2degrees’ new pre-pay offer: the cheapest around or a con?

It’s handbags at dawn as 2degrees and Vodafone trade insults over a new pre-pay offer.

READ ALSO: Knee-capping a 2degrees sale

Earlier this week, 2degrees introduced a new pre-pay offer for voice calls: Everyone 100, which gives you 100 minutes of calls for $30 - or 30 cents a minute, as it was phrased in various promotions and PR. 

It looks pretty tasty, especially if combined with 2degrees’ recently announced $6 for 50MB data and $10 for 500 txts pre-pay deals. (And incidentally, it would not have come as such a surprise to keen NBR readers - see 2degrees boss hints at future plans.)

2degrees said Everyone 100, at 30 cents a minute, was the cheapest rate around for voice calls - even if you include all of Telecom and Vodafone’s contract plans.

Fair Trading Act breach?
Vodafone was quick to suggest that 2degrees’ marketing of Everyone 100 could be a breach of the Fair Trading Act in that calling cost only equates to 30 cents a minute if a customer uses up all of their $30 allowance inside a month (as they must to achieve the lowest possible rate; any leftover money does not rollover to the next month - unlike Telecom or Vodafone’s pre-pay plans, or indeed 2degrees entry-level deals).

And Telecom and Vodafone’s experience suggests that not many would use up their $30 a month.

Yesterday, a Telecom rep told NBR that the average Telecom pre-pay customer spends just $10 a month. Vodafone has previously told NBR that its median pre-pay customer spends around $18 (which leads analysts to suspect the average is closer to Telecom’s).

2degrees’ lower pre-pay rate (Telecom charges 89 cents per minute; Vodafone has 89 cents and 49 cent options) may encourage more use. But then again, given the fact it pockets the $30 whether a customer uses it or not under Everyone 100 (whereas Telecom and Vodafone’s plans are pay as you go), that doesn’t really matter. (2degrees won’t disclose what its average customer spends right now).

Vodafone’s second Fair Trading objection was that it thought 2degrees should be more up-front about the fact it rounds up charges to the highest minute.

That is, if a call lasts two minutes and 1 second, you’ll be charged for three minutes.

2degrees bites back
A 2degrees rep told NBR that Vodafone’s allegations “sound like sour grapes to us. We've always charged minute plus minute - just like Vodafone do on their prepay - and that's clear in our terms and conditions.

Telecom is the only one of the three to offer per-second pricing on pre-pay.

The Commerce Commission weighs in
A spokeswoman for the Commerce Commission said the watchdog had not received any complaints about the new 2degrees offer and had not examined it in detail:

“However, from the information available about the offer on the 2degrees website, it appears to clearly disclose that minutes are available for 30 days, so it is unlikely that the issue that Vodafone has raised regarding advertising the offer as 30 cents a minute, when that price would only apply if you used all of the 100 minutes your $30 buys you within a month, would be a breach of the Fair Trading Act.”

However, 2degrees - and indeed Vodafone - could possibly face more scrutiny over rounding up minutes.

“In terms of the per second rather than per minute pricing, as a general comment, where companies advertise plans offering a certain number of minutes for a fixed price and then round each call up to the nearest minute for billing purposes (eg, where a call of 1 minute and 10 second duration is billed as a call of 2 minutes) they should clearly disclose this practice alongside the claimed benefits,” said the spokeswoman.

“Any failure to clearly disclose that the calls are being rounded up to the nearest minute for billing purposes means the advertisement may be a contravention of the Fair Trading Act, as consumers may not get the advertised minutes for the advertised price unless all their calls were exactly of whole minute lengths or they were to make one single call that uses all of the available minutes.”

The commission's Fair Trading Act team is currently is looking at the general issue of the level of disclosure of call rounding, said the spokeswoman.

So is 2degrees cheapest?
2degrees claims there’s no pre-pay or post-pay plan that beats Everyone 100’s 30 cents a minute (yes, with the proviso you use all your minutes inside a month). Especially given the minutes can be used at any time of day and for landline or mobile calls to any network.

NBR invited Telecom and Vodafone to point out any plans that contradicted this statement.

With contract deals, it’s hard to compare apples with apples, because Vodafone (and to a lesser extent Telecom) invariably mixes in text or data, and handset subsidies often form quite a large component of the plan.

Then there are the infamous (for 2degrees) on-net deals: Vodafone’s Best Mates, and Telecom’s Favourites, which offer steep, steep discounts for calling a circle of friends on the same network.

Vodafone’s BestMate1000, for example, gives you 1000 minutes for $6, or 0.006c minute.

Beyond on-net deals, Vodafone offered its Easy 60 plan as an example of a cheaper plan. It gives you 120 minutes for $29.95 a month - which works out to 25 cents per minute if you use your maximum allowance. The is a qualifier, however: half the minutes are off-peak.

Telecom put forward its $29.95 Talk and Text 300 plan, which offers XT customers 300 off-peak minutes and 20 peak minutes and 300 text messages per month. Again, there’s that after-hours qualifier.

Vodafone and Telecom both also offer business plans that let you pool minutes between multiple users, most of which work out to as low as 29 cents ex GST a minute. For example, Telecom’s Business Share 750 lets two to four people share 750 minutes a month for $222.

So who you think is cheapest depends on how you squint your eyes. But one thing’s for sure - there’s definitely more competition, which is what the Commerce Commission was intending when it smoothed the way for 2degrees.