The Case for Telstra

  • Australia's largest telco
  • Wholesaler of infrastructure to competitors
  • Involved in almost every internet transaction

As a comparison website, most of the enquiries we face are from customers who specifically want to avoid Telstra, Australia’s largest telecommunications provider. When we get a chance to ask why, the usual complaints are over price, though customer service plays a big part as well. Other providers charge similar prices, and other providers offer questionable customer service, but only Telstra consistently invokes such a deep and passionate response.

Incumbency

Telstra is the incumbent telecommunications provider, meaning that it is the inheritor of the network that was built with taxpayer money, but operates as a private competitor in the current market. To be more accurate, Telstra bought the Copper Access Network (CAN) for about $20bn, when all costs are accounted for (including the amount to it takes to keep it maintained).

Telstra acts as the wholesaler for every other provider, with some limited exceptions. Every other provider rents some network space from Telstra, but a few (such as TPG, Internode, iiNet and Optus) also have their own limited networks that require little or no Telstra involvement. But at some point, every single ISP has to deal with Telstra in the wholesale market, while also competing with them in the retail market (where Telstra trades as BigPond). This leads to a heated and very complicated relationship.

For customers, the equation is much more simple. Telstra has, until recently, ignored the way the rest of the market was going, and failed to deliver on their advertised status as a blue-ribbon provider of customer service and support. To add salt to the wound, many customers are also Telstra shareholders, and the shares have never bounced back from their initial prices (many hold onto them, because they pay a dividend).

But Telstra is unavoidable, and will remain that way for some time. Telstra remains the only provider who can provide service to every customer in Australia who can get broadband at all. We’re going to look at some specific complaints and look at whether these are Genuine complaints, or whether customers should Wait A Minute and consider all the facts before crucifying Telstra.

Complaint: Telstra is far more expensive than other carriers. 

Wait A Minute: A typical Telstra bundle for home phone and internet costs $101.90 for 200GB. This compares to the other top tier providers like Internode (which provide 300GB for roughly the same price) and iiNet, which charges similar prices. Telstra has to service 2000+ exchanges in Australia, including areas where it costs more money to provide a service than they make in subscriptions. The smaller competitors can cherry-pick the most profitable exchanges to service, which seems limited to 400 (both iiNet and TPG cover about 400 exchanges each, mostly overlapping each other). This means that their great deals, like TPG’s industry-beating $60 unlimited bundle, are only great value if you’re part of the population who can get it. If it weren’t for Telstra, the people attached to the other 80% of exchanges would have no choice at all.

Genuine: Well, not really. Telstra still knows how to squeeze a profit from rural exchanges, which makes it harder for them to cry poor when boosting their prices. A better excuse is that they’re not allowed to drop their retail price below their wholesale price, and their wholesale business is very profitable. To some extent, Telstra will seek to charge exactly what the market will bear, and no less. Their wholesome advertising positions them as a trustworthy, family friendly provider, above the fray of the bargain basement providers. This simply isn’t true- Telstra engages in aggressive cost cutting, buying very cheap retail equipment (including modems and entertainment units like the T-box), off-shores customer service and technical support, and sends teams of outbound callers, door knockers and other aggressive sales agents to secure new customers. They’re very much in the trenches, no matter how much they hold their head high. Moreover, they seek to entangle customers in complicated bundles, selling services that customers aren’t seeking, and wrapping everything up in 24 month contracts. Most advertised discounts are heavily dependent on having several services with Telstra.

Overall: Genuine complaint, but only just barely. Were Telstra to drop all of its plans by $10, they’d be sitting equal with the other expensive providers. But more important, Telstra appears to penalize customers who only want to take one Telstra service.

Complaint: Telstra plans represent poor value

Genuine: Most would argue that on the face of it, Telstra offering 200 GB for $100 and TPG offering unlimited GB for $60 makes Telstra look hopelessly out of touch. The same is true with mobile broadband, where Telstra offers 15GB of data for $100, while Optus can provide you with 16GB for $60.

Wait A Minute: An unlimited plan looks great, but most users typically use 50-150 GB a month. People who game all night, stream video all night and otherwise use a lot of data, are attracted to those unlimited plans as well – and that big usage can cause all sorts of network instability which Telstra avoids by not attracting those customers. As for Mobile – Telstra’s network is measurably faster and more reliable in far more places than Optus and Vodafone’s networks on their best day. That extra $40 is the difference between a service that works, and a service that almost works.

Overall: Wait A Minute. Telstra’s plans only represent poor value on paper. In real-world values, Telstra’s plans are equitable and fair – but mostly only for mobile. For ADSL, providers are getting better all the time at improving network stability, even with big bandwidth hogs on board.

Complaint: Telstra’s customer service is poor:

Genuine: for many years, Telstra’s customer service has suffered from a terrible reputation for rudeness, excruciatingly long wait times, and “slamming”, where a sales person talks a customer into a plan or product that they don’t understand, or don’t need. Other companies were guilty of this too, but they were generally cheaper. Companies like iiNet and Internode have developed a corporate culture that emphasizes truly superior customer service, all while charging the same as Telstra.

Wait A Minute: Telstra has acknowledged this problem, and have made a heroic effort to turn the ship around within the last 2 years. Tales from the inside suggest that sales-based incentives have been evened out with customer-service based incentives, and more and more services are being brought back into Australia from overseas call centres. Wait times have been reduced, and slowly but surely Telstra’s reputation has improved. It’s still the most complained about ISP by far, but the complaints have come down slightly.

Overall: Wait A Minute on being too harsh, but the more people demand good customer service, the more Telstra (and competitors) will have to deliver. It’s also worth remembering that Telstra didn’t decide to become better- their shrinking market share, deflated share price and inevitable separation from their wholesaler position decided that for them.

The Case for Telstra

Telstra is no worse than most of its competitors, and still maintains enough good points to sit comfortably among the “good” providers. This includes customer service that is still a cut above the average (and largely based in Australia), the best coverage for both ADSL and Mobile Broadband, the largest fibre-optic network in Australia (for now) and a comprehensive range of other services. They’re also the only network that can be there for everyone, though this is only because they’re forced to be so.

When you hear that Telstra is your only option, it’s worth considering that at least someone is there for you as a last resort. Telstra is undergoing a structured separation of its wholesale and retail arms, and even the wholesale part will eventually be folded into a government-run National Broadband Network. Telstra will slowly become a retailer like everyone else. That’s when things will get really interesting. Will they change their name? Will they buy out another company while they still have the money to do so? Only time can tell. For now though, Telstra is involved in almost every internet connection out there, and they’re doing a better job of it than most people give them credit for.