While policies that push cellphone operators to alert customers when they are about to exceed their plan limit are meant to make things better for consumers, a recent study shows the opposite may be happening.
According to a study from faculty at the University of Toronto and Boston College - published in academic journal American Economic Review - out-of-bundle (OOB) warnings can end up being more costly, because cellphone companies adjust their plans and fees accordingly to maintain profits.
"While some consumers do benefit, others either decrease or stop usage, end up with more expensive plans, or continue to underestimate their usage and choose the wrong plan," says Rotman School of Management at the University of Toronto.
"Fixed prices go up, free minutes go down and then some of the average rates drop. But the overall effect is that the average person pays more," says assistant professor Matthew Osborne, who co-wrote the paper with Michael Grubb, assistant professor of economics of Boston College.
SA stance
Vodacom spokesperson Richard Boorman says whether the study holds true for SA is debatable. "We've had SMS usage warnings in place for years and over that time period data prices have almost halved."
He says the idea behind the SMS notifications is the same as providing other mobile tools, like apps. "We want customers to be able to manage their spend effectively and not to be surprised with unexpected bills."
Despite this, and attempts by authorities to educate local mobile users, consumer complaints around bill shock (caused by OOB roaming in particular) are still relatively common, despite attempts by authorities to educate local mobile users.
Towards the end of October 2013, the Independent Communications Authority of SA (ICASA) took out a full-page newspaper advert headed "ICASA alert to consumers on high billing caused by smartphones data usage" after it was inundated with complaints around high and wrongful billing by mobile operators. At the time, analysts warned the problem was only going to get worse.
Mobile operators reacted immediately afterwards, outlining the measures they said they had already taken to combat the problem.
Some industry observers have tagged OOB-induced bill shock as one of the main woes cellphone users face when it comes to their finances. In January, cellphone bill analysis company Tariffic found 38% of overspend comes from OOB data usage for voice lines.
"The problem is more severe for data lines, however, with OOB costs on these lines accounting for a massive 72% of the total costs of data lines," it said.
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