Mobile domestic roaming not declared by ACCC

Finding that a declaration of wholesale mobile domestic roaming might actually reduce competition, the ACCC has confirmed its draft decision while also publishing a paper on regional telecommunications issues.
Written by Corinne Reichert, Contributor

The Australian Competition and Consumer Commission (ACCC) has announced its final decision not to declare wholesale mobile domestic roaming despite the pending Federal Court decision on whether its draft decision was validly made.

"The ACCC's inquiry found that declaration would likely not lead to lower prices or better coverage or quality of services for regional Australians," ACCC Chairman Rod Sims said when announcing the decision on Monday morning.

"Declaration could actually harm the interests of consumers by undermining the incentives of mobile operators to make investments to compete with each other in regional areas.

"While geographic coverage is important to many consumers, it is not the only factor people consider when choosing their provider. Many Australians actually prefer Telstra in areas where there is competing coverage due to the quality of the network."

The Domestic mobile roaming declaration inquiry: Final report [PDF] states that a declaration of wholesale mobile domestic roaming, which would allow Vodafone to piggyback off Telstra's mobile infrastructure instead of building out its own, "would not promote competition in the retail mobile services market to a significant extent".

"MNOs compete across a range of factors, including the extent of network coverage, the quality (ie depth) of coverage in areas where they provide services, retail support, price, and service inclusions (eg data inclusions, free voice calls, and SMS). We found that overall geographic coverage is not the primary driver of competition, nor is it essential for MNOs to have equal geographic coverage to compete effectively in the market," the final decision said.

"Declaration would remove Telstra's competitive advantage in geographic coverage, but would not significantly reduce Telstra's competitive advantage on other factors, such as network quality."

According to the ACCC, the "superior network coverage" of Telstra and Optus is as a result of the competitive nature of the market, and a declaration would reduce this competition. A declaration could also result in telcos moving away from uniform national pricing and charging more in regional areas, the ACCC said.

"Declaration is unlikely to promote the efficient use of infrastructure more generally," the decision says.

"We found that Telstra and Optus, and to a lesser extent, VHA, are currently competing on network quality. Declaration has the potential to distort these current investment incentives. Optus and VHA may not have the same incentives to match or better Telstra's network quality, and Telstra may not have the same incentives to respond if a mobile roaming service is declared. As such, we have concluded that declaration would not promote economically efficient investment in infrastructure."

Despite this, the ACCC added that it has "identified a range of regulatory and policy measures that could improve inadequate mobile phone coverage and poor quality of service in regional Australia", and published a measures paper on this.

"We identified a number of issues where we think improvements could be made that would deliver better outcomes for regional consumers," Sims said.

"Better transparency about network coverage and quality, more accountability about network investments, and better information for regulatory and policy decision makers are all important."

Sims added that the ACCC will commence a review into the Facilities Access Code for identifying barriers to collocation and deployment of infrastructure, and will improve the mobile networks information it collects under this code.

The Measures to address regional mobile issues [PDF] paper, also published on Monday, points to the issues as being: A lack of transparency and consistency on network coverage, quality, expansions, and improvements; improvement needed across measures for reducing the costs of deploying and improving mobile networks; and the effect of spectrum allocation on competition and consumer outcomes needing to be taken into consideration.

"We will approach industry directly to develop more transparent and consistent information about networks and services. In particular, we will ask industry to identify metrics that could be used to provide a more accurate assessment of mobile tower performance," the ACCC said.

"We propose to write to Communications Alliance and the Australian Mobile Telecommunications Association and ask that they facilitate a process for MNOs and MVNOs to develop a framework for improving transparency and consistency of network quality and coverage information for consumers."

Among other actions, the ACCC said it would also write to the Department of Communications about how to improve the mobile blackspots program; to the department, the Australian Communications and Media Authority (ACMA), and state departments on what information is required from telcos to improve decisions on network coverage; to telcos themselves with encouragement on removing terms of access that restrict them from advertising their coverage footprint or technology; and to the National Broadband Network (NBN) company on actively discussing use of its fixed-wireless infrastructure.

"The ACCC strongly recommends that the radiocommunications regime explicitly recognise, and do more to promote, competition in relevant markets," the ACCC concluded.

The ACCC had last month said it would proceed with making its final mobile domestic roaming decision in October despite the Federal Court action taken against its draft decision by Vodafone, the telecommunications carrier with the least network coverage across rural and remote Australia.

Telstra, Optus, and Vodafone have relentlessly debated the matter since the ACCC first announced its inquiry in 2016, with the former two saying that a declaration would remove their incentive to build out mobile infrastructure in regional areas.

Vodafone launched judicial review proceedings in June, saying the inquiry process had been "flawed", as it did not properly define eligible services, leaving the matter too "vague".

During the hearing in September, Vodafone counsel Noel Hutley SC argued that the ACCC had "failed to conduct the inquiry lawfully", and that by publishing its draft decision and threatening to publish its final decision, it is failing to act in accordance with the law.

The ACCC -- along with Telstra and Optus, which joined proceedings as the second respondent and an intervener, respectively, as they said they would be affected by the decision -- argued that the law says nothing about a definition needing to be set at the beginning of the inquiry process.

A definition "can be developed" during the inquiry instead, counsel for Telstra Alan Archibald QC said, adding that the regulator would be "depriving the public" of the benefits of a public inquiry if exact specifications were demanded at the beginning of the process.

"Vodafone fails to establish any foundation for its contention of unlawfulness," Archibald argued.

The QC also refuted Vodafone's claim of being denied natural justice, saying that while Vodafone could not directly address the ACCC's specification, because it wasn't provided until the draft declaration was made, it did address its own preferred meaning of eligible service "at length" and made "comprehensive submissions" on all aspects of the inquiry.

"They did not suffer from lack of a target," Archibald argued.

"They without impairment provided their version of the appropriate declaration."

Vodafone is seeking the ACCC's draft decision to be either quashed by writ or treated as non-existent by court order. The court could also find that the regulator is not conducting a declaration inquiry, meaning the ACCC would have to start the process again.

Griffiths J has reserved his judgment.

In response to the final decision, Vodafone on Monday called it a "bad" decision and said the ACCC is protecting Telstra's monopoly.

"This decision rings alarm bells for regional communities. The inquiry has shone a spotlight on the alarming lack of competition and high prices for mobile in many areas, but the ACCC seems to think that this is OK," Vodafone chief strategy officer Dan Lloyd said.

"It is extraordinary the ACCC has failed to intervene in a market where Telstra is clearly dominant, with the ACCC admitting Telstra has a regional market as high as 84 percent in some area. Telstra has received over AU$2 billion of handouts from government and its competitors over the last decade, and continues to receive more than AU$230,000 per hour of subsidies.

"It's inexplicable that the ACCC thinks that a taxpayer subsidised regional mobile monopoly is reasonably effective competition when we provided compelling evidence that this is costing Australia up to AU$1.4 billion a year."

Editorial standards