Optus is introducing measures like speed caps because its mobile plans aren't making enough money, according to CEO Kelly Bayer-Rosmarin.
Speaking at Optus' Tech Day event, Bayer-Rosmarin said it's important that there is a sustainable and thriving telco sector in Australia, but that it isn't seeing the return on the investments it's made, which doesn't allow it to further invest in its network.
"Right now the average return on capital for telcos in this country is below our cost of capital and that is unacceptable because we want to continually invest in providing better connectivity, underpinning the digital economy for Australia for the future," said Bayer-Rosmarin.
"The reason we have some [speed] caps in some places is to make sure that we are actually monetising the huge investment in infrastructure that goes into building wonderful, fast 5G networks."
"The margins we are earning here are not sufficient for us to be able to make a return on the capital we’re investing in. […] So some of those decisions really reflect how we’re trying to make sure we monetise the market and ensure that consumers understand the value of the great service we are providing.”
Mobile plan speed caps are a relatively new concept where in addition to data limits, plans have speed limits - a maximum download speed that they can achieve, similar to NBN plans.
Optus is introducing a 150Mbps speed cap for most of its prepaid plans in July, and a single more expensive $55 recharge with speeds of 250Mbps. Its postpaid plans will continue to be uncapped, which means they can operate at the fastest speeds the network is capable of. Optus' cheapest 28-day prepaid recharge will be $35 as of July, while its cheapest postpaid plan is $49 per month.
Optus has also introduced more affordable 5G options for its MVNO partners, which have a 100Mbps speed cap. Southern Phone is the first Optus-powered provider to have introduced these.
Speed caps create further differentiation in the mobile plan market places. In addition to picking a data allowance, customers are required to choose a speed, with faster speeds plans costing more (and typically being more profitable for the telco). Similar trends have played out in countries like Finland where most mobile plans have unlimited data, but you pick a speed tier instead.
Optus isn't the only provider introducing speed caps. Telstra also caps the majority of its prepaid plans to 150Mbps, and has a single uncapped prepaid plan. Telstra network providers typically offer cheaper plans capped at 100Mbps, and faster plans capped at 250Mbps.
While speed is often touted as the major benefit of 5G, it does offer improvements. 5G networks also have better network capacity and less lag. Enhanced capacity can help prevent congestion, and 5G allows for more simultaneous connections than 4G or 3G do.
Alex Choros
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