The common assumption with contract-free phone plans is that they predominantly benefit the consumer. Customers have the benefit to swap plans at will, to take advantage of a change in the market, or to ditch a telco whenever.
Yesterday, Telstra proved this can also go the other way. As part of a plan refresh, Big T announced that over four million customers will be migrated to the new plans by the end of September. Not old customers, sitting on out of date plans they've had for years, but customers who'd signed up to a contract-free plan as of June 25, last year.
These new plans offer more data, but are a minimum of $5 per month more expensive. In some cases $15 per month. Telstra is well within its rights to increase the prices for customers without a contract, but we've never seen a telco make this kind of sweeping change before.
A customer who signed up to a Telstra postpaid plan yesterday will have their bill rise. They don't have the option to stay on their current plan, the one they signed up for. Instead, they'll be moved on to a pricier option.
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Historically, customers have been able to stay on any given phone plan almost indefinitely, even out of a contract. That's far from the best idea, but it provides certainty. You were able to sign-up for a $50 per month plan with 30GB, expecting that's what you would pay ad infinitum.
When asked why the previous generation of plans will be removed entirely, a Telstra spokesperson said it "removes complexity and simplifies things for customers".
Telstra is softening the blow by waiving the price difference in plan fees for customers over the first 12 months, provided they manually switch to a new plan before the September 30 cut-off. If a customer declines to do so, they will be moved on to the equivalent new plan at the start of October, and be liable for an increased monthly price.
"Customers who are on the 20 new simplified plans we introduced last year will be migrated across to these new plans at the end of September," said a Telstra spokesperson.
"However, customers can offset any price increase for 12 months by moving across to the new plans before September 30. If they do so, the price increase will be rebated back every month for 12 months."
Since the plans are contract-free, it does mean anyone not happy with the increased pricing can swap to a cheaper option, or leave Telstra entirely.
One situation where this isn't quite as clear cut is if you're paying off a new phone. Customers who purchased a new phone from Telstra after June 25 last year will also be hit with the price increase. The monthly handset repayment will stay the same, but the core plan cost will increase.
If you purchased an iPhone 11 on a 36-month Small Telstra plan earlier this week, you would have done so with the expectation that you'll pay $83.30 per month for the entirety of your three-year term. Due to the price rise, you'll pay $83.30 per month for your first year or so with Telstra, if you opt to have your fees waived, and then $88.30 per month for the remaining two years.
A Telstra spokesperson said that customers unhappy with this kind of price rise can leave and pay out the remainder of their device, but leaving an iPhone 11 plan one-year in would require dropping a lump sum of at least $800 and forfeiting any remaining handset discounts. This might be a viable option for some, but certainly not for others. It's easy to see why a customer might feel trapped.
As part of the plan refresh, Telstra quietly culled the option to buy a new phone on a 36-month repayment, but customers buying a phone on a 24-month plan are still impacted by this sort of change.
Nonetheless, this shifts the dynamic of buying a new phone through Telstra. It's now impossible to tell if the price you're paying today will be the same price you'll pay down the line. It's a complete contrast to how the industry has operated. A grace period where the difference is waived for a year helps somewhat, but there's no telling if Telstra will offer a similar incentive in the future.
Telstra would not confirm whether future plan changes would be structured in the same way.
"We won't be speculating on what our plans or pricing structures [look like] in the future," said a Telstra spokesperson.
For the most part, a telco changing its plans is a good thing. It can make their offering more competitive, and force other providers to respond. It can make the entire market better. But customers should still have the freedom to stay on their old plans. But as Telstra has now proved, this freedom could be fleeting. We'll just have to wait and see if Optus and Vodafone follow suit.
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