Four days before Christmas, regional Australians were dealt another blow when the Australian Competition and Consumer Commission (ACCC) nixed a deal between Telstra and TPG to share mobile network infrastructure.
It was a wrong decision that will hurt both competition and especially regional mobile users.
Telstra is the mobile market leader with 48% market share, followed by SingTel Optus with 33% and then TPG, which runs the Vodafone network, third with 18%.
The deal between the two fierce rivals would have allowed Telstra and TPG Telecom to share mobile phone infrastructure covering more than 1.5 million square kilometres and 17% of Australia’s population. It would have been the first of its kind in Australia, allowing Telstra to access underused spectrum in regional areas. TPG would have increased its regional network five-fold by jumping on Telstra’s 3700 regional towers allowing it to better compete with both Telstra and Optus.
TPG would retain full control of its core network, which is where pricing and product differentiation happens. Telstra would have gained increased certainty on its infrastructure assets, at present more important to them than market share as it prepares to split the company into retail and infrastructure arms.
Telstra and TPG are disputing the decision at the Australian Competition Tribunal.
TPG must act in the best interests of its shareholders. Telstra has by far the most superior regional network. Australia’s huge landmass and small population mean that it is simply not economical for competitors to build a rival network to Telstra which has used its chunky profits and historically large margins on fixed-line services — now replaced by an annual $1 billion payment from the National Broadband Network (NBN).
Optus threatened to cut its network investment and this seems to be the line the ACCC has swallowed, despite it knowing Optus’ network will never match Telstra’s — and that Optus would not offer TPG a deal that would allow it to properly compete.
Telstra’s network dominance has seen calls by experts for Australia to follow the decision by the New Zealand government and mandate roaming on regional mobile networks, so customers can simply jump from one to another if their network doesn’t have coverage.
Telstra, of course, is against this, wanting only commercial roaming agreements. TPG argues that this would not be enough as basic roaming does not go deeper into the networks’ services layer, as its Telstra deal would have.
The ACCC’s job is to try to improve competition and look after consumers’ interests. This decision does neither and is detrimental to both. So with the ACCC stumbling and seeming to not grasp how the sector works and how mobile networks compete, it’s well past time that the federal government stepped in. The ACCC clearly states that it “can only grant authorisation if it is satisfied in all the circumstances that either there is not a likely substantial lessening of competition” and — here’s the real kicker — “or that there is likely to be public benefits that outweigh any public detriments”.
Despite this deal passing the benefits-outweighing-detriments test it was blocked. The ACCC appears to be stuck in the last century, continuing to insist that competition in the telco sector is based on spectrum and mobile tower infrastructure. In the modern telco world of the past 25 years or so since the iPhone supercharged mobile broadband take-up, mobile carriers have increasingly competed on software, content and services they offer their customers. Network reach is simply a prerequisite for this.
The ACCC’s alternative was effectively that TPG switch horses and strike some sort of deal with Optus. This is mildly insane, as TPG had told the ACCC it had tried to strike a deal with Optus but the Singapore government-owned company wanted to restrict TPG to slower 4G speeds, meaning it could not necessarily offer the rich media services it wanted.
Optus is badly wounded after last year’s massive data breach of customer information. Anecdotal evidence from mobile industry sources suggests that the disaster — at that stage unprecedented in Australian corporate history — led to considerable churn, particularly initially. In plain English that means customers fled for rivals they considered would keep their data secure. In this case that meant Telstra and TPG.
But perhaps the fact that Optus has been dealt such a blow played into the thinking of the ACCC, ever keen to find ways to prop up competition.
The decision is massively contradictory in terms of the NBN. It seems there is one rule for terrestrial services and another for wireless, bizarre in today’s interconnected world. The ACCC’s attitude to the fixed-line NBN is that all players should be able to offer services on a national network. But consumers are network agnostic; they simply want to be able to make a call, send a text or watch Netflix no matter what the underlying infrastructure.
Australia’s regional areas continue to suffer from substandard telecoms services and don’t care too much about competition. They just want reliable service at a fair price — something the ACCC can control no matter who owns the spectrum, towers and cables.
Last week Nationals Leader David Littleproud called for the Universal Service Guarantee (USG) to be extended from its outdated fixed-line definition to include mobile services. The guarantee ensures that all Australian homes and businesses have access to both broadband and telephone services regardless of their location.
It’s a shame he didn’t think to do this while in government for nine years. That’s on former communications minister Paul Fletcher, a former Optus executive who was in the box seat to drag Australian telecoms regulation into the 21st century but did nothing.
As Telstra prepares to break itself up, it’s the optimum time for Communications Minister Michelle Rowland to look at the sector holistically. The government and the regulator also need to understand that commercial deals, such as the one Telstra and TPG had proposed, are far better for the sector than the heavy-handed regulation that is, at present, being fumbled by the regulator. In the push and pull between regulation and the market, less can often mean more for consumers.
Have you been affected by poor mobile coverage? Let us know by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
