“Bill shock" is an industry term for being absolutely taken aback by the exorbitant total on your bill and having no idea how it got so high. But today, Telstra announced they will soon no longer charge for excess data usage, a move which should see a reduction in the number of “bill shock” cases.

Eliminating excess data charges could be a world first, and undoubtedly, a first in Australia. The move comes as an increasing number of consumers purchase smartphones which use a significantly higher amount of data than traditional mobile phones. Smartphones, like the BlackBerry, iPhone or HTC models act as not just a phone, but a mini computer as well. They provide fast access to web content, email, online gaming, online videos and social networking sites.

Telstra expect to make the shift to shaping – a term used for when a customer’s internet speed is slowed once their data cap has been reached, by the end of 2011. Telstra Chief Financial Officer John Stanhope said the record numbers of smartphone purchases meant that Telstra’s decision will “better protect its customers from surprise bills.”

“Our customers deserve to be able to enjoy the full capabilities of their Telstra post-paid mobiles without fear of a large, unexpected bill.  By slowing data speeds once a customer has exceeded their data allowance, and not charging for the extra data, customers stay connected without fear of a hit to the hip pocket,” Mr Stanhope said.

Along with no excess data charges, Telstra will be updating their alert system to provide a “near real-time” SMS when customers are close to reaching their caps.

“The new service will make life much easier for our customers by providing them with greater certainty and control over their data usage and their bills. Data throttling complements recent increases to the included data allowances available through Telstra’s Freedom Connect Plans,” Mr Stanhope said.

Earlier this year the Telecommunications Industry Ombudsman (TIO) observed a significant growth in excess internet usage, often caused by a “lack of information” for consumers regarding how to monitor data usage and how much excess data can cost. They claimed customers are often confused by “unclear advertising and contract terms.” The TIO also claimed that many customers were unsure on just how many kilobytes and gigabytes it takes to download different types of content. 

Telstra’s move could pave the way for other mobile carriers to eliminate expensive usage charges, both here and internationally. Currently, Optus charges 50c/MB, Vodafone charges .25c/MB on their Infinite Plans, and 50c/MB on their regular caps. Virgin mobile charges the highest for excess data at 0.2c/KB (that’s $204.80 per megabyte!)

Telstra is implementing a number of customer service initiatives in an attempt to improve on their customer service, including access to 24/7 customer service and more competitive bundles and pricing plans.