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Published 10 April 2013 07:40, Updated 18 April 2013 00:45
Don’t hang up: Ruslan Kogan’s company Kogan Mobile is fighting to prevent the suspension of more of its users’ phones. Photo: Luis Ascui
Ruslan Kogan was planning to spend April promoting his new mobile phone service. But things have turned out quite differently for the internet retail entrepreneur. Instead of a marketing campaign, he’s started legal proceedings against ispONE, the wholesaler provider his company engaged to run the service.
Kogan scored an early victory in the Victorian Supreme Court last week, with an injunction ordering ispONE to reinstate 600 Kogan Mobile account users it had suspended after deeming them to be using the service in excess of permitted levels. The injunction also staved off the imminent blocking of 2000 more accounts that ispONE, which sells prepaid access to the Telstra network, had flagged as unusable when their account balances reached zero and became due for recharging.
The relationship that started so promisingly in November, when Kogan Mobile signed a wholesale agreement with ispONE, has now degenerated into bitter finger-pointing and accusations.
Kogan Mobile has demanded ispONE apologise to all customers it has suspended, while ispONE has refused to hand over 50,000 micro SIM and 1500 nano SIM cards the retailer had ordered until agreement is reached on changes it wanted in the master wholesale agreement.
The damage accruing all this time to the Kogan brand is apparent to all. Between March 15 and March 22, the Telecommunications Industry Ombudsman received 15 complaints from Kogan Mobile customers who were unhappy that the supposedly unlimited service they had paid for was cutting them off for over-use.
In an affidavit filed to the court, Kogan Mobile executive director David Shafer said: “In addition to the damage to Kogan Mobile, I believe that the wider Kogan business brand has suffered significant reputational damage as a result of ispONE’s repeated unilateral disconnection of prepaid mobile services.”
Justice James Judd has to decide what constitutes excessive use and whether ispONE is permitted to take action against Kogan Mobile’s customers, even though it has no formal relationship with them.
Much of the problem seems to have arisen from a poorly drafted master wholesale agreement.
During the injunction hearing, Justice Judd said this “seems to be about as vague as one could possibly be in the use of the English language”.
The two sides were at least aware of this. In his affidavit, Shafer says during March and early April Kogan Mobile and ispONE talked about new operating rules to clamp down on overuse, but couldn’t agree on them.
The dispute also stems from Kogan Mobile’s offer of unlimited data usage to its own customers, or end users. While Kogan Mobile pays ispONE a fixed fee per user, ispONE pays Telstra according to usage. The suspended customers were downloading large quantities of data using USB ‘toggle’ modems.
While Kogan won the first round, the BRW Young Rich lister may not get his way entirely. In mid-March, after discussions with ispONE, his company clarified its acceptable use policy to limit all customers from downloading or uploading more than 400Mb of data in one day. Technology lawyer Peter Moon said Kogan Mobile’s acceptable use policy – the fine print for users – was “unclear and ambiguous”.
Kogan’s company, which earlier this month had 56,890 active accounts and had processed 102,647 sim card orders for customers in total, may need to make things clearer for its customers.
“The problem seems to me to be one where you have people out there who are end users who may have a real grievance about their compliance with the Acceptable Use Policy… and how is that to be adjudicated?” Judd said last week. “They’re the people that in the end seem to be of paramount importance in this dispute and they’re not represented here.”
It hasn’t been a good start for Kogan’s four-month-old business. He’ll be hoping there’s money left for a marketing push after paying the lawyers.