Why Australian customers get a raw deal

THE US enjoys unlimited mobile data and can cancel phone, TV or gym contracts without penalty. So why do Aussies get such a raw deal?

Why do Aussie customers get a raw deal compared to Americans?

IMAGINE place where you could enjoy unlimited mobile data every month with super-fast internet speeds at an affordable price.

Wouldn’t it be nice to be able to cancel your mobile, pay TV or gym contract whenever you like without penalty? What about simply paying month to month and forgetting about contracts altogether?

Well, that place exists. It’s call the United States of America, a country whose inhabitants wield immense consumer power — and frankly make Aussies look like a bunch of chumps.

All of their major mobile phone carriers give unlimited data plans for mobiles as standard — something that Australian providers are yet to offer up.

Similarly, many companies that offer monthly services — such as gyms, internet providers and pay TV providers — don’t require you to sign your life away and commit for the next two years. You simply pay month to month and can cancel any time without penalty.

Want to return an item after you bought it? No worries. It couldn’t be easier to get a full refund.

So, why do Australian customers get such a raw deal by comparison? Is it likely to change? And is there anything we can do as consumers demand more from our service providers?

Australians don’t enjoy the same consumer power as Americans.

‘THE RACE TO THE BOTTOM’

There becomes a point in consumer markets where one business takes a punt on giving a better deal to win a heap of new customers. This forces competitors to match the deal and the consumer wins.

This happened years ago in the US when its telcos began offering plans with unlimited mobile data.

Co-founder of comparison site Finder.com Fred Schebesta said Australian telcos weren’t there yet, but these more lucrative offers would come eventually.

“What happens in any market is you get this race to the bottom,” he told news.com.au.

“And that’s capitalism and that’s why it’s so brilliant and amazing.

“You can imagine America was probably at the same stage where Australia is but then someone went, ‘OK, how can we engineer a contract — a business model — so that we can offer something cheaper of obviously higher value for less price or get around this consumer problem?’”

Mr Schebesta said it hadn’t happened yet in Australia due to a lack of competition and deficiencies in our telecommunications infrastructure.

“You remember when Vodafone unfortunately had that issue when they launched their 4G and everyone went on it but they didn’t actually have the infrastructure to handle it? Then everyone left Vodafone,” he said.

And while Vodafone fixed that problem and attracted customers back, it serves as a cautionary tale for other providers.

“They don’t want to promise [unlimited data] then have mass exodus of customers,” Mr Schebesta said.

“Someone’s going to move, but I would submit that it’s not going to be super fast because they’ve got to deliver on that promise.”

Boost Mobile founder Peter Adderton said in February that he believed Aussies would be able to access unlimited mobile data before the year was out.

“In my opinion we’ll see everyone move to unlimited in less than 12 months, I honestly believe that,” he said. “It’s going to take one [provider to offer unlimited] and the rest will follow at 100 miles per hour.”

Fingers crossed!

Finder.com.au co-founder Fred Schebesta.

THE PROBLEM OF GEOGRAPHY

The most obvious reason that Americans get offered better deals is that there are more of them: 323.1 million compared to a measly 24 million Australians.

And worse for us is the fact that we are spread out over 7.7 million sq km.

Queensland University of Technology retail expert Gary Mortimer said Europe and the UK enjoyed similar benefits to Americans thanks to a denser population.

“Because you’ve got the volume and the population, those telco providers are willing to invest in the infrastructure that’s needed, so it becomes quite competitive,” he said.

“Where you’ve got a large population of consumers with generally good spending power and discretionary income, retailers, service providers, hotels, telcos are very keen to capture a large proportion of that market,” Dr Mortimer said.

“To capture 25-30 per cent of that market is massive volume, massive revenue for your company.

“Here in Australia, it’s a much smaller consumer mass so capturing 25 per cent it doesn’t lead to a massive amount of revenue.

“So, where you can have a large amount of market share with a large proportion of customers paying you, you can afford to bring your prices down, so it’s economy of scale that takes place in consumer markets across the US.”

QUT retail expert Gary Mortimer.

EXPECTING A GOOD DEAL IN AMERICANS’ DNA

Mr Schebesta said Americans also secured better offers from companies because the nation’s businesses were built on good service and convenience.

“The centrepiece of American business is convenience,” he said.

“It’s all about making it easy: easy to sign up, easy to leave, easy to get on board, easy to pay.

“All of the friction points that exist in any transactional market, Americans find a way to get around that.

“Amazon is the classic one with one-click buy. Amazon’s prices aren’t even the cheapest but because they’re convenient people just go with it.

“Smoothing out inefficiencies is what American companies do so well.”

A tipping culture, which Australians don’t have, also means that Americans expect top-shelf service.

“This entire country was built on service … and there’s that respect for service. The company is there to serve you.”

Mr Schebesta argues it goes even deeper to cultural differences between the nations.

“There’s something built into the Australian psyche where you take what you can get. You take, almost what you’re given,” he said.

He said the American psyche meant people were less reliant on governments and institutions and much more inclined to take matters into their own hands.

“They think, ‘No one’s going to save me, I’m not just going to put up with the status quo’ in America. I’m going to go do something about it.”

Imagine a world without pesky gym contracts.

SO WHAT CAN WE DO ABOUT IT?

While Australians don’t have the consumer power of the Americans due to a lack of competition, we can demand better deals from the businesses we do have.

The easiest thing to do is simply ask.

“Pick up the phone and call your insurance company, call your telco, call you bank and just ask for a better deal and if they can’t give you a better deal, go to a comparison service or go on the internet and find somewhere else to get one,” Mr Schebesta said.

“People feel like there is a lot of pain in switching your products whereas actually, there’s not.”

Dr Mortimer agrees.

“Shop around: Go into your retailer or your telco provider or your insurance provider informed,” he said.

“If you don’t ask you don’t get.”