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How mobile phone users are being massively ripped off

Date

Alan Finkel

Outlaw sky-high roaming price agreements that fleece travellers.

My wife and I are overseas, trying to navigate our way through the streets of London. But we haven't dared to use Google maps on our iPhones. We know that if we do we will generate massive phone bills. Without our phone apps we are like birds with clipped wings.

The pricing practices that govern mobile phone voice and data charges during overseas travel are unprecedented in the massive penalty they apply to travellers.

It's worse than you ever imagined. The international data rates from our major telephone companies are about 1.5¢ per kilobyte.

This sounds cheap but there is a gotcha, in that normal domestic data rates are quoted in gigabytes, not kilobytes.

As it happens, one gigabyte is 1 million times more data than one kilobyte. So if you convert the quoted international rate of 1.5 cents per kilobyte to the normal gigabyte units, the price comes out to $15,000 per gigabyte.

This is a stunning, 1500-times multiplier on the usual domestic rate of $10 per gigabyte. A week of regular email with attachments and using Google maps can easily gobble up half a gigabyte. An unwitting friend of mine recently returned home to find a bill of more than $7000 waiting for him. Even more shocking, if you were travelling and you used your 3G-enabled laptop computer to download a two-gigabyte movie your ticket would be a staggering $30,000.

This extreme pricing results from an undeclared agreement between telephone companies. To illustrate, consider that each Australian mobile phone company does a deal with its counterpart in, for example, France. Under this deal, when one of the Australian company's customers uses her phone in France, the French phone company charges the Australian company an exorbitant rate per gigabyte, vastly more than the actual cost for delivering the service. The Australian phone company doesn't complain. Instead, it passes the charge through to its customer.

The customer knows the price is outrageous but whom can she blame? The Australian company argues that it is merely passing on the price it is charged by the French company.

So what's in it for the Australian company? Well, there is a reciprocal deal under which the Australian company applies an excessively large charge per gigabyte to French customers roaming in Australia. This time round, the Australian company makes an excessive profit.

These reciprocal agreements are legal, but they are to the great disadvantage of customers.

Is this a case of caveat emptor? In truth, the mobile phone companies dutifully publish their international roaming rates on their websites. But the information provided by the mobile phone companies is quoted in kilobytes, numerically correct but misleading customers into a gross under-appreciation of the actual costs.

To help mobile phone users understand the true costs, mobile phone companies should be legally required to always quote domestic and international data rates using the same units, such as gigabytes, so that at least their customers can make a meaningful comparison.

What can be done in the long term? After an inquiry in 2005 the ACCC determined that the wholesale charges set by overseas mobile network companies were beyond the ACCC's jurisdiction.

To fix this impasse the Australian government should introduce legislation to outlaw excessive roaming price agreements between mobile phone companies.

There will be excuses that it is too difficult to introduce such legislation because the agreements between mobile phone companies span multiple countries. However, there are precedents for introducing multinational legislation, such as in the field of taxation law.

Let's hope that there is action soon to restrict phone companies to applying a fair charge for the provision of international data and voice services.

That way, next time you travel in London or anywhere else you will be able to read your email while sitting at a train station, then use your phone to navigate to your next destination.

This article expresses the personal opinion of Alan Finkel. He is chancellor of Monash University and president of the Australian Academy of Technological Sciences and Engineering.

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106 comments

  • Getting ripped off in Australia, Noooo you can't be serious.

    Commenter
    J Walker
    Date and time
    January 09, 2013, 7:35AM
    • In London at least there is a Starbucks outlet every other block and each outlet offers a free wifi network (often extending outside it's borders). Learn to use that because the temporary SIM options in the UK and (especially) the USA are very poor.

      Commenter
      Richard
      Location
      Sydney
      Date and time
      January 09, 2013, 11:31AM
    • J Walker, it is reciprocal. Our telcos rip off travellers from overseas as well.

      Commenter
      jofek
      Date and time
      January 09, 2013, 12:13PM
    • Roaming charges are expensive anywhere. If a person hasn't got the initiative to explore without a phone they don't deserve to travel. There are so many options available to help find your way around. It's not as if there is a language barrier. Ask someone.
      These people should stay at home and watch you tube clips of different cities and avoid the obvious hassle that travelling appears to be.

      Commenter
      TVB
      Date and time
      January 09, 2013, 12:20PM
    • I started a company only a few months ago precisely to attack this problem! The best way to avoid the charges is a local SIM and if it doesn't already come with data- adding a data plan. You can buy the SIMs on my website before you head off and they are prepaid so you have peace of mind. I've signed up a number of partners who I will be rolling out my offering with over the next few months (Lonely Planet and Travellers Point..). Most other competing 'roaming' SIMs out there don't have any better data rates than standard telcos. Like Alan mentions, make sure you pay attention to the detail because its quite easy to get stung. Feel free to drop me a line if any queries..

      Commenter
      Peter from dataGO.co
      Date and time
      January 09, 2013, 12:43PM
    • Recently in New York got a prepaid AT&T sim for my Iphone4, for $25, that was way more GB of data than I needed for a month of travelling and usage.

      Commenter
      Deipnosoph
      Date and time
      January 09, 2013, 1:11PM
  • Couple of points:
    1. Ask yourself why 'we' (you) are being ripped off? Answer: Because you let it happen. There is life beyond an iPhone, and if you do have to use it overseas, purchase a local SIM card for the occasion or an international card which is considerably cheaper. A lot of times the reason for people getting ripped off is their own inertia (to put it mildly). And then it is deserved.
    2. You are in London and then use an example of a French telecom company - Anglo-Saxon anti-French bias, anyone? The same happens to you in English-speaking countries as well, you know (and probably worse, knowing the crude capitalism applied in those countries.
    3. That same capitalist doctrine forbids regulation and red tape, lending all power to individuals through transparent, free markets (apparently). Now look what you've done with that: Had a whinge in a newspaper for more regulation.

    Commenter
    Brenda Loots
    Location
    Sydney
    Date and time
    January 09, 2013, 8:01AM
    • +1

      Commenter
      Ahawalaa
      Date and time
      January 09, 2013, 8:10AM
    • Hi Brenda - In many countries it is now not possible to purchase mobile data on a temporary sim. Some even demand evidence of local residence (Japan).

      Your assertion "because you let it happen" is really stupid. Maps and various apps are more useful to you the further you get from home, not less useful.

      You also said "That same capitalist doctrine forbids regulation and red tape" .... yes but it also forbids collusion and anti competitive activity, which is what is happening here. There is very little transparency.

      What you have is an example of obfuscation, opaque rules and opportunistic, exorbitant pricing.

      Commenter
      ralf
      Date and time
      January 09, 2013, 8:32AM
    • I think you are reading far too much into the French thing - as stated in the article it was 'for example, France'. He was in no way singling out France, as was quite clear this is happening everywhere. The anti - French claim is just absurd really.

      Commenter
      Tom
      Location
      Wagga
      Date and time
      January 09, 2013, 11:25AM

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