Phone up for discounts

Published In: The Australian Financial Review Enterprise Section
Date Published: 6th July 2004
Author: Mark Lawson

With most of the SME market now using broadband, and more smaller companies realising they can negotiate prices on their telecommunication services, price differences between the different phone carriers are vanishing.

The shift to broadband means that, as well as bargaining for data services, SMEs can also take advantage of voice over internet protocol (VoIP, which uses the internet connection for voice) to negotiate better voice-call rates.

Telstra is still in a strong position, particularly for marketing to ordinary consumers. But consultants say that SMEs with small annual spends, down to just $10,000 a year, are realising they can negotiate and play one carrier off against another.

Once negotiations start, then price differences between the carriers whether it is Telstra, Optus, AAPT, Prime, Macquarie Corporate, PowerTel or others melt away, consultants say.

But the client may be required to sign a contract to lock in the rates.

Alan Ruff, a senior analyst at utilities consultant NUS, said Telstra's standard charge for a local call is about 20 cents but it might offer, say, 14.5 cents a call after negotiation and in exchange for a two-year contract, depending on the volumes involved.

Standard rates for national calls (that is, long distance within

Australia) may cost 25 cents for the connection and anywhere between 9 cents and 24 cents a minute. Negotiations may succeed in getting that cost down to 14.5 cents for a connection and 14.5 cents a minute.

An increasing proportion of telecommunications bills are for calls between fixed and mobile phones, with typical Telstra rates being 25 cents for a connection and 30 cents a minute for calls to a Telstra mobile. The rate is 36.4 cents a minute for a non-Telstra unit.

If the business consumer agrees to a contract, the rate can be 14.5 cents for a connection and 24.5 cents a minute for talking to a Telstra mobile and reduced rates for non-Telstra units, plus a further 7 per cent discount.

Much the same sort of discount can be obtained if the business is prepared to shop around, Mr Ruff said.

At the very least, as there is often a reluctance to switch carriers, the business should ask their carrier what deal they can offer.

But to get those rates, the client may have to sign a contract which locks them in with the same carrier for up to two years with penalty clauses if they change their mind, he said.

Graeme Cox, a director of Expense Reduction Analysts Australia which advises companies on reducing telecommunication bills albeit at a much higher spend than most SMEs said he was unaware of carriers offering contracts to business clients. But he said that major price reductions could be achieved by negotiation.

The carriers might give a discount if the client stayed with them for, say, more than 12 months, but not by reducing each monthly account. Instead the discount would be handed to the client as a reduction on the 13th monthly bill, he said.

Mr Cox said he believed one of the main differences between the various carriers was in the service they offered.

By "service" he does not mean that the phones remain connected, but matters such as settling disputes over the bill quickly.

"Even for an average business, the telecommunications bill can be quite difficult to decipher," he said. Billing disputes can arise over amounts that significantly affect cash flow, so the ability to sort it out quickly is valued by business.

Paul Budde, principal of the consultancy Paul Budde Communication, said that changes in the telecommunications market usually started at the top and worked their way down.

Mr Budde said the SME end of the market was now experiencing the same price competition that had benefited larger companies, and the shift to broadband and VoIP was helping the trend companies are better able negotiate packages on these.

He also noted that, as far as he was concerned, all the initial technical difficulties of VoIP as a substitute for telephone services had been overcome.

Another aspect of the SME market, particularly for very small companies, is that they required a much higher level of service, Mr Budde said.