- TPG and Optus battle for #2
- Each targets different customer types
- Different approaches, but both offer innovative pricing models
Ed Note: With the recent Optus price rise, we have published an article offering viable alternatives to popular Optus plans. You can access this article by clicking here.
Optus and TPG plans don’t share a great deal in common, at first blush. Optus broadband competes in the premium end of the market with Telstra and iiNet/Internode. TPG competes with low-cost providers like Dodo and Exetel. So why compare the two?
For starters, comparing TPG to other ‘cheap and cheerful’ ISPs charging the same amount is not fair. TPG runs basic, text-based ads, offers seemingly impossible deals on Unlimited broadband, and their website has no blog or other friendly bits and pieces. Their customer service is mostly based offshore, and their plans have a basic ‘like it or lump it’ quality that matches other small-time providers. But the difference is that TPG doesn’t just take those savings and bank them. TPG is the one provider that treats broadband as the un-sexy utility that many people perceive it to be, and invests heavily in making sure that its infrastructure WORKS – never mind the ads showing families getting in touch; here’s a tap, and the internet is going to come out of it. So while TPG has a cheap weatherboard frontage, inside it’s marble and polished wood.
Optus, on the other hand, is high class throughout. Its public image, using cute and curious animals in their advertising, conveys a dynamic but also family friendly provider – a safe company that will be around a long time. They have mobile towers, interstate networks and cable networks. Their name can be seen on the occasional streetpost near cable trenches. Optus is the largest telco in Australia built from the ground up – Telstra may be twice the size, but much of its strength comes from the control of the system it inherited. Optus inherited some satellites; everything else was built in the last 20 years.
The reason why TPG and Optus offer a stark basis for comparison is this – TPG is the cold, hard face of competition. Optus is cuddlier, but was specifically built to be the competition. Which one actually offers better value for the end user?
What TPG does right
First there was the landline telephone. Everyone had one. After that, everyone got a mobile. But they kept the telephone around because mobile calls were prohibitively expensive.
Then everyone got ADSL. The telephone line can provide ADSL because it contains two copper wires – and ADSL simply activates a digital internet connection on the line not being used for telephone. So phone + internet was a natural bundle; everyone had a landline, so activating ADSL was a natural progression, and it was natural to bundle the services with one provider.
Then came mobile cap plans, offering oodles of credit for a low monthly fee. Everyone stopped using their landline, or not bothering to connect it at a new address at all.
This is where TPG comes in. TPG recognizes that many people don’t want a home phone at all, but DO want reliably fast and plentiful broadband connection. The technological (and economic) reality is more complicated – you MUST have a landline connection to get ADSL. You MUST pay line rental to rent that line for ADSL – whether you use the associated phone service or not. There’s Naked DSL, which supposedly offers this – but not really. All Naked DSL does is offer broadband and line rental wrapped in one price, with no home phone service – it’s not cheaper, and in fact it’s usually more expensive. It’s also harder for an ISP to arrange, for a whole host of reasons.
So TPG stripped away most of the unnecessary baggage that comes with line rental and phone, to cut down on price. Some of your line rental pays for a battery backup of your line, to provide a dial tone even when there’s a general power outage. But most people have mobiles, so let’s take out that charge.
Some of your line rental goes towards Telstra’s Customer Service Guarantee. This is a guarantee on major line repairs. If your line goes down, you can claim back a portion of your line rental for the time it takes to repair it. In reality, this happens very rarely, and rarely takes more than 3 or 4 days to repair. So if line rental is about $30 a month, and your service is down for 4 days, then the rebate you can claim back is around…$4. For this, you pay a lot for standard line rental.
Part of your line rental pays for compatibility with services like Priority Assist, Faxstream Duet (fax line), back-to-base alarm system, and other ‘dial-back’ services that use the landline to make automated connections. Not gonna miss them? Good, because TPG stripped that away too.
So TPG got rid of all of this, leaving just the most basic line rental, and reducing the cost to customers who don’t need the line for phone – they just need the line for broadband. As for the Unlimited data part – TPG can do that because they don’t rely on Telstra or Optus for ‘backhaul’ like everyone else. They have their own undersea fibre optic cable connecting Australia to Guam, which is in turn a central switching point for direct connections to the USA, Europe and Asia. TPG is, with Telstra and Optus, the only other ‘inter’ internet provider.
In addition – TPG realizes that most people are tired of 24 month contracts. Long contracts are an insurance policy for telecommunications companies, a tacit admission that their network and customer service are going to disappoint eventually, but in order to keep you on their books, they can use contracts to lock you in. This is expensive. It means that an ISP has to offer freebies, like free connections and free modems. It also means that your average telco has a bunch of customers that are both unhappy with their service, and vengeful over their telco’s inflexibility. Those customers are in a hurry to leave when their contract is up – not just to get a better deal, but to also ‘get back’ at their old ISP. That’s Bad Mojo.
TPG limit most of their plans to 6 or 12 months, charging upfront for connections and modems, or relying on the fact by now, many people already have a compatible modem. That way, if you’re not happy with your service, at least you won’t be shackled to TPG and building resentment against them – they then have a better chance of winning you back later, once their network improves.
So what TPG does right is offer the highest amount of data on a fully-backed international connection, for the lowest price, and under the fairest terms. Their phone offerings are pretty basic – Telstra rates for calls, with the option to pay $10 extra for unlimited local calls, landline calls and 100 international minutes to boot. And that’s it. Otherwise, you have a phone line with such limited capacity that you may as well not even plug in a telephone (and TPG won’t provide you with one), that comes with a high speed unlimited broadband service behind it. It’s like buying the full Happy Meal because just buying a cheeseburger and coke would be more expensive. TPG could run an obscure ad campaign with: “TPG. Just Throw Away The Fries”. Only I would get it, but that doesn’t mean it doesn’t make some sense.
What Optus Does Right
Optus has to have a different profile. Its customers and shareholders have invested in a top-tier provider, a company whose very existence depends on you not wanting to be with Telstra. But that also means they have to offer a version of everything Telstra does, to appeal to the broadest range of customers possible.
That said, Optus makes a go of meeting the actual demands of the market. Telstra can maintain all they like that what people want is a good old fashioned home phone service; home phone is their cash cow. For everyone else, home phone is something they offer and which they rent off Telstra – every home phone service a non-Telstra company signs up, means more money to Telstra.
Optus can get around that. It has jumped into the Naked Broadband waters, realizing that it wasn’t going to make its money on home phone. It has concentrated on mobile, offering Timeless plans that come with unlimited calls, text and lots of data, while still offering the latest handsets. They have embraced prepaid. But most importantly, they have embraced a new role as the Telstra of mobile.
Telstra provides wholesale access to everyone else on a few different levels. The small one is backhaul- many ISPs use Telstra’s interstate and international networks, but they have plenty of competition from Optus, TPG, Internode, iPrimus, etc. Telstra also provide wholesale access of ADSL – to small ISPs, but also big ISPs in areas that their own networks don’t extend to.
But the big, big, big part of Telstra’s wholesale business is in ‘the last mile’. This encompasses the 12 million or so connections from neighbourhood exchanges to every. Single. Premises. That’s homes, flats, units, businesses, bus stops, doghouses – 99% of the complexity of building a network is in this part of it, and that’s all Telstra.
Optus has a big mobile network. Not only does it have thousands of towers, 3G dishes and antennas over the Aussie landscape, they also have international connection points thanks to them being owned by SingTel, a Singaporean telecoms giant that dwarfs Telstra. Optus’ 8 million mobile customers make up…wait for it…1.8% of SingTel’s 434 million subscriber base.
Without getting too technical, Optus’ foreign connection does provide it with a lot more scale for providing wholesale mobile and mobile broadband access. Telstra is also very stingy when it comes to mobile access – to date it has wholesales to exactly one provider, JB Hi-Fi, with a very small range of plans (and those plans aren’t cheaper than going directly with Telstra). The Optus Open Network, on the other hand, provides far and away the best value mobile service in Australia, through resellers like Amaysim (1300 302 942) and Dodo (1300 136 793).
Meanwhile, Optus also wholesales its ADSL network at a much more accommodating rate than Telstra does. This allows companies like iPrimus (1300 137 794) to break through with great value Naked Broadband plans.
So what Optus does right is use their size and scope to play two different games- offering a family friendly, comprehensive, top-tier experience to those willing to pay for it, while also using their wholesale network to effectively capture the more savvy customers who know what they want. In turn, ideas that are successful in the wider marketplace can get incorporated into Optus’ own stable of products. Case in point – Optus now has unlimited mobile plans, 20GB mobile broadband plans, and Naked broadband plans on both ADSL and Cable. These are the product offerings of a small and innovative company, not a big behemoth.
TPG’s best value plan, for people who just need ADSL2+ broadband, is their $59.95 Unlimited Bundle. As stated, this provides a basic phone line and an unlimited data plan, on a minimum 6-month contract. The total connection charges come to $120, with no modem included – but you can buy a Wi-Fi enabled modem for $110.
You CAN get an unlimited Naked DSL plan from TPG, where you get no phone line at all, and just broadband through your copper line. BUT…it’s $70 a month, with a $129 connection fee. It might seem to make no sense – why pay MORE just to not have a telephone service? Even more frustrating – TPG cannot connect a naked service on an inactive, or ‘vacant’ phone line. They can only CONVERT your line to Naked if it already has a dial tone on it. It sounds backwards, but there are technological reasons for it. At the end of the day, getting the cheaper and easier-to-arrange bundle, and then not using the phone line is a better option. The main benefit of Naked DSL is slightly faster speeds – if every megabit-per-second counts, then it might be worth the hassle.
If you DO need a phone line to make calls on, then the same plan is available for $69.95, with free local and STD calls, 100 minutes of free international calls and a free Wi-Fi modem. $110 connection fee, 24 month contract.
Optus will provide Naked Broadband via ADSL2+ or Cable, whichever is available (priority is to Cable connections). For $69.99, you get 150GB of data, split into 75GB peak and 75GB off-peak. It’s a decent plan for medium users who want the least amount of fuss possible, and comes with a Wi-Fi modem. The total connection fees come to $100, on a 24 month contract. For $10 more, you can get 500GB (250 peak and 250 off-peak).
For those who need the phone line, Optus Fusion Bundles provide the most comprehensive call plans available. The blue-ribbon plan is the $109 Fusion Bundle, which includes free calls to local, STD and any mobile network, 500GB data (with no peak or off peak splits!), free Wi-Fi modem and free connection on a 24 month contract. The same plan is available from $79, with 120GB data and free calls to local, STD and Optus mobile numbers only; it also goes up to 1000GB of data for $129 a month.
Optus has added some odd frankendeals lately. These are deals with very specific markets in mind – if they suit, they’re fantastic, but if they don’t, they’re best regarded as interesting experiments. The first is a $60 Home Advantage plan. This is a 2 year home phone contract, with free calls to everything – local, STD and all mobiles. With this, you get a free, 50 GB, no contract fixed line broadband connection – ADSL or Cable – with a free connection and free Wi-Fi modem.
The mobile version of this deal is $89, includes free calls to local, STD and all mobiles, and comes with a free handset – and we’re talking good handsets here, including the HTC One X and the Samsung Galaxy S3 (iPhones starts from an extra $5 a month with this deal). And then you get that free, no contract, 50GB broadband connection.
The caveat – If you need more than 50GB from time to time, stay away. You can’t upgrade – upgrading means taking up an additional service. If you drop the broadband, the deals by themselves aren’t terribly competitive. But if this fits right in with your needs, it’s a great offer. And at the very least, it demonstrates that Optus are willing to play around and try different pricing models.
Call Optus directly on 1300 137 897 for information on these deals.
TPG’s best value plans are suited towards non-landline phone users. Optus’ best value plans are suited to people who still rely on the landline – but both offer good alternatives. When broken down, their prices actually come out similar, with Optus usually needing less cash upfront and offering a wider range of payment options – but also needing 24 month contracts. But both companies are taking chances and offering innovative solutions, while still maintaining deep networks.