ACCC wants to regulate SMS costs

The Australian Competition and Consumer Commission (ACCC) has handed down its draft decision (PDF) today on whether to continue regulating mobile termination rates across Australia, and has determined that extending its powers for another five years to control the rates for the termination of mobile voice services would be beneficial to market competition. The ACCC currently sets the price that telcos are allowed to charge each other to connect voice calls between rival networks, to ensure that larger telcos do not overcharge smaller players in the market.

Looking to add to its regulatory repertoire, the ACCC has decided that it would be beneficial to end users for it to regulate the termination rates for SMS messaging as well. In its decision, the ACCC said that it had decided not to extend the mobile terminating access service (MTAS) description to include SMS due to a lack of "demonstrable market failure". But given that SMS termination rates have gone down for some time, and in the ACCC's view there are no substitutes for SMS, the regulator wanted to step in.

"The ACCC is concerned that mobile network operators may be exercising monopoly power over access to their networks to keep wholesale SMS rates significantly above costs," ACCC chairman Rod Sims said in a statement.

"Although some of the higher price retail plans offer unlimited SMS, the wholesale charge for SMS termination is passed on in other retail costs. Our preliminary view is that regulating SMS termination will address the use of monopoly power and promote competition in the mobile sector. It should also result in lower costs to consumers."

Despite a plethora of mobile applications and social networks that are looking to replace SMS messaging, the ACCC said in its decision that the ubiquity of SMS was a key factor in its determination.

"As there are many different messaging applications, some of which can only be used on specific smartphones, not all users with smartphones will be able to contact each other using these services. However, SMS services can be sent between any two users of a mobile phone capable of making and receiving voice calls."

The ACCC said that it expects any lowering of SMS termination rates to be passed onto consumers.

Optus had called for SMS termination rates to be regulated, while Telstra and Vodafone were opposed to the proposal.