Some people are taking out personal loans to cover debts racked up after buying “smart” phones that can do everything from play a video to provide satellite navigation, according to the Telecommunications Industry Ombudsman in Australia. “We're seeing an increasing number of complaints about 'bill shock', where people get internet or phone bills far higher than they expect,” ombudsman Deirdre O'Donnell says. “Bills can amount to thousands of dollars and some people have told us they've taken out personal loans to pay the debt.”
Smart phones – the best-known is Apple's iPhone – have advanced features that allow you to receive and send email, search the internet, watch videos, download music or tap into services such as live camera shots of peak-hour traffic. And they're hugely popular.
According to the Australian Mobile Telecommunications Association (AMTA), the number of mobile broadband subscriptions more than doubled in the past financial year to 2.2 million. That's a growth rate of 100,000 a month – in the midst of an economic downturn.
The trouble is, these sorts of products and services involve receiving (downloading) and sending (uploading) a lot of data and you can quickly accumulate charges or exceed the limit on a capped plan.
The founder and director of independent provider Phonelink Communications, Audrey Rodda-Frack, says her company has dealt with many people seeking help with costs since the launch of the iPhone in July last year.
“A lot of it comes down to the salesperson ... the right salesperson will tell you you need a data plan. No one walks out of here without a data plan,” Rodda-Frack says. “Customers shouldn't get large bills – they need to be educated by their mobile account manager ... [but] there are too many out there not doing their job properly.”
O'Donnell says users must do their homework and make a prudent assessment of how much the services and applications will cost and whether the plan they've chosen suits their habits.
But she also acknowledges complex plans and contracts can make comparisons difficult and says service providers should give customers “clear, practical information as they make their purchasing choices”.
She says carriers are obliged, under the Telecommunications Consumer Protection Code, to monitor customers' usage and notify them if there's unusual or excessive usage.
O'Donnell cites a recent case where a consumer with internet service on his phone took out a A$49 capped plan but was shocked to find his first bill was A$7102 and the subsequent one $3766.
The carrier told him he'd have to start paying $700 a week to clear the debt – more than his weekly income – but cancelled the charges after the TIO pointed out, among other things, the provisions of the consumer protection code and industry guidelines on preventing financial overcommitment.
The chief executive of the Australian Communications Consumers Action Network, Allan Asher, says the onus isn't just on customers to guard against bill shock.
“There's a real obligation on suppliers – both value-added suppliers [of services and products] and the carriers – to do a bit more to warn consumers,” he says.
He says it's the equivalent of having speed signs on highways. “It's still the person's responsibility to adjust their driving but it's the responsibility of the road builders to let us know there are some tricky turns ahead.”
Asher says smart phone providers should use some of the techniques common in computer-based broadband plans, where downloads are slowed, or “choked”, once you go over a certain number of megabytes, rather than higher charges being applied.
Alternatively, customers could receive a warning that they're about to go over their limit and will lose access to data services unless they “opt in” to a higher-level – but still capped – plan. Currently, if you breach your limit you migrate immediately on to very high rates.
The chief executive of the AMTA, Chris Althaus, says the group has been looking at the issue of bill shock and rejects any suggestion telcos deliberately “trap” people. “We're interested in sensible usage of our products, not 'extreme' usage,” Althaus says. “It's in no one's interest to have people going into debt – it causes stress at both ends.”
He says the industry has responded by providing a range of bill management tools such as SMS spending “alerts” and free-call usage check numbers.
It is also releasing a simple set of illustrations (www.amta.org.au) to give people a sense of what their usage might be for certain applications.
Althaus says the first step for people should be to get advice from their provider about the right device and right plan. He says some might want to consider a prepaid plan to start with – until they have a better idea of what their usage might be – before moving to a capped plan.
Avoid a bill blow-out
Think about how you'll use your smart phone — will the plan be just for email, or will you also download videos, movies, music and applications?
Ask the service provider how much data different activities might consume.
Be realistic about how often you'll use the service — a few times a week, or a few hours a day?
Determine the total cost of a plan — cheaper plans may have high charges for excess use and may not be the best for you.
Ask how the plan works. Will you pay excess charges if you exceed your data limit, or will your service be slowed or “shaped” instead?
Ask how you can keep track of your usage. Does the phone have a setting or will the service contact you if you're nearing your limit?
Ask whether you can change your plan if you find you're using more data than you expect.
Regularly check your usage, particularly if you pay your bill by direct debit.
Source: Telecommunications Industry Ombudsman (Australia)
Sydney Morning Herald
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