The Australian Competition and Consumer Commission (ACCC) said that it is unlikely to mandate wholesale domestic roaming for mobile services in regional Australia because there’s no compelling reason to do so. Telstra is pleased – Vodafone Hutchison Australia is furious.
The ACCC has been looking at the issue of domestic roaming since September 2016. At issue is whether a domestic roaming declaration would improve competition in regional Australia – where coverage is spotty and often provided by a single operator (namely Telstra) – and encourage infrastructure investment to improve coverage.
“We are extremely conscious of the fact that in regional, rural and remote areas, mobile coverage and choice of service provider are vital issues,” ACCC Chairman Rod Sims said in a statement. “However, the effect declaration would have on competition in regional, rural and remote areas is uncertain. While declaration may deliver choice for more consumers, declaration has the potential to make some consumers worse off.”
Sims said that regional consumers already benefit “to some extent” from price competition in the metro areas because operators price their services consistently across Australia, despite the higher costs in servicing regional areas.
The ACCC found that a domestic roaming mandate was no guarantee that Telstra’s prices would go down. The draft decision expressed concerns that prices could actually go up if, for example, other cellcos raise their retail prices to reflect the cost of roaming access prices.
“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,” Sims said.
Furthermore, he added, there is evidence that a roaming declaration could damage some incentives for operators to invest in coverage – a view championed by Telstra, who has argued that it has no commercial incentive to invest in regional infrastructure if its rivals can use it to compete with them.
Telstra cheers, VHA jeers
Telstra issued a statement from CEO Andrew Penn praising the draft decision, saying that it ensures the industry still has the incentives to invest in coverage for regional Australia.
“If this decision is confirmed we will immediately move to expand our 4G coverage to reach 99% of the population by later this year,” Penn said. “It also paves the way for ongoing investment in the coming years that would see an additional 1.4 million square kilometers of 4G coverage for regional and rural Australia. This means that about 600 base stations will be upgraded from 3G to 4G.”
Penn said Telstra expects to see up to A$1 billion ($739.8 million) of investment flow to small towns and regional centers across the country over the next five years, via direct investment and co-investment.
Vodafone Hutchison Australia – who has been actively pushing for a domestic roaming mandate – slammed the ACCC draft decision, calling it a “missed opportunity for regional Australia” that “denies the benefits of increased coverage, competition and choice to Australian mobile customers.”
VHA chief strategy officer Dan Lloyd also slammed Telstra, who is the only beneficiary from the decision, he argues.
“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 A$1.4 billion per year,” Lloyd said in a statement. “Since 2006, Telstra has received around A$2 billion in government subsidies and funding to build its regional networks, yet it only spends A$150 million per year on mobile in regional areas.”
Lloyd said the telecoms divide between the cities and regional areas will only get worse, “as no other operator will be able to close the coverage gap between Telstra and the rest of the industry.”
Lloyd also said that the lack of domestic roaming means Telstra would continue to unfairly benefit from taxpayer subsidies for initiatives such as the Mobile Black Spot Program. VHA has long complained that Telstra has been getting a disproportionate share of funding from MBSP. In the first two rounds of MBSP funding allocations, Telstra has received funds to build 577 base stations, while VHA has only received funds for 74 sites.
Lloyd also accused Telstra of trumping VHA’s “compelling” evidence in favor of domestic roaming with “a scare campaign with no facts or substance”.
“Monopolies don’t drive investment, competition does. Without domestic roaming, the opportunities for investment in areas where it is uneconomical to build more than one network are very limited,” Lloyd said.
VHA still has a chance to make its case. The ACCC will make its final decision on the regional Australia coverage/competition problem in mid-2017. The ACCC’s Sims said that while the ACCC is unconvinced that a domestic roaming mandate is the solution, the commission will seek comment on other regulatory and policy measures that could better address the issue. Stakeholders have until June 2 to submit comments.
Lloyd said that VHA will use that time to convince the ACCC to change its mind. The cellco will have its work cut out for it, as rival operator Optus has sided with Telstra on the issue of infrastructure incentives. Optus’ interim head of corporate and regulatory affairs, Andrew Sheridan, told The Australian newspaper that its continued push to invest in regional areas likely played a big part in the ACCC’s decision:
“We have poured A$7.5 billion into the network since 2009 and the ACCC has picked up how much investment we have made,” he told The Australian.
“The mobile sector has been a success story in Australia and infrastructure competition remains the best possible path to delivering services in rural areas.”