On the eve of the planned suspension of flat rates for new 4G telecom services, people lined up outside stores of the nation’s major telecommunications operators on Oct. 31, while Chunghwa Telecom Co said it had to extend its opening hours to 11pm to digest the flood of signups.
Consumers who were on waiting lists to get an Apple Inc iPhone 6 were panicked about not getting unlimited Internet access in time.
However, at the last minute, the nation’s big three telecoms operators made a U-turn due to stiff competition and said that they would extend the promotional period for unlimited 4G services at fixed monthly charges. Obviously, the extension is a countermeasure to brace for subscriber losses after smaller rival Taiwan Star Telecom Corp said on Oct. 30 that its flat-rate packages would be in place for an unspecified period of time — alongside a price cut.
The telecoms’ decision to resume offering flat rates is a regression in the evolution of the nation’s telecommunications industry, as most of their peers in developed economies have scrapped unlimited Internet use when launching 4G services due to the limited spectrum available and for the good of their financial health.
To better utilize bandwidth, global telecoms — such as AT&T Inc of the US — provide tiered mobile data plans to replace fixed-rate plans for unlimited Internet use, or they offer fixed-rate plans with conditional data speed throttling for smartphone subscribers that kicks in when Internet use exceeds certain levels. In Asia, South Korean firms do not offer flat-rate plans.
The nation’s major mobile companies originally planned to follow global mobile companies by terminating flat-rate services when entering the 4G era, given that expensive network deployment costs — including licensing fees totaling NT$118.65 billion (US$3.89 billion) — will make reaching profitability an uphill job.
“We think it may take longer than we expected to scrap the flat-rate plans,” Chunghwa mobile business group president Lin Kuo-feng (林國豐) said.
Foreign brokerages also say that flat-rate plans for 4G services will erode profits of the nation’s major mobile service providers and the impact could last as long as 30 months, as a result of contracts signed now. Investors are encouraged to either reduce their holdings in the nation’s big three, or at least not buy those shares. Telecom shares used to be considered good investment targets because of lucrative cash dividend yields between 5 and 6 percent.
Apparently, consumers do not fully understand that they might not need to pay more than NT$1,300 per month for unlimited data use at normal data transmission speeds. Some consumers might overpay their mobile bills, while others might just become addicted to Internet browsing. In fact, consumers could pay half that price for a sufficient capacity of 5 or 6 gigabytes (GB) from local telecoms.
Local mobile data use averages 5.4GB a month on 3G networks, a survey released by Far EasTone Telecommunications showed. The monthly use surges to 8GB when consumers switch to 4G networks, due to increased video streaming. In South Korea, 4G users average just 3GB of data per month, a survey showed. Far EasTone said 80 percent of its 4G subscribers sign up for flat-rate plans.
So it looks as though Taiwanese consumers have excessively used or inefficiently utilized the available spectrum, due to mobile companies charging the same rates. Telecoms are responsible for educating the public to treasure the limited spectrum and use it effectively, as well as educating them on how to pick the right plan for themselves.
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