In the world of business, it is common sense that you get what you pay for.
When parents thought they found a bargain and bought toy jewelry made in China, some children ended up playing with charm bracelets and pendants that turned out to contain cadmium, a cheap toxic metal, as a substitute for lead, another toxic metal that manufacturers knew they could no longer get away with. In the end, the quality of the product was so low that the price savings to the consumer were not worth it.
The same concept holds true for telecom services.
Brand-mimicking shanzha (“bandit”) cellphones are never as sturdy or stable as the originals like Apple Computer Inc’s iPhone or HTC Corp’s Diamond smartphone. Pirate handset users can testify that the quality is inferior, even though some users may be satisfied and say the non-branded phone’s features are “good enough” because they consider the genuine product too expensive or too complicated.
Thus after the National Communications Commission (NCC) rolled out a rate reduction plan last week for the nation’s telecom carriers set to begin in April, the regulator must pay further attention to quality.
Compared to the commission’s 2007 rate cuts of 5.35 percent and 4.9 percent respectively for fixed and mobile telecom services, the suggested rate cuts announced last Wednesday were slightly larger at 5.686 percent and 5.87 percent respectively for the retail rates of fixed and mobile services next year after factoring in inflation in the previous year.
The regulator’s recent rate cuts sound reasonable compared with the legislature’s and the Consumers Foundation’s request for an eventual 50 percent and 44 percent rate cut for the services over the next three years.
Operators have been handed reasonable profits to fund their operation and no public utility business is expected to be highly lucrative. With that in mind, it is reasonable to offer rate cuts to consumers.
Nevertheless, quality must not be sacrificed.
For the time being, five major domestic telecom operators — Chunghwa Telecom, Taiwan Mobile, Far EasTone Telecommunication, Vibo Telecom and Asia Pacific Telecom — have all opposed the commission’s rate cut plan, threatening to implement self-imposed rate cuts at a smaller scale despite a fine of up to NT$5 million (US$157,282) each.
Their opposition is understandable since the cuts will eat into profits. Three publicly traded telecom operators — Chunghwa Telecom, Taiwan Mobile and Far EasTone Telecommunication — suffered a 12.64 percent decline in revenues, or NT$25.8 billion, over the past three years after the commission enforced the first rate cut in 2007.
However, one of the companies’ arguments against the rate cut does not add up: They complained that their research and development efforts in higher-end wireless services would suffer if the rate cut puts a squeeze on their profits.
Such research and development issue is part of a company’s internal investment strategy for long-term sustainability; it is not part of the service they are offering current customers, so why should customers accept an increased rate?
Until the new technology is launched and applied successfully, no consumers should have to pay higher rates for services they cannot even subscribe to yet.
After all, it is also common sense that businesses cannot expect consumers to pay for what they don’t get.
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