We were chatting to a researcher the other day who thought that mobile carriers were screwing you when you went ‘OVER’ your cap. ‘THAT’S WHERE THEY RIP YOU OFF’ was the comment that was made.
Ok, calm down we said, there’s no need to call the Dr or ask for help, the simple diagnosis is ‘bill shock’. Do you concur?
In this post, we’re just going to focus in on call rates on mobile plans to understand them and then we’ll look at data plans and bill shock in another post.
Call rates of $1 per minute are not a rip off when used in their sweet spot and should not be shocking, it is just that this is poorly explained to consumers by telco. You’ll be less shocked if you understand how this all works. Some consumer reports now estimate that almost half of the mobile phone base in Australia has experienced bill shock so we’re talking to one if every two readers here.
It is easy to understand how all the components of a mobile plan (included value, data, overseas use and other features) can play into a large bill.
The idea that you are ‘penalised’ when you go outside your included value is not true, it is just feels that way.
There is no penalty, it is just the discounting has stopped. The call and SMS rates do not change, but it does feel like they do. Let us explain below.
A standard mobile plan works out at just over $1 per minute when you include flagfall charges (most plans are 90c per minute and the flagfall charges are 30c. The average call length in Australia is 3 mins therefore you are looking at 90c x 3 minutes ($2.70) + 30c flagfall on average which equals $3 or $1 per minute).
Still following? A mobile plan from Carrier X might advertise $600 of included value for $60 per month which would equate to 600 minutes of maximum use for $60. You’ve seen the ads everywhere.
Time rolls on…you’re happily calling away each month and everything is going great and you get charged $60 per month and coming in just under 600 minutes but you never really notice.
BUT, then when you have a big month and a friend needs to talk every night and you double your phone usage for the month. You get the feeling that you’ve get a bigger bill this month, probably double your normal bill which feels about right to you.
You regular bill is $60 per month and in your head you think it might be $120 on this big month.
Wrong, that’s where the shock is. In fact that first 600 minutes at $1 per minute and the carrier gave you $600 of value to use by paying them $60 per month. The next 600 minutes are also $1 per minute except you pay per use on this. This means that second set of 600 minutes are going to cost $600 also, but you did not pre-purchase that from the carrier at the nicely discounted rate of $60 so you pay per use at $600.
Therefore, your bill is $660 for double usage in that month up from $60. Double usage DOES NOT double the price of $120 and that is a shocking to most people’s understanding of products. If you’re going to go over your included value amount, call your carrier immediately and upgrade plans.
Your might be on a $60 plan for 600 minutes. A $100 plan might give you 1400 minutes and get you out of trouble for this month and every further month. The art of the mobile plan is to find the sweet spot where you are under using your plan’s included value whilst getting the maximum amount paid off your new shiny handset.
The plan itself is not bad value. Were you to use 600 minutes of calls for just $60 per month, the EFFECTIVE rates mean that you’d really only be paying 10c per minute as you were given 10x bonus when you paid $60 and $600 of value and that is cheaper than the amaysim As You Go plan (as 15c, now 12.5c per minute) which is offered as a mobile plan killer.
It pays to compare mobile plans BEFORE you buy and think smart during your contract.