Crap picture of iPhone

Hello, and welcome back. Being busy and lazy after the partying to bring in 2010, I haven’t posted anything till today (although you’ll see a few posts backdated soon). So what better way to start a new year, and a new decade, with a new style of post – a proper opinion piece. So, sit back, and enjoy the first post of 2010.

Over the new year, needing to contact myriad people due to wanting to wish them a happy new year alongside organising certain events, I realised how much of a ripoff  now more than ever Australia’s mobile telecommunications system is. Calling it “Australia’s” system however is a bit of a misnomer – of the four major providers, only Telstra is majority Australian-owned (with SingTel Optus being owned by the Singaporean government, 3 by the Chinese and Vodaphone by the British).

Yes, if we look back historically at the pricing of calls and short messages (SMS) over the last few years, not much has changed. I remember first buying a mobile phone in 2004 on Virgin pre-paid with it costing around 25c to send a short message and around $1/min to place a call. Now on a Optus plan, I still pay around the same figure. Although over time you wouldn’t expect prices to stay stationary – like all things in economics they will either go down if the cost to provide the service drops (assuming not too much extra profit is laid on top) or the price will go up if the cost to deliver the service increases – a very basic principle of the telcos passing on costs and costs savings.

Phone Tower

So, since the price of mobile services has stayed stationary over the last few years, this should technically mean that there are both pressures which take the price up and take the price down to even out at a stationary level. This can be realised in the increased cost to implement 3G services, which require the installation of a lot of costly equipment. However, the cost to operate such services has decreased, namely due to more efficient technologies which allow more data to be transmitted in less spectra – in other words, more income from subscribers (since the number of subscribers has risen over the past few years) yet less costs in spectrum licences. These efficiencies are mainly realised through the use of 3G however the cost of operating 2G has come down with cheaper-to-run equipment and by squishing more subscribers “onto the same equipment”.

However, it isn’t all doom and gloom. The implementation of HSPA (high speed packet access) 3G services (“mobile internet” to you and me), unlike the implementation of UTMS (used for short messages/voice), has increased the speed of mobile internet exponentially whilst reducing the price at the same rate. In fact, a few months ago, I could have got a better deal (at a similar speed) by using mobile internet instead of DSL for my main connection. This begs one big question, however, which is the crux of this article.

VOIP (Voice over Internet Protocol) has revolutionised the way people communicate via a land line, and reduced prices exponentially due to the cheaper cost of transferring the data as packets over the Internet. So, why don’t we do this with mobile phones? The reason is not technical, it is very easy to do so. The real reason is due to the telcos prohibiting such a thing in their contracts to save their own asses. They all know if we all used VOIP we’d be able to save a heck of a lot of money, and send it somewhere else as the telcos don’t have the infrastructure to support VOIP, as they kept their heads in the sand when the technology matured. To illustrate the savings encountered, I’ll show you some maths below.

Telstra Phonebooth

For the purposes of this exercise, I’m going to ignore Telstra who have archaic plans with little to no data (Telstra, for the most part, are a ripoff who make their money from people who are too lazy to switch, who require their extensive coverage due to location, or people who believe that since they are the biggest they are the best – such as a lot of businesses). 3, Vodaphone and Optus all offer 1GB of data for around $15 (usually included however in other plans with other services, or “computer-only” mobile broadband with extra money for the modem – again, increased costs on the “mobile mobile” network for the above reasons).

A friend of mine, who is quite annoyed at having a $400 bill for sending 1850 SMS messages, could have saved a lot of money if the telcos would have been fairer. If we encode the messages in a standard transmission format, and based on each message being the maximum length of 160 characters, she would transfer 160 x 1850 = 296000 bytes or 296 kilobytes. Now, that is raw data, and overheads would increase that size but no more than around 50%. This would, in effect, cost less than a cent (although she’d need to buy the $15 pack).

So despite these advances, is she spending less? No, instead, more of her treasure is being spent thanks to the greedy telcos.