The limits of ‘more for more’

Telecoms inflation lags the 3.6% national CPI, challenging the efficacy of 'more for more' strategies as data value peaks.

Heath Gibson · Executive Manager – Industry Intelligence and Insights at NBN Australia26 April 2024Period: Q3 FY244 min read

3.6%↓

Australian Annual CPI (March 2024 Quarter)

1.1%↑

Telecoms Equipment and Services Annual Price Index Rise

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Abstract

This report analyses the divergence between Australia's 3.6% annual CPI growth and the 1.1% rise in telecommunications equipment and services. It examines how major operators like Telstra and Optus utilize CPI-linked pricing mechanisms and the 'more for more' strategy to justify price hikes. The analysis suggests that as consumer data needs are increasingly met, the marginal value of additional data allowances is diminishing, potentially limiting the effectiveness of traditional pricing levers in the near term.

Key Takeaways

Australia's CPI rose 3.6% annually to March 2024, while telecoms prices grew much slower at 1.1%.
Telstra's annual price review policy links postpaid mobile plans to the March quarter CPI, suggesting a $2-$3 monthly increase.
Optus is likely to increase mobile prices in the next six months, having not changed core pricing since August 2022.

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Frequently Asked Questions

While Australia's annual CPI rose 3.6% to March 2024, telecoms equipment and services grew by only 1.1%. This lag is compounded by a 0.3% quarter-on-quarter price decline in March 2024, indicating that sector-specific deflationary pressures are offsetting broader economic trends.

Telstra is positioned to implement a $2-$3 monthly increase on postpaid mobile plans to align with its March quarter CPI-linked pricing policy. Optus is likely to follow with its first core pricing adjustment since August 2022 to address the widening gap between its rates and the 3.6% general inflation rate.

The 'more for more' strategy is yielding diminishing returns as consumer data needs are increasingly met by existing quotas. Furthermore, NBN Co’s proposal to increase the 100 Mbps tier to 500 Mbps threatens to remove speed as a viable pricing lever for the broadband market.

The limits of ‘more for more’

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