Vodafone shouldn't get a 'free ride' on domestic roaming: Telstra

Telstra has spoken out against the Australian Competition and Consumer Commission (ACCC) enquiry into whether to declare wholesale domestic mobile roaming, saying Vodafone Australia should not be given a "free ride" on Telstra's extensive, nationwide network, as it is free to invest in its own network.

"There's nothing stopping Vodafone from investing in rural and regional Australia," Telstra chief sustainability officer Tim O'Leary said at the Australian Communications Consumer Action Network (ACCAN) 2016 conference in Sydney on Thursday morning.

"Vodafone are not some sort of recent startup from NSW; they're in fact a very large multi-national telco with $70 billion of revenue. Telstra has long been investing in rural and regional Australia. The amount of investment in rural and regional Australia from Telstra at the moment is probably unprecedented."

O'Leary pointed out that Vodafone can already gain access to Telstra's mobile towers by paying for it, as there is regulated access to them and regulated access to backhaul.

"What we object to is that sense of Vodafone being able to have a free ride," he explained.

On the other hand, Vodafone chief strategy officer Dan Lloyd, also speaking at the ACCAN conference, said that declaring wholesale mobile roaming is "the only way" to provide competition and choice for those living in rural and remote areas.

"There's nothing stopping other people investing in regional Australia -- [except] the fundamental laws of economics," Lloyd countered.

"We have a country that is 7.6 million square kilometres, with a population density of 3; it is the most extreme geography to try and roll out mobile networks. You inevitably get to a point where there simply isn't the return, there simply isn't any case to invest."

Lloyd also pointed out that every other Western economy with a large landmass and low population density has already regulated domestic mobile sharing.

"There's lies, damn lies, and then there's statistics," Optus VP of corporate and regulatory affairs David Epstein said in response to Lloyd's comments.

Epstein pointed out that the Vodafone global CEO is on record as opposing national roaming, and that Vodafone NZ opposed roaming in New Zealand. He added that while there is roaming in the United States, Canada, and New Zealand, as pointed out by Lloyd, this is because the former two countries have a legacy of regional spectrum markets, whereas Australia has national spectrum licences, and because the New Zealand regulator wanted to introduce third and fourth mobile carriers.

"We for one argue quite strongly for a collocation arrangement," Epstein said at ACCAN, explaining that greater usage of data calls for greater density of towers.

"Regional and under-served areas ... are the new areas of competition."

While Lloyd acknowledged that there are a number of models for infrastructure sharing -- including collocation, active sharing, spectrum sharing, and roaming -- he argued that these models simply shift the boundary of investment.

"You have to stop investing where you can't invest in further," he said.

"Collocation is the crudest and most inefficient way of doing it, because you duplicate the radio network equipment, you duplicate the transmission, you duplicate a lot of the cost of providing a service."

O'Leary said that Vodafone needs to be "a bit more imaginative" about solutions to the issue, pointing towards alternatives such as Telstra's co-investment program with the Northern Territory government to roll out mobile infrastructure to the remote communities located there.

The ACCC announced its investigation into the declaration of wholesale domestic mobile roaming last week, with Telstra immediately saying that such a program would stymie competition and investment in regional and rural areas.

A declared roaming service would allow telcos to piggyback off each other's infrastructure to provide coverage in areas where they don't have their own mobile network.

"Where there is lack of choice of operators for regional Australians, it is the result of decisions by our competitors to not invest in those areas," Telstra group executive for Corporate Affairs Tony Warren said last week.

"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.

"Declaration would ensure there is no incentive for any operator to invest for competitive reasons in many regional areas."

According to ACCC Chairman Rod Sims, however, the regulator has received "significant interest" from groups including the Regional Telecommunications Review Committee, Infrastructure Australia, and the House of Representatives Agriculture Committee on making such a declaration.

The declaration inquiry will examine the changing nature of consumer demands for mobile services in regional and rural areas; telecommunications providers' existing plans to roll out coverage or upgrade technology and infrastructure in those areas; any "significant" barriers to mobile network expansion; similar situations in comparable countries; and whether declaring the service would actually lessen competition by dissuading telcos from investing in their own network coverage.

Australia's mobile telecommunications providers have been investing in expanding coverage across the country of late, as has the federal government through its mobile blackspots program.

Under the first round of the program, Telstra and Vodafone Australia secured AU$185 million in government funding to build or upgrade 499 mobile towers across Australia. In total, Telstra will build out 429 cell towers while Vodafone builds out 70, with both telcos also adding their own funding to complete the program.

Telstra was also commissioned to install small cells in 135 small towns to provide 4G services where Telstra infrastructure is already available.

The government announced the second round of the program in early December last year, providing a further AU$60 million to those participating. At the end of May, the Coalition pledged to spend an additional AU$60 million to fund a third round of the mobile blackspot program to build or upgrade a further 900 mobile towers.

Additionally, Vodafone announced in May that it would be investing more than AU$9 million on constructing 32 new mobile base stations across the country to improve telecommunications coverage in regional areas.

Vodafone has also expanded its 4G network nationwide by purchasing AU$68 million worth of 1800MHz spectrum and refarming its 850MHz spectrum band to bring coverage to regional and metropolitan Queensland, New South Wales, and the Australian Capital Territory, and proposed to the to the Australian government that it be permitted to pay AU$594.3 million for 2x 10MHz in the 700MHz spectrum band that was unsold in the 2013 auction.

Vodafone's 4G network covers 95.3 percent of the Australian population, or 23 million people, while Telstra's reaches 98 percent of the population after upgrading more than 2,000 network sites to 4GX during FY16.

Optus last month announced that it would similarly be extending mobile coverage across 12 Northern Territory regions using small cells that leverage Optus' satellites rather than having to build out additional mobile towers in remote areas.