the clock stops on fixed line

Michelle Innis
July 5, 2006

Telstra is feeling the heat from intense market competition. The telecommunications giant has launched three phone plans for calls made from fixed line, or home-based, telephones.

The plans are significant because they mean an end to timed STD calls and the removal of what the telco calls "distance bands" that in the past helped determine prices for calls.

Generally speaking, the further away from home you called, the greater the cost of the call. So, a telephone call from a home in Melbourne to a fixed line in Sydney would cost less than a call from Melbourne to Brisbane.

Under one plan, known as the HomeLine Ultimate, all local and STD calls are covered with one monthly fee of $89.90.

Under a second plan, known as HomeLine Together, the $69.90 a month fee covers all local calls. STD calls are charged at 75 cents a call, no matter what time of the day you make the call or how long you stay on the telephone. Line rental is also included in the $69.90 a month fee.

"You can call Perth from Sydney, stay on the telephone for four hours and it will cost you 75 cents for the phone call," says Telstra spokesman Warwick Ponder. "Australians have always fought to keep hold of untimed local calls. We've now introduced untimed STD calls."

The third plan is called HomeLine Reach. It costs $49.90 a month and includes untimed local calls at 10 cents each and untimed STD calls for $1.

Each plan includes the cost of line rental, access to message bank and three-way chat.

Where the plans get more complex is calls to mobiles. Each charges different rates for calls to Telstra and non-Telstra mobiles.

The Ultimate plan charges 50 cents for the first 20 minutes if you are calling a Telstra mobile telephone from your fixed-line phone. The price rises to five cents a minute after 20 minutes. There is a 39 cent connection fee.

The Together plan starts with charges of 75 cents for 20 minutes of chatting to a friend with a Telstra mobile and 10 cents a minute after that. There is also a 39 cent connection fee.

Finally, the $49.90 a month Reach plan has calls to Telstra mobiles at $1 capped for the first 20 minutes then 20 cents a minute, plus the 39 cent connection fee.

Calls to non-Telstra mobiles on all three plans attract heavier charges at $1.75 for the first 20 minutes then 37 cents a minute, plus the 39 cent connection fee.

Ponder says that the company is cutting costs to win customers in an increasingly competitive market.

"We are trying to make it clear to people that their home phone is cheaper to use than their mobile," he says. "But we also hope that if people use Telstra at home, they will also use Telstra when it comes to their mobile, the internet and other services."

Multiple services, such as internet and mobiles, don't have to be bundled together to get access to the plans but Telstra is hoping the price of the plans generates customer loyalty.

The most confusing aspect of Telstra's deals is that no matter what plan you decide to go with, you're guaranteed to pay more than $89.90, $69.90 or $49.90 a month for your phone bill.

"You'll pay whatever the cost of the plan and then on top of that, you'll pay extra for the calls to mobiles and international calls," says PhoneChoice spokesman Reg Robertson.

"And because telephone numbers are portable, there is no way of knowing whether the mobile you are calling is a Telstra number or not. You can't control those costs."

Telstra says international calls are not covered in the three new plans. Consumers can buy different plans depending on which country they call and how often.

Paul Budde, analyst and head of BuddeComm, says: "It is almost impossible for consumers to work out what to do. Telstra has approached this market not necessarily thinking about making customers happy, but thinking about limiting the damage they suffer.

"The starting point for Telstra is not really to look after customers, it is to stop the erosion of [its] market share."

New technology and new market players mean Telstra's longstanding business is under threat. Voice over Internet Protocol (VoIP) allows avusers to make very cheap local and international telephone calls using their broadband connection, sometimes for as little as 10 cents a local call.

One provider, engin, has 10-cent local calls, 27-cent calls to mobiles and free engin to engin calls.

Gordon Renouf, a spokesman for the Australian Consumers Association, says many consumers have already picked up VoIP technology for home use.

"It isn't complex to download the software from the internet and when the quality is good, it is better than a mobile," Renouf says.

"You need to get a headset, which might cost $30, but once you've got that, your calls are very cheap."

One limitation for VoIP users is that you can't call 000 emergency services. Renouf and Robertson believe homes should all have land lines so that calls can be traced in an emergency.

Renouf adds that, despite Telstra's decision to make plans easy to understand, consumers still need to know their calling patterns to make sure they switch to the right plan.

Robertson says an older person whose family lives in Sydney may not make many STD calls and very few calls to mobiles.

"But if you are a young person who has many friends, all with mobiles, you might find those plans are expensive because the charges to mobile telephones are not cheap," Robertson says, especially if you are on the phone for more than 20 minutes when the price cap runs out.

AAPT also has deals that bundle local and STD calls for cheaper call rates. Telstra and AAPT do not make consumers sign long-term contracts to get access to their plans. There are no joining fees.

But AAPT offers $1000 worth of calls, covering local, STD, mobile calls and international calls for $129 a month plus line rental. Monthly line rental is $29.95. Charges rise after you hit your plan's $1000 limit.

Robertson says the average one-person household spends about $80 a month on a fixed line phone and a two-person household spends about $125 a month.

"Depending on which Telstra plan you chose, Telstra customers will in fact pay somewhere between $77 and $130 a month for their plan."

PhoneChoice says these numbers are based on average usage rates for local, STD and calls to mobiles, plus line rental costs.

"It is a good thing that Telstra has come to meet the market because competition is always good for consumers," Robertson says, "but be careful which plan you choose."