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There’s an untold story behind the 2017 Commerce Commission telecommunications monitoring report. Before we get to that, edited highlights from the official media release:

Telecommunications Commissioner Stephen Gale says:

“The cost of internet use has dropped over the last year with up to four times the data included at the same price points. 100GB in a fixed-line voice and broadband plan can now be bought for $65, $10 less than a year before.

“At the high end, a 100Mbps fibre voice and broadband plan with unlimited data costs $90 per month, 19 percent less than the equivalent in Australia1.

“Average broadband speeds have also been increasing thanks to a significant boost in fibre uptake, with fibre connections growing from 197,000 to 368,000 in just one year. Those moving to fibre generally get all the speed they need, while congestion is also reducing on the copper network.”

Mobile services are also accessible in New Zealand. An entry-level mobile plan with 50 minutes of calling and 100MB of data is $13 per month.

“Broadband and mobile service prices in New Zealand compare favourably internationally. It is pleasing to see our telco firms being responsive to the public’s consumption habits in terms of the pricing plans they have in the market.”

A glowing report

It’s a well deserved positive assessment. If you brought a report card like this home from school you could be up for a new bike or Playstation.

Even the title is approving: Consumers of broadband and mobile services get better value for money.

This is true. When it comes to bringing down costs, improving performance, adding choice and rolling out new service options New Zealand’s telecommunications industry has done well by any standard.

The industry has even managed to increase revenues in the past year, something it has not done in a while.

However…

Tucked away at the bottom of the report is a single dissenting sentence from Dr Gale:

“However, telecommunications consumers report a high level of problems and we believe there is plenty of room for improvement in customer service.”

There are pockets of decent customer service in the telecommunications business. Many of them are in the smaller telcos where the people fielding a customer call are the people who fix the problem. If you are a customer you may even know their names and faces.

Yet as anyone who has sat on hold for hours listening to repetitive “your call is important to us” announcements, a lot of telco customer support is abominable.

Structural reform

A decade ago politicians drew up plans to build a fibre network and reform the industry. The idea was to separate the physical land-based network from retail telecommunications customers.

This allows service providers to compete on a more even footing. Service is the key word in that sentence. It’s a word that often gets glossed over. Yet at the time of structural reforms many in government and in the industry thought the telcos would compete on service quality as much as price.

That never happened. New Zealand’s telecommunications customers never had an Apple-like player that towered over rivals by meeting and exceeding customer expectations. No telco decided it could charge a little extra for delivering a first class experience.

Race to the bottom

Instead of looking to impress customers, the bigger telcos compete on price. You’ll notice that the cost of a connection is often front and center in their marketing.

One school of thought says this is the most logical approach for a price conscious market. This, by the way, is not unique to New Zealand nor is it unique to telecommunications.

You might also note that, for now, most land-based internet services are bitstream. That is, service providers buy packaged connections from wholesalers. There is a set wholesale tariff. By law every service provider pays the same price.

Indistinguishable

This has the effect of making each service provider’ landline products almost indistinguishable.

Although the customer experience can vary from one service provider to another based on what they do further up the line. Take a look at TrueNet’s reports to see how much difference there can be.

They also use marketing.

It’s a little like petrol. All the petrol in New Zealand comes from the same source. Nobody thinks one brand offers better fuel than another. All the difference between brands is at the margins.

Customer support

Many internet users get by fine without ever needing customer support. This is understood well by Spark which owns the Bigpipe brand. There’s no traditional customer support. No-one answering phones. Everything is managed online.

Bigpipe customers pay less than Spark customers for what amounts to an identical internet service. They don’t get telephone support. They don’t get Spark’s Lightbox movies and they can’t use Spark’s wi-fi network without paying an extra fee.

One lesson from Bigpipe is a sizable slice of customers don’t care about support. For that matter they don’t care about Lightbox or Wi-Fi hotspots. That’s not true of everyone. Older, less tech-savvy users often prefer handholding.

Support challenge

The problem with customer support it is expensive for a service provider. It is difficult to get right. It’s even harder to maintain any kind of quality. Worst of all, it has the potential to go spectacularly wrong.

And it does go wrong. When customer support fails it can damage a brand.

There will always be some unhappy customers. That’s life. But compared with, say, the petrol business the telecommunications industry has a poor record.

Of course some brands are worse than others.

Thankless task

Customer support can be managed in-house or outsourced to an external provider, sometimes these can be overseas.

The advantage of overseas call centers is they can cost less. Not as much less as you might imagine. Wages may be lower in India or the Philippines, but so is productivity. Add in the cost of routing calls to a foreign destination and the economics do not look so good.

Overseas call centers have one big advantage: They have a ready supply of willing labour. It’s hard finding people to do the job in New Zealand and even harder to keep them. Sooner or later people get worn down dealing with angry customers.

Keeping a call center operating smoothly is an art form. It can be hard to get things back on track if things go off the rails and backlogs build.

Can the industry lift its support game?

Improving telecommunication customer service is far from easy. Profit margins are thin. They don’t leave much scope to invest in more customer support.

Customers do not like poor customer support when they think they have paid for it. Yet they seem to be fine with cheaper brands like Bigpipe who make it clear up front they offer less, then pass the savings on.

As a customer you can’t expect low prices and great service. The best you can hope for is acceptable service and reasonable prices.

 


  1. This is an impressive turnaround. A decade ago New Zealanders paid a lot more than Australians for broadband.↩︎