Australian CSP, Telstra, incurred as much as AU$90 million (US$80 million) in bad debts in its past financial year, caused largely by customers that disputed and didn’t pay expensive bills.

Chief financial officer John Stanhope told an analyst meeting in Sydney recently that bad debts increased 44 percent in the year ended 30 June 2010 to some AU$364 million. This is a little surprising because the Australian economy, and its businesses, largely escaped the economic recession the rest of the world endured.

In an incredibly stark admission Stanhope described as ‘self-inflicted bad debt’ – debts that Telstra believed it either could have prevented or could prevent in the future by simplifying internet and phone plans and making them more easily understood by customers.

“We’re pretty hard on ourselves,” Stanhope said. “What happens is that a customer might be described a plan, but when they get their first bill it’s hard to understand or doesn’t match the plan they thought they were going to get as described by someone at the front of house. Then a dispute occurs with the bill.”

“Part of our simplification strategy is to make sure that customers understand the plan they have and how it will look on their bill.”

Bloggers came alive after the news was released. One wrote, “And how many deception-induced bills should have been challenged and weren’t, instead becoming part of Telstra’s profit?” Another wrote, “All the enticing sales patter of what a great deal you have made finally makes sense once the first bill arrives. It is invariably way north of what you thought it would be.” “It’s about obfuscation – remove the detail from the bill so the customer doesn’t know what they are being charged for and hopefully, for Telstra, won’t seek redress. And how many deception-induced bills should have been challenged and weren’t, instead becoming part of Telstra’s profit?”

Also quick to ‘put the boot in’ were newspapers that took the opportunity, again, to highlight multiple ‘bill shock’ cases they had uncovered, especially around international roaming. I have lost count how many times I have reported ‘bill shock’ stories with warnings that they are the worst press any CSP can get, but still they come.

The Australian Telecoms Industry Ombudsman was unable to reveal how many complaints have been received regarding international roaming. In adjudicating in cases of financial ‘over-commitment,’ it says an important factor is whether a telco provider had issued any warning about a debt and whether that had been effectively expressed to a customer. It also says it looks at what steps the customer may have taken to limit the debt once he or she has been advised of it.

Rosemary Sinclair, managing director of the Australian Telecommunications Users Group, stated unequivocally that, “unhappily, we’re at the point where regulators and governments now have to take direct action.” Isn’t that always the case?

To be fair the problem does not just lie with Telstra. The Australian market for many years has been inflicted with countless and complex pricing plans, particularly from mobile operators. It is almost a national pastime comparing plans to see which is best suited only to find, after the first bill usually, that unknown extras pop up. Try as I might to understand the logic of ‘capped’ plans where you got lots of extra minutes or kilobytes of data but actually pay more per unit than ‘normal’ plans. If I’m confused as a ‘billing guy’, how does the average customer cope?

It is fascinating to see the CFO of a tier one CSP to talk about a ‘simplification strategy to make sure that customers understand the plan they have’. Blimey (Australian vernacular for ‘Crikey’), why not just make the plans simple?

For those operators rueing the day they offered their remarkably simple ‘all-you-can-eat-plans’, at least their customers understand them! If you take the Telstra example then they may have saved themselves US$80 million, not to mention the savings from less calls to customer support.