The Australian Competition and Consumer Commission (ACCC) has suggested that streaming service providers could contribute to telecommunications network infrastructure investment to help handle the jump in data usage, after fixed-line downloads increased by 40 percent over the last year.
During its annual review of the telco sector, the ACCC reported that over the year to June 2015, Australians downloaded 1.3 million TB worth of data over fixed-line networks and 110,000TB over mobile services -- a rise of 40 percent and 35 percent, respectively.
In its paper, ACCC telecommunications reports 2014-15: Competition in the Australian telecommunications sector and Price changes for telecommunications services in Australia [PDF], the ACCC said the consumption of over-the-top (OTT) streaming services such as Netflix, Stan, and Presto is what led to such a substantial increase in data usage.
"The increase in demand for data is largely due to the popularity of audio-visual streaming services, including the introduction of subscription video-on-demand (SVOD) services such as Netflix, Presto, and Stan," ACCC chairman Rod Sims said, with the report predicting mobile data traffic to increase by almost five-fold between 2014 and 2020, and fixed data to grow by 180 percent between 2014-19.
To ease the resultant network congestion, the ACCC suggested that telcos employ better traffic management, implement congestion pricing, and continue investing in their networks in order to improve capacity -- including by seeking monetary contributions from streaming services themselves, and forming partnerships with content providers.
"As much data growth has been a result of increased use of over-the-top SVOD services, operators may look to new ways of providing their own content services, or seek contributions from OTT providers to expand network capacity," it said.
"Network operators may also seek to pursue partnerships with OTT and content service providers in the coming years."
The ACCC's report accused telcos of being largely unprepared for the uptake in streaming services, as evidenced by the rise in consumer complaints to the Telecommunications Industry Ombudsman (TIO) about network congestion.
"The rapid take-up of SVOD services appears to have caught the industry by surprise," the ACCC said.
"The TIO reported that with the launch of SVOD services, it received nearly 250 consumer complaints about SVOD services, including in bundled products between March 2015 and June 30, 2015. Complaints related to delays in receiving equipment to access the SVOD services, delays in receiving sign up information to enable promotional subscriptions, and internet slowdowns.
"Further, Optus recently acknowledged that an increase in new complaints to the TIO for 2014-15 was due to a number of factors, including a significant rise in mobile data usage on its 4G network."
Telcos have made a number of improvements in their networks, partially as a result of the explosion of streaming services, the ACCC acknowledged: Optus has stated that it invested AU$1.5 billion into its mobile network -- including on acquiring spectrum -- while Telstra said it has invested AU$1 billion in its mobile network over 2014-15 and will invest another AU$5 billion up to June 2017.
The ACCC said the National Broadband Network (NBN) will also influence more bundling of services to leverage the popularity of streaming services.
"As the NBN rollout increases, we expect service providers to continue to innovate in order to attract new customers, such as through bundling and discounting of service offerings," the report says.
"For example, fixed-line providers are offering 'triple play' services, which include broadband, home phone, and a streaming service."
In regards to the NBN, the ACCC also addressed competition concerns, saying it could potentially lock down competition in favour of Telstra, which has more oversight of NBN plans thanks to its fixed-line network assets being used for the rollout -- hence the Structural Separation Undertaking, the compliance for which the ACCC monitors annually -- and to the disadvantage of smaller service providers.
"Another significant issue is any real or perceived competitive advantage Telstra may gain from access to significant information flows regarding the multi-technology mix NBN," the ACCC noted.
"For smaller retail service providers to enter the NBN market, a competitive and efficient aggregation market will be essential. Smaller providers may encounter obstacles to growth without access to backhaul at competitive prices and to commercial aggregation products," it added.
"We will be watching the progress of the NBN rollout and how fixed-line markets under the NBN develop."
The regulator pointed out that Telstra remains by far the dominant fixed service provider while the NBN is being rolled out, with competition a continuing concern in this area.
"Telstra remains the provider of ubiquitous fixed-line access. As at September 2015, Telstra supplied around 8.9 million active connections on its copper access network, compared to NBN Co's 500,000 active fixed-line connections," it said.
Referencing the TPG-iiNet acquisition, the Vodafone Australia-TPG deal, and the Vocus-M2 merger, the ACCC also said that any further aggregation in the telco industry would be counter-intuitive to a competitive market.
"As the fixed broadband market has become relatively concentrated, any further consolidations in the industry would likely raise serious competition concerns," it said.
"Further, with this increased consolidation, a continuing focus on barriers to entry in fixed communications markets will become increasingly important."
Pricing for telco services fell by 0.5 percent over the year, the ACCC reported, with internet service prices decreasing by 1.3 percent; mobile prices rising by 0.2 percent; cable services decreasing by 3.4 percent; NBN broadband services falling by 3.5 percent; and fixed-line voice services falling by 1.6 percent.
Despite the price drops in most services, "data inclusions increased substantially" across both mobile and fixed broadband packages, the ACCC said.
"Data quotas across all internet services increased by 56 percent on average, driven largely by quotas for DSL services, which grew by around 73 percent," the report says.
"Wireless plans had the smallest gains in quota size, at around 8 percent. Many end users benefited from either reduced real prices or larger data quotas."
The ACCC also referred to its broadband monitoring pilot, saying it continues to believe that such a program would bolster competition and drive prices down further due to improved visibility.
"We consider that such a program would benefit competition in the retail market. On the one hand, providers would be able to see how their network performs in comparison to other providers which would encourage them to compete on service performance. On the other hand, it would allow consumers to choose a provider that offers the level of service performance that meets their needs."
Lastly, the regulator added its voice to those calling for a change to the federal government's Universal Service Obligation (USO), which mandates Telstra as the fixed-line phone service provider of last resort and gives the telco hundreds of millions of dollars each year for the installation and maintenance of fixed-line services.
According to the ACCC and others, the USO is outdated due to the widespread usage of mobile services.
"In our submission to the Regional Telecommunications Independent Review Committee, we strongly supported changing the USO to introduce a technology-neutral obligation to provide both voice and data services," the ACCC said.
Thanks to that review -- which also made 12 recommendations on how the government can improve regional access to telco services to leverage connectivity for business, education, health, and personal purposes -- the USO is now facing government reform.