Bulletin

Issue: March 2004

Research in Action

MOBILES: MASSIVE MONEY MONSTERS

Mobile phones are causing a serious debt problem amongst youth as telecommunications companies target young people's financial and consumer inexperience.

A La Trobe University report into youth debt highlights young people's ever increasing use of mobile phone short message service (SMS), SMS marketing, SMS competitions and SMS television and radio station polls.

Supervised by La Trobe lecturer in Law & Legal Studies, Ms Liz Curran, the report was prepared by La Trobe students on Clinical Legal Education Placement at the West Heidelberg Community Legal Service. The students are Deanna Caruso, Courtney Wright, Andrea Intagliata and Tanya Meek.

The report also expressed concern that the latest technology enabling mobile phones to replace credit cards would be an additional potential social problem.

Whether it be blatant overpricing-like charging up to 25 cents per SMS message or 55 cents for premium messages, when it costs the company only one cent to send-encouraging reckless spending through providing unlimited credit or unreasonable credit limits, or the constant bombardment of advertising, mobile phone company actions seem far from having the consumers' best interests at heart.

Lack of awareness of consumer rights and questionable marketing and sales techniques were the main causes for youth mobile debt-and the latest SMS market and quasi-credit card use will only exacerbate the adverse financial and social consequences for youth.

The report advocates that mobile phone companies must stop targeting people who have little chance of managing the potential debt phone companies freely offer. If the companies will not be more responsible, authorities need to introduce more stringent guidelines to prevent them taking advantage of vulnerable customers.

Thirteen million Australians own mobile phones and SMS messages were a cost effective alternative to making calls. However SMS calls constituted a market currently worth one billion dollars annually with more than 400 million text messages sent each month. Some teens reported having sent up to 600 SMS messages in one day.

Teenagers in Australia spend around $2.5 billion annually. They are a lucrative target having a direct influence on 75 per cent of all household purchases. However their lack of consumer and financial experience make them most susceptible to aggressive marketing tactics. Companies have many 'have now, pay later' schemes although conscious of the fact young people do not have the money to pay up front.

SMS polls and competitions have become the latest revenue raiser for large corporations as they promote SMS through popular television and radio shows. SMS media and telecommu-nications companies charge 55 cents for each SMS message.

While marketing and selling via SMS is a significant problem, it is not the only mobile technology with potential to plunge the inexperienced and vulnerable into debt.

Of most concern was mobile commerce or m-commerce. This, according to the report, has converted mobile phones into mobile wallets, enabling the user to make payments with the push of a button.

This wave of technology has only just begun and major credit card companies have begun to join forces with mobile phone corporations, making payments for almost all goods and services possible with the touch of a mobile phone.

The report concludes -

'Society needs to protect its consumers and if credit card-equipped mobile phones are to be the next generation, then stringent guidelines need to be applied on SMS pricing and reasonable credit limits must be employed.

'The fact that telecommunications companies have targeted young people's financial and consumer inexperience to make enormous profits, and the fact that the media, other large companies-and even local councils-are now lining up for their share of the profits, should cause alarm bells to ring.

'If action is not taken, the situation will only deteriorate as youth nationwide will fall further into debt.'•

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