Some of Australia’s biggest telcos have been dealt a blow by the Australian competition watchdog after its draft decision to reject proposals to allow a wholesale domestic mobile roaming service.
The Australian Competition and Consumer Commission (ACCC) released its draft decision on 5 May, with the Commission’s chairman, Rod Sims, suggesting that the regulator has seen insufficient evidence that a declaration for such a plan would improve the current state of telco competition in Australia.
The ACCC launched an inquiry into a mobile roaming service for Australia in September last year, the third such inquiry to be launched by the Commission since 1998.
If a national roaming service were to be declared, it would allow mobile network users to access infrastructure belonging to other telecommunications providers to access additional coverage.
Naturally, Telstra, which claims the largest and most far-reaching mobile network in the country, has had some strong words to say about the proposal.
“Declaring mobile roaming would stop coverage being a differentiator in the Australian market and therefore, remove the key rationale for investment in regional Australia for all operators,” Telstra Group corporate affairs executive, Tony Warren, said late last year.
Now, the ACCC has taken the first step in formally rejecting the plan, with Sims suggesting that, while such a declaration may deliver choice for more consumers, it also has the potential to make some consumers worse off.
“We are extremely conscious of the fact that in regional, rural and remote areas, mobile coverage and choice of service provider are vital issues,” Sims said. “However, the effect declaration would have on competition in regional, rural and remote areas is uncertain.
“Currently, regional consumers benefit to some extent from price competition in metropolitan areas because operators price their services consistently across Australia, despite the higher costs in servicing regional areas. They also benefit from competition between operators on network investment.”
“There is insufficient evidence to suggest that declaration of a mobile roaming service in regional and rural areas would further lower prices or improve services, given the higher costs in servicing these areas,” he said.
The ACCC’s draft decision suggests that a domestic mobile roaming scheme in regional, rural and remote areas may not reduce Telstra’s retail mobile prices to a “significant extent”, and could well result in overall higher prices if other service providers raise their retail prices to reflect the cost of roaming access prices.
“The ACCC has examined the incentives for mobile network operators to upgrade their networks or invest in expanding coverage both with and without declaration,” Sims said. “We heard from many regional groups concerned about coverage.
“We consider there is evidence that declaration could damage some incentives for operators to invest such that overall coverage is not likely to improve with declaration,” he said.
One of the mobile carriers set to benefit from such a scheme, Vodafone Australia, has criticised the ACCC’s draft decision, suggesting that it represents a “missed opportunity” for regional Australia.
“It denies the benefits of increased coverage, competition and choice to Australian mobile customers, especially hundreds of thousands of Australians living in regional and rural areas,” the company said in a statement.
“Too many Australians will continue to be held hostage to Telstra, and will have no choice but to pay Telstra’s mobile premium which totals $1.4 billion per year.
“Telstra will continue to receive a disproportionate share of taxpayer subsidies, and initiatives such as the Mobile Black Spot Program will not be able to realise their full potential,” it said.
The company suggested that, without domestic roaming, the opportunities for investment in areas where it is uneconomical to build more than one network would be limited.
The telco said it plans to work with the ACCC to reconsider its position in its final report.
“We struggle to understand how the commission could reach this decision, as when it last reviewed the issue, it concluded that it would be likely to regulate if the industry did not reach commercial agreements,” the company said.
Now, the ACCC is seeking comment on other regulatory and policy measures that could improve coverage and competitive outcomes.
“We are very keen to get comments from a broad range of stakeholders on our draft decision announced today, including on these measures. We will carefully consider all feedback before making our final decision in mid-2017,” Sims said.
The ACCC invites submissions on the draft decision until 2 June 2017.