First Vodafail, now Telstruggle. Is Telstra in strife?

AFTER three outages in two months, Telstra could be in big trouble. As Vodafone well knows, good coverage is what their business depends on.

Telstra No Worky

TELSTRA’S recent triple outage could ruin its reputation for a long time. Three times in the past two months, the phone network supposed to be Australia’s best has fizzed out.

For a nation that lived through Vodafail in 2010, the prospect of Telstruggle in 2016 is frightening.

But it would be even more frightening for Telstra. The network has spent a long time and a lot of money positioning itself as the best telecommunications brand there is.

Companies like Vodafone, Telstra and Optus all compete to be seen as the best. They spend a lot of money on ads.

Everywhere I go I see billboards for Optus, featuring Usain Bolt, the sprinter. This is a switch from the animals they used for a long time — they had elephants, meerkats, orangutans, a whole menagerie. The point was to emphasise they were cuddly and nice.

Now they are trying to emphasise they are fast (because Usain Bolt is fast, you guys! Get it?!)

But a million-dollar ad campaign can’t trick us into thinking a network is amazing if we’ve got no bars of service.

No amount of happy ads featuring attractive families will make Telstra’s problems go away.

In some industries, quality is a bit ambiguous. Is this burger tasty? It’s a subjective judgment. Is this bar cool? That’s subjective. You can manipulate consumer judgment of the product by messing with other elements like price and brand name, etc. But is my phone connecting to the internet? That’s not subjective. The consumer can tell.

That’s why the Telstra problems are so significant. Service outages make us furious. Sometimes irrationally furious. They stick in our memory and shape our impressions most.

Telstra’s problems are somewhat different to Vodafone’s old problems. In 2010, that company wasn’t ready for the 4G era and it had to spend billions of dollars to catch up.

Vodafone has caught up, and then some, as this graph of customer complaints shows. Vodafone now actually gets a lower rate of complaints than Telstra or Optus.

Vodafone has clearly made a comeback, and Telstra’s complaints are sure to rise in the next version of this graph.

Of course, this graph only goes to December, before the latest outages. I suspect when the Telecommunications Industry Ombudsman publishes the next version, Telstra’s complaints will shoot upwards.

Optus is obviously not doing too well either, but whatever its problems, they have been a bit less visible than a widespread outage. And perhaps customers hold it to a slightly lower standard than Telstra — which is pitched as a premium product.

It is widely agreed that Telstra is the most expensive. Mobile phone plans are famously hard to compare, but here’s a neat fact to illustrate their market positioning: Telstra has a mobile plan at a whopping $195/month (which includes 25GB of data and unlimited international calls).

That premium pricing only makes sense when the service is very good. And for a long time, it was.

WHAT’S CAUSING TELSTRA’S OUTAGES?

They have come from a variety of sources — a human error, a software problem, an undersea cable. Most probably, their network isn’t falling apart — sometimes bad luck just clusters together.

But there is a small chance something has gone wrong inside Telstra. The company formerly known as Telecom Australia changed CEO last year. The old CEO, David Thodey, was something of a hero. He doubled Telstra’s share price in his six-year reign and restored its brand supremacy.

New Telstra CEO Andy Penn is going to be under a lot of pressure this week. Picture: Britta Campion / The Australian

But the minute the new CEO took over, he sharply boosted Telstra’s spending on infrastructure. Did that mean spending hadn’t been enough before? Or, perhaps, this focus on new infrastructure diverted focus from day to day maintenance?

Either way, another Telstra outage now would be a very bad sign. And the impact on customers would not be something Telstra can fix with a simple ad campaign.

Jason Murphy is an economist. He publishes the blog Thomas The Thinkengine.

Follow Jason on Twitter @Jasemurphy