Calls for tougher fines after latest Telstra scandal

Big telcos are falling afoul of consumer protections far too often, a leading advocate says.

Big telcos are falling afoul of consumer protections far too often, a leading advocate says. Photo: TND

Australia’s biggest telcos must be handed larger fines for falling foul of consumer protections to halt the growing number of corporate failures by Telstra, Optus and TPG, a leading advocate has said.

Australian Communications Action Network (ACCAN) chief executive Andrew Williams says misdeeds that shaft consumers are “cropping up far too frequently” across the industry, requiring a tough new crackdown.

Speaking to TND after the telco regulator revealed on Thursday that Telstra put debt collectors on vulnerable customers during COVID, Mr Williams said public trust in Australia’s largest telco is suffering.

Telstra has now had more than half a dozen run-ins with regulators in the past two years that have seen it pay millions in compensation and fines.

“It’s not great that these issues keep cropping up,” Mr Williams said.

“It really highlights that stronger regulatory powers are required to send a really strong message.”

Mr Williams said ACCAN and other consumer bodies will push for watchdogs to be granted stronger investigatory powers and the ability to hand out bigger fines to telcos in an upcoming review of industry rules.

Telstra rap sheet grows

Thursday’s wrist slap by the communications regulator came after 70 financially vulnerable Telstra customers were penalised by the telco for failing to pay their bills – despite falling under hardship protections.

Between August 2019 and April 2022 – a period that covered COVID lockdowns – customers had services suspended or disconnected improperly. Two customers were referred to debt collectors.

Acting Australian Communications and Media Authority chair Creina Chapman said Telstra must fix longstanding system issues that led to its vulnerable customers being denied adequate consumer protections.

“With the pressures caused by rising costs of living and the COVID-19 pandemic, it’s more important than ever for telcos to support their customers, particularly those in difficult circumstances,” she said.

“Telco services like phone and internet are now essential to daily life, used for everything from work and education, through to health and government services, so even briefly suspending or disconnecting customers can cause a real disruption to their lives.”

Telstra was not handed a fine for the conduct revealed on Thursday, but this was not the first time it has been in trouble over the past two years:

  • In May, Telstra signed an enforceable undertaking over $11 million in delayed compensation payments after its internal systems failed.
  • In April, Telstra was fined $506,000 and paid $1.73 million in compensation for overcharging thousands of customers and failing to properly fix the problem.
  • In December 2021, Telstra was fined $2.5 million for failing to protect private phone numbers after uploading data into a public database.
  • In July 2021, Telstra refunded customers $25 million after misleading them about their NBN speeds, claiming it was faster than it was.
  • In May 2021, Telstra was fined $1.5 million for disrupting the industry by suspending phone number transfer services during COVID-19.
  • In May 2021, Telstra was fined $50 million for unconscionable sales practices targeting Indigenous Australians, following ACCC action.

Different issues, similar excuses

Telstra has not been the only telco doing the wrong thing, with rivals Optus and TPG often featuring in regulator enforcement action.

This was particularly the case around misleading NBN plans, revealed by the ACCC.

But Telstra’s excuses for failure are often quite similar, Mr Williams noted, with the telco routinely citing problems with legacy systems.

That was the case on Thursday, when ACMA said Telstra blamed issues with “legacy IT systems” for misidentifying those protected by hardship.

It was a similar excuse in April when issues with “internal systems” like “data transfer problems” were blamed for overcharging customers.

“It’s a concern [that] everything seems to come back to legacy IT systems,” Mr Williams said. “As the telcos and Telstra upgrade their systems they’ve really got to make sure they’re capable of addressing these issues.”

Veteran telco consultant Paul Budde said Telstra’s IT issues stem back to decades ago when it had an effective monopoly on the industry and maintained thousands of outdated systems to hide from regulatory eyes.

“It was to their advantage to have all sorts of legacy systems that made it very difficult for regulators to understand what was going on,” he said.

“We’re talking about an enormous amount of systems.”

Mr Budde said Telstra has been updating its systems en masse amid the competitive pressure of today’s market, but that this doesn’t excuse the  raft of regulatory failures that have resulted.

Calls for tougher penalties

Mr Williams said consumer advocates will push governments for tougher fines and enhanced investigatory powers for regulators in an upcoming review of the telecommunications consumer protection code next year.

As things stand, the compensation payments and fines given to Telstra in the past two years represent a minuscule proportion of their revenue, which was an astonishing $22.5 billion during the 2021 financial year.

However, Mr Williams doesn’t think Telstra sees its regulatory failures as a cost of doing business, saying executives fear reputational damage.

“It’s not great to see these issues cropping up, but looking at positives – Telstra has self-reported a lot of these issues,” Mr Williams said.

In a statement, a Telstra spokesperson apologised for the errors with its application of hardship policies, and said the telco is making changes.

“We have made significant improvements over the last few years to improve the customer experience,” they said.

“We have simplified our plans, removed lock-in contracts and excess data charges, brought calls back onshore and our stores back in-house.

“All of these improvements have seen our customer complaints drop to record lows.”

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