Option 1 is expected to result in total industry establishment costs of $xx million, with ongoing costs of around $xx million per annum. Most of these costs fall on the MNOs. It should be noted that MNOs are already complying with many of the elements of option 1, largely due to changes they have made in the past few years. During consultation, some MVNOs indicated that the compliance costs associated with this option may cause them to leave the IMR market.
The implementation costs for a warning SMS and basic price information SMS that meet the minimum requirements of the Direction are estimated at between $xx million and $xx million (combined) for Telstra and Optus to implement, exclusive of existing systems development costs. Vodafone has not provided any figures, but notes that implementation costs will vary significantly depending on implementation timeframes (longer timeframes would reduce costs). As Vodafone already has a comprehensive warning notification system in place, its implementation costs are expected to be relatively low. These costs relate to the alteration of the arrival notification to include a warning about costs and information about opting out of IMR services.
A major cost involved in option 1 would be the development of a communication system between MNOs and MVNOs in order to inform the latter that one of its customers is roaming within an hour of the first provider becoming aware that the consumer is roaming. This is estimated to be approximately $xx per MNO with the implementation costs falling with a longer lead time to implementation. This adds $xx million to the total establishment costs.
Separate development costs will also be borne by resellers who (due to their smaller size) may find this impact to be financially greater, up to $xx per provider based on the resellers who have made submissions to the ACMA. While MVNO engagement in consultation processes for the standard was limited, two of the MVNOs indicated that this may cause them to leave the IMR market. It may also deter new entrants into the mobile service industry from offering IMR services.
The MVNOs that the ACMA has liaised with note that IMR is not a core part of their business model, and in some cases is only offered to corporate clients. Each described itself as a price-taker for IMR services.
It is also worth noting that some MVNOs may be aggregators/wholesalers themselves, and will therefore be required to establish systems to pass on information to other MVNOs. This is an additional cost that aggregator MVNOs will be required to cover, however no representation of the scale of these costs is currently available.
Benefits
This option standardises and mandates the warnings and charging information consumers will receive when they arrive overseas and ensure that this information is received by all consumers no matter their service provider.
Specifically, Telstra customers will receive (compared to the status quo):
messages detailing pricing information for IMR services.
Optus customers will receive the following benefits (compared to the status quo):
an ‘on arrival’ message informing customers that they are using IMR services; and
messages detailing pricing information for IMR services.
Vodafone customers will receive the following benefits (relative to the status quo):
a warning that significantly higher charges are likely to apply due to IMR services.
The recent move by Telstra and Optus to introduce data alerts for mobile roamers indicates that there is also likely to be a benefit to mobile roaming service providers (in addition to the consumer benefit) to provide this facility. This benefit is not reflected within Option 1.
Customers of MVNOs will receive the benefit of a reduced likelihood of Bill Shock from all the elements of this option. The additional information provision requirements on MNOs and wholesale MVNOs will also enable MVNOs that wish to compete in the IMR market to know when their customers are using IMR services and have improved information about IMR charges from wholesalers. The customers of MVNOs will then benefit from the requirement that this information is communicated to them.
Risks
While option 1 meets the terms of the Direction, it doesn’t enable all IMR consumers to easily monitor and manage their usage while overseas. The information provided to consumers would therefore be limited to an initial warning, and an ability to opt-out and information about prices. Although it explains prices for IMR services, it does not assist consumers to understand or measure how usage and IMR costs accumulate. Information about data usage on smart phones remains opaque to the user. As travel packs purchased from MNOs may revert to the considerably more expensive casual rates once the data allowance is exhausted, customers risk bill shock as they will not receive usage notifications or spend management tools.
There is value in the ability to monitor usage in addition to sending price alerts on arrival. Reducing the frequency of bill shock incidents – without also tackling the increasing ‘size’ of those incidents as indicated by the TIO data - means that the cost to the community of IMR bill shock incidents may remain relatively high.
Option 2
Costs
Option 2 is expected to result in total industry establishment costs of $xx million, with ongoing costs of around $xx million per annum. Most of these costs fall on the MNOs. During consultation, some MVNOs indicated that the compliance costs associated with this option may cause them to leave the IMR market. Consultation also revealed that elements of this option are likely to impose significant costs on industry but provide no tangible benefit to the issue of bill shock.
Option 2 would have significant cost implications for industry. In addition to the cost associated with option 1, industry would be required to quickly develop systems for providing personalised pricing information, spend management and usage notifications for a comprehensive variety of IMR services.
The actual cost information requirement in the SMS cost information message would require integration back to existing billing systems. The notifications requirements would be prescriptive and required to be implemented at the time the Standard is made. This helps standardise information across the industry however adds up to $xx million in initial compliance costs across the MNOs.
This option is the most costly to implement, involving substantial investment for resellers relative to market share. Estimates put total development costs of this option at up to $xx million for MNOs. This figure excludes any development costs for Vodafone except for the $xx communications system development cost for MNO-MVNO communications.
Vodafone has a number of systems in place that are expected to keep implementation costs for customer notifications and warning messages lower than for Telstra and Optus. This version of the Standard does require different types of usage notifications to be sent for different types of roaming customer (post-paid customers, pre-paid customers and automatic pre-pay service) which represent a contributing factor to these higher costs.
These costs for industry exclude any ongoing costs for updates and maintenance which can be substantial, with estimates for Optus running at $xx million. A reasonable estimate of ongoing costs, extrapolated from Optus’ figures, is therefore a minimum of $xx million for MNOs.
Advice from industry indicates that the costs of establishing the more prescriptive elements of this option are significant and may have the unintended consequence of forcing most MVNOs out of the market. This outcome is even more likely than under option 1. It is likely to be uneconomical for most MVNOs to build notification systems in a short timeframe, noting that MVNOs have advised the ACMA that IMR services are not a core part of their business model. The measures may also deter new entrants.
Some of the measures in this proposal, such as notifications at 100% of usage for pre-paid consumers, are of limited benefit as this notification is mirrored by the service halting due to the exhaustion of credit. Providers are unanimous in opposing measures such as this that impose significant cost to industry that provide no tangible benefit to addressing the issue of bill shock.
Benefits
The benefits identified at Option 1 also apply to Option 2. Additional benefits under this option are discussed below.
This option provides the most comprehensive suite of benefits to consumers in a short timeframe, including the consumers of resellers who utilise IMR services. It requires that resellers develop systems to mirror the services provided by the MNOs, covers a comprehensive array of notification requirements (both at and after the first roaming contact) as well as covering the mandatory elements in the IMR Direction.
As travel packs purchased from MNOs may revert to considerably more expensive casual rates once the data allowance is exhausted, customers will benefit from usage notifications and spend management tools. The additional information provision requirements on MNOs and wholesale MVNOs will also enable smaller MVNOs to provide spend management tools and cost information to their customers which is currently not possible. Depending on the associated costs this could be a significant improvement on the status quo for both the MVNOs and consumers as they will both be kept more informed. It is likely to reduce the likelihood of bill shock for consumers and substantially reduce the magnitude of bill shock when it does occur.
The inclusion of spend management tools will provide consumers with an increased level of confidence in using IMR services overseas.
Risks
The main risk of this option relates to the incremental benefits achievable relative to the costs of the option. The main problem identified with mobile roaming has been the consumer lack of awareness and propensity to accumulate large costs due to data usage. This option includes mandated requirements and costs related to voice and SMS and pre-paid and post-paid services. In other words, it is less clear that the large cost of this option would deliver significant benefits relative to options 3 analysed below.
