is only one outcome for them — that is to change their business practices and own their customer in a way that is materially rewarding," he said.
The new code fulfills about 95 per cent of the ACMA’s wish-list of improvements, Ms Silleri said. The remaining five per cent was for volumetric pricing on advertising — but which will be included on individual offers — and real-time spend information.
The ACMA launched a national inquiry into consumer protection in 2010 after a record number of complaints were made to the industry ombudsman. It used evidence gathered from this inquiry to pressure the industry into meeting its recommendations, Ms Silleri said.