Some telecom firms losing money in bid to win IDD clients

PUBLISHED : Sunday, 28 June, 1998, 12:00am
UPDATED : Sunday, 28 June, 1998, 12:00am

MAKING an international call is now cheaper as fierce competition among phone companies has seen the introduction of lower rates and special offers.

Calls to the United States are now as low as $1.80 a minute - so low, in fact, that companies often provide the service at a loss.

Since Hongkong Telecom's monopoly on International Direct Dial (IDD) services lapsed in 1995, stiff competition has seen a sharp reduction in prices. Rates vary greatly among providers and destinations, but they can be as much as 75 per cent lower than Hongkong Telecom.

Some telecom executives believe people in Hong Kong have failed to appreciate the savings that can be made. Leslie Harris, president of Wharf Holdings' telecom arm, New T & T, said 63 per cent of Hong Kong households had not signed up with an IDD service. 'It is like they are burning dollar notes,' he said.

Before joining, consumers should consider carefully where most of their calls go. Rates to the US, Canada and Guangdong province generally are the lowest and vary little among providers. Rates to Europe tend to be more expensive and vary more widely. For example, a call to Germany made after 9pm costs just $3.80 per minute with New World Telephone's 009 service but $7.51 with New T&T's 007 service.

Most companies undercut Hongkong Telecom's prices, but sometimes by only the slimmest margin. A 009 call to Sweden is charged at $10.30 per minute, just 70 cents less than an off-peak call would cost on Hongkong Telecom.

A few actually are more expensive than Hongkong Telecom. For example, New World charges $6.50 per minute to call Japan, compared with $5.75 on Hongkong Telecom.

Most services also offer lower rates for calls made during off-peak hours, usually after 8pm and before 7am.

Some packages, such as New World's HeartConnect, offer discounts for frequently called numbers, but there might be restrictions on when the calls can be made. Dialling a US number via HeartConnect costs just $1.70 a minute. New T & T gives its residential users a 5 per cent discount on calls to the country called most often during that billing cycle.

Providers admit they are making a loss on many calls. They have to pay the owners of the wires, switches, gateways, satellite links and underwater cables they use, and those costs sometimes add up to more than customer charges. To cover losses, providers tend to charge more for calls to less-popular destinations.

Service provided by new competitors also can be significantly worse than that offered by Hongkong Telecom.

Many use a 'callback' system to connect calls. That means when a call is made, the local service provider throws out a signal to a telecom provider in the destination country, who then dials back to Hong Kong to connect the call. It takes only a few seconds, so the caller notices nothing more than a slight delay.

However, the connection tends to be of inferior quality than if the call had been dialed directly. Often, there is a time lag, with speech delayed by about a second. And connections are more likely to be lost and might be faint.

An official from New World Telephone said her company was working hard to improve services and was monitoring quality constantly. Connections were being made 20 per cent faster than they were last September, and line quality was improving.

New T & T also said it constantly monitored quality and insisted on certain standards from its partners. For example, a company spokesman said the company did not permit providers to use more than one satellite link in any connection.

Not all countries allow callback services, so the IDD providers also use Hongkong Telecom lines and dial directly. The result usually is a better quality service, one that is more expensive for the provider. As a result, Hutchison Telecommunications and New T & T have introduced premium-rate IDD services that dial calls directly.

Hongkong Telecom, Hutchison and New World Telephone offer calling-card services. These make it possible to access a provider's network from any phone, including an overseas one. Charges for locally originated card calls usually are similar to those for calls made from home - and have the same line-quality problems.

Charges on calls made from overseas tend to be much higher. For example, calling the US from Hong Kong costs $2.88 per minute with a Hutchison calling card, but calling Hong Kong from the US costs $5.80.

One way to cut bills without losing too much quality could be Hongkong Telecom's 0060 callback service, which offers a discount on the normal international rates.

Although 0060 rates are lower than standard Hongkong Telecom rates, they are still 20-40 per cent higher than those of other IDD providers.