Vodafone demands SMS pricing regulation consistency from ACCC

Vodafone Australia has highlighted that greater transparency and consistency is needed around Mobile Terminating Access Services (MTAS) pricing to show it is in the best interests of end-users, and not Telstra.
Written by Aimee Chanthadavong, Contributor

Vodafone Australia is demanding that a "consumer welfare analysis" is necessary to demonstrate that past Mobile Terminating Access Services (MTAS) pricing decisions have promoted the long-term interests of end-users (LTIE).

The Australian Competition and Consumer Commission (ACCC) released a discussion paper (PDF) last month into its regulation of MTAS that sets the rate larger telcos can charge other telcos to call their networks, or prevent those telcos from connecting calls to their network entirely.  
The ACCC announced in April it will regulate the cost of wholesale SMS services, in a move that the watchdog believes will lead to lower SMS prices.

In its submission (PDF), Vodafone highlighted that while MTAS prices fell from 21 cents per minute to 3.6 cents per minute during 2003 and 2014, consumers have not "adequately" benefited from fixed to mobile price reductions as Telstra has not fully passed on reductions in MTAS.

"Telstra has introduced Telstra Home Phone Pinnacle which does offer unlimited fixed to mobile calls. However, this plan costs $85 per month! We calculate the increased margin on retail FTM calls has contributed to Telstra accruing AU$1.4 billion in unrealised consumer benefits from the lack of retail FTM pass-through," Vodafone said.

"Unequivocally, the major beneficiary from lack of (or delayed) FTM pass through is Telstra due to its still dominant share of fixed voice subscriptions.

"By contrast, MTAS reductions have disproportionately adverse impacts on Telstra's competitors in the mobile services market — again an outcome that benefits Telstra and is detrimental to the LTIE."

The telco also suggested it would be "worthwhile" for there to be a transparent industry assessment of the ACCC's data and methodology to understand how the high subscription charge, and other subscription prices, is included in the ACCC's fixed to mobile price calculations.

It also claimed that the ACCC's analysis "misrepresents the fundamental challenge in regulating the MTAS" and that any delay in FTM pass through creates a "dynamic efficiency problem". Vodafone highlights even in the ACCC's own reporting Telstra's FTM margins have increased from 37 percent at the end of the 2004 to 64 per cent in the third quarter of 2013.

"Any decision that delivers significant benefits to an extremely profitable incumbent (even if they are transitory) must be carefully assessed. In our view, this is not an appropriate time to further enrich Telstra," it said.

Optus provided a similar argument in its submission (PDF). It raised it was concerned that if a consistent approach to MTAS is not adopted it could result in a "regulatory-imposed competitive distortion", which ultimately would benefit Telstra as it does not pay access charges for calls between its mobile and fixed networks as these sit across Telstra's two networks. 

"Providing further regulatory assistance to Telstra will not promote the LTIE and is likely to result in further cementing Telstra’s dominance in the mobile market and across other communications markets," Optus said.

The telco also said it supports a reduction in the SMS termination rate to an "efficient level", which is said would likely be a fraction of the voice MTR.

Meanwhile, Telstra (PDF) said the current regulatory approach taken to the mobiles sector is "working well" for Australian consumers. In turn, Telstra disagreed with the Commission's suggestion that a consistent approach to regulatory pricing for SMS termination is necessary or appropriate and it does not support the introduction of a mandated pass-through of MTAS reductions.  

At the same time, Vodafone said the ACCC requires a quantitative economic framework to make an informed decision about the trade-off it faces in making its MTAS decision between enhancing incumbent fixed profitability and fostering a competitive mobile services market.

"In the absence of a coherent economic framework it is virtually impossible for the ACCC to assess whether its decisions are successfully meeting the statutory criteria and, as a consequence, to adjust its process where decisions have not had their anticipated effect," it said.

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