When you are hated as much as Australia's major phone and internet companies, a $40 million cash incentive seems a modest price to pay to turn around the situation. That is the amount that Telstra chief executive David Thodey is willing to pay his full-time staff if they can lift Telstra's customer service rating this year by a minuscule 3 per cent.
It is hardly an ambitious target but Telstra privately admits things are so bad it may take years to improve its customer satisfaction from 6.5 to 6.7 out of 10.
Thodey and his telco compatriots, Paul O'Sullivan at Singtel's Optus and Nigel Dews at Vodafone Hutchison Australia, have topped the unpopularity charts, generating more complaints from the public than those former pariahs of customer service, the Big Four banks.
Just as the banks have spent the past five years striving to resolve systemic problems that inspired the complaints against them and damaged customer relations, the telcos were planting some toxic seeds that have spawned a customer backlash unlikely to be repeated in any other industry.
Complaints to the telecommunications industry ombudsman (TIO) rose 54 per cent to 230,000 in the year to June, after climbing 50 per cent the year before.
And what a growth industry it has been. The rise in complaints this year was so startling the ombudsman had to employ 150 more people to handle the load. Customers complained about billing and payments, contracts, customer service, faults and, you guessed it, complaint handling.
"The companies themselves are increasingly hated and the chief executives do not know what to do about it," says Allan Asher from the Australian Communications Consumer Action Network.
Asher blames a deliberate strategy by the companies to make their products as confusing and complex as possible.
"The business model has been rightly called a confusopoly," he says. The word was coined by Dilbert creator Scott Adams to describe "a group of companies with similar products who intentionally confuse customers instead of competing on price".
Asher says the telcos are aware their confusopoly causes intense frustration and rising levels of complaints among customers but the corporate response has been to build walls around themselves, with recorded messages, internet-based messaging and no human contact.
He says the companies have effectively outsourced their customer service to the TIO because it is cheaper to pay the $31 fee to cover the cost of a level one complaint than invest in their own customer service.
"The telcos are really stuffing people about," Asher says. "About 90 per cent of complaints are resolved straight away but only a third of people get to the TIO."
The fundamental weaknesses in the industry's complaints system and the important role played by the TIO were brought home to the Weekend AFR when Optus tried to charge this author a $212.73 cancellation fee for moving a mobile account to Telstra.
First, Optus failed in its obligation to respond in 14 days to a complaint lodged through its internet home page. Secondly, it mistakenly charged a fee for cancelling a 24-month contract when the contract was actually a monthly, post-paid arrangement.
However, within 24 hours of a complaint being lodged with the TIO, Optus emailed its willingness to talk. It admitted it had got the contract terms wrong and that the cancellation fee was unwarranted. It later sent a letter of apology and cancelled the charge.
Optus says technology products are complex to administer and sometimes this results in confusion in matters such as billing or movement from one service to another. It admits it needs to lift its game.
"We continue to introduce solutions that give customers more choice and better control over their services," consumer customer service director Austin Bryan says.
But Asher says more choices are not the solution.
"There are 4000 different mobile phone plans, which means the choice is not a real one."
Minister for Communications Stephen Conroy has become increasingly frustrated at the industry's failure to improve customer service, warning he will take further regulatory measures if the telcos don't shape up.
The self-regulatory code will be reviewed in 2010. Until then, the national broadband network bill before parliament will give ACMA the power to issue infringement notices.
Asher believes the industry's self-regulatory supervision structure needs to be replaced. He has lobbied minority federal senators to include a binding code of practice in the NBN legislation before the Senate.
"There are too many fuzzy rules - self-regulation is not working," he says. "We need something more enduring that is not reliant on a sleepy regulator."
That regulator is the Australian Communications and Media Authority, which is determined to show it is on top of the problem.
ACMA chairman Chris Chapman says the level of complaints to the TIO is a continuing concern.
"The ACMA is considering all of its options including additional further investigations of systemic issues into individual companies, the structure of the incentives for both customer service and compliance with codes, and possible changes to current regulatory arrangements.".
He adds that over the past 18 months ACMA has audited 250 companies for code compliance, and conducted 24 investigations into the code compliance of individual providers and three investigations into compliance with the TIO scheme. Chapman is now shifting ACMA's attention to the big telcos, which he says need to improve compliance with the scheme.
ACANN wants to see incentives put in place for customers to complain, which in turn will encourage telcos to improve their frontline staffing handling customer complaints.
Asher says every time a company has a level one complaint it should pay the consumer $50.
The industry response to the explosion in complaints has varied; some companies play it down and others take it very seriously.
Optus says it is concerned but highlights its share of complaints at 14 per cent is lower than its market share of telco products. Yet that ignores the fact that TIO complaints rose 36 per cent in 2009.
VHA says CEO Nigel Dews is working with the TIO and will participate in its next strategic planning meeting. VHA rejects suggestions telcos are hated.
"Complaints received by the TIO from Vodafone and 3 mobile customers in the last 12 months represent less than 0.3 per cent of our overall customer base," it says.
VHA says a one-size-fits-all approach to mobiles to avoid complexity and confusion, "may be easier to understand but would not be in the best interests of customers, who want to enjoy freedom of choice".
Complaints to the TIO about VHA doubled in 2009.
It is Telstra's Thodey, of the three big telco CEOs, who is most willing to recognise the need to do something. He got the top job because of his brutal honesty about its woeful customer service.
In his pitch to succeed then CEO Sol Trujillo, Thodey said the customer service situation was dire and urgent action was required. The board, which had accepted the upbeat mumbo jumbo of the previous three years, was shaken out of its complacency.
Thodey was made chief executive in May and within six months the executive responsible for consumer marketing and channels, David Moffatt, was gone. Moffatt had also pitched for the top job but insiders say he looked through the same rose-tinted glasses as Trujillo.
Telstra wants to differentiate itself by the quality of its customer service, even though it says that telcos are on the nose all around the world.
Thodey has put customer service at the heart of everything Telstra does. There is a monthly report to the board, the top six group managing directors must discuss the issue at monthly meetings and financial incentives for executives are tied to improving service.
In an industry where complexity is king, a transparent and simple retail offering will certainly ensure Thodey a place in telecommunications history. Fairfax Business Media
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