Australian competition watchdog to regulate SMS costs

The Australian Competition and Consumer Commission has decided it will regulate the cost of wholesale SMS services.
Written by Josh Taylor, Contributor

The Australian Competition and Consumer Commission (ACCC) has decided to wade into the SMS market and regulate wholesale SMS costs, in a move that the watchdog says may lead to lower SMS prices.

The commission today concluded its lengthy review into the Mobile Terminating Access Services (MTAS) that sets the rate telcos can charge other telcos to call their networks. The five-year declaration was due to expire this month, but the ACCC has decided to extend it for an additional five years out to 2019.

The mobile telecommunications industry was largely in broad agreement over the MTAS regulation, with Telstra, Optus, Vodafone, Macquarie Telecom, AAPT, and iiNet all agreeing that it should be maintained to ensure competition in the mobile telecommunications market.

Another idea floated by the ACCC during the inquiry had less support, however. The ACCC has said it was looking to declare SMS and MMS services and have costs regulated, and today decided it would regulate SMS charges.

Optus had been in favour of regulation of SMS prices, because it said that the price telcos charge each other to deliver SMS messages had not changed in a decade, despite new alternative over-the-top services such as WhatsApp and iMessage entering the market to compete with traditional SMS.

Telstra and Vodafone were opposed to the proposal, however, stating that the fees charged between the telcos tend to balance out as customers reply to each others' messages, and most customers have unlimited SMS and MMS included in their plans.

In its decision, the ACCC said that those unlimited plans generally started at AU$60 per month, and many users were on plans that didn't include unlimited SMS. Additionally, it said that over-the-top messaging services were not used by everyone, including 30 percent of the Australian market it said did not have smartphones.

"In considering the relevant downstream market, the ACCC found that OTT messaging applications are not an effective substitute for SMS services," the ACCC said.

"This was because these messaging applications require a smartphone, which only a portion of Australians used, and a data connection. Further, there are many different OTT messaging applications available to consumers, but for end-users to communicate, they must have the same application.

"In contrast, SMS services can be sent between any two mobile users,without the need for a smartphone, the same application or data connection."

The ACCC said that it decided to regulate with the aim of reducing the cost of SMS services to low income consumers.

A spokesperson for Telstra said the company welcomed the MTAS regulation, but said it saw no need for SMS regulation.

"We see little benefit in regulating wholesale SMS as our customers already have access to unlimited SMS on our most popular plans and can choose from a host of alternatives with the emergence of smartphones, message applications and social media," the spokesperson said.

"We are reviewing today's decision and look forward to participating in the next stages of the review."

Optus welcomed both decisions.

"Optus has been the leading advocate for lower SMS termination. Optus welcomes the decision of the ACCC and looks forward to substantially lower termination rates, which should increase retail price flexibility for mobile providers," a spokesperson for Optus said in a statement.

"In particular, the ACCC's decision will help Optus to continue to offer unlimited SMS to customers on our market leading My Plan Plus plans. The trend is clear: customers want simpler, more transparent telecommunications pricing. This decision will help deliver that outcome."

Matthew Lobb, Vodafone's general manager for public policy said that SMS regulation was "unnecessary red tape."

"Our view remains the declaration of SMS termination rates introduces unnecessary red tape, as the majority of plans already include unlimited SMS for a fixed price. What we believe needs urgently addressing is the impact from Telstra's high fixed to mobile voice rates. These have not fallen in line with the substantial MTAS reductions of the last decade and have already cost consumers more than AU$1.4 billion," he said.

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