Replacing Telstra

commentary Bill Scales spent a fair amount of time defending his boss Ziggy Switkowski at a Senate committee hearing on Monday.Scales may be a group managing director at Australia's largest telco but he was, at times, reduced to a personal assistant by Labor's Sue Mackay, who kept pressing for an explanation as to Switkowski's no-show.

commentary Bill Scales spent a fair amount of time defending his boss Ziggy Switkowski at a Senate committee hearing on Monday.

Scales may be a group managing director at Australia's largest telco but he was, at times, reduced to a personal assistant by Labor's Sue Mackay, who kept pressing for an explanation as to Switkowski's no-show.

Switkowski, Telstra's head, was chided for his repeated absence. "He has never attended an estimates hearing -- ever -- as the chief executive of the biggest company in Australia that is majority owned by the Australian people," Mackay said.

The lengthy debate on Switkowski's attendance was followed by scrutiny into Telstra's recent price hikes, which, for the record, were approved by the ACCC (Australian Competition and Consumer Commission).

Monthly line rentals will increase by $0.60 to $3.45 per month starting June, while from July 26, a surcharge of between 0.63 percent and 1.69 percent will be levied on bills paid via credit card.

The committee was told that "intense competition" had forced Telstra's hand.

When asked by Labor's Kate Lundy to explain how, Optus, for instance, places competitive pressures on Telstra in terms of line rentals, Darian Stirzaker, head of channel management at Telstra, said: "I saw on television last night an ad by one of the competitors -- Optus is no different; it has been this way for some time -- which was centred on the bundling element.

"They recognise, as most of us do, that the marketplace has customers with multiple services and that the dynamics and the consumer base have moved quite markedly in terms of how they use different services. So, in essence, they are also doing what we are doing."

Stirzaker then tried to deflect the issue by focusing on Optus' price hikes.

"I am not going to get the dates right, but it was some months prior to our latest range of increases as well as rewards options which we are discussing, that they put their line rentals up. That, of course, passed through relatively unnoticed within the media, as distinct from what has happened to us. But it was actually quite a significant increase, well above our access prices at the time," he said.

This provided even more ammunition for Lundy who swiftly put things into perspective.

"How many customers pay line rental to Telstra in Australia," she asked. All in, Telstra has a whopping 90 percent market share on line rentals with six million clients, revealed John Stanhope, group managing director for finance and administration.

So Telstra's argument made no sense. It was like comparing ping pong with footy in Australia. Products usually cost less when there's competition but I guess somehow, even Telstra can defy the laws of gravity.

On the new surcharge for credit card payments, the rationale is simple -- the processing costs were simply too high. When asked to justify the move, Stanhope pointed to the Reserve Bank.

"We took up the opportunity given that the Reserve Bank of Australia deregulated the financial services market to allow the pass-through of merchant fees. We decided to do it for certain payments ... because we want to recover some of the costs of providing the convenience of paying by card," he said.

According to Stanhope, the number of people who pay by card is about 40 percent but insisted that the new fees would not afford a "full recovery" of the costs.

Give me a break. Telstra wouldn't go through such great lengths to penalise customers for meagre returns.

Telstra wants consumers to believe that the sweetner lies in its rewards programme. I look at it as "vendor lock-in". However, there's nothing wrong in giving your business to a single vendor if the quality of service is met and value for money is truly justified.

Until now, the likes of Optus, Primus and AAPT offer various bundling programmes -- albeit in different permutations -- for voice, data and mobile. It would be interesting to see the single, point players like Vodafone, which only offers mobile calls, and an Internet Service Provider such as IINET, joining forces with a landline provider to compete with Telstra.

This will turn the traditional telecommunications marketing model on its head and offer REAL competition. When that happens, it will hopefully bring an end to Telstra's abominable behaviour.