The Australian Competition and Consumer Commission (ACCC) has published its discussion paper on the declaration of wholesale mobile domestic roaming, exploring the issues of competition, investment in and use of infrastructure, and achieving any-to-any connectivity.
"Mobile coverage and choice of service provider are important issues for Australians, particularly those living in regional, rural, and remote areas," ACCC Chairman Rod Sims said.
"This inquiry will explore the extent to which domestic mobile roaming would promote competition among providers and its effect on investment in mobile infrastructure."
According to the Domestic mobile roaming declaration inquiry: Discussion Paper [PDF], the inquiry will focus on the impacts a declaration would have on mobile network operators (MNOs), as well as the long-term impacts on investment incentives.
"The geographic coverage of a network is a key area on which MNOs compete ... Telstra's mobile network covers a considerably larger area than Optus' or VHA's mobile networks, such that for over 1 million kilometres squared, Telstra is the only MNO with mobile coverage. While this is a large area, it covers sparsely populated regional and remote parts of Australia; only 0.8 percent of the population live in areas where Telstra is the only MNO with coverage," the discussion paper says.
"The difference in the MNOs' coverage in regional areas is likely due to the economically challenging nature of extending a mobile network in regional Australia. The low population density (and therefore low utilisation and potential commercial return) and high costs of extending a mobile network in these areas may mean that there are not strong incentives for MNOs to build infrastructure in these areas.
"It may also mean that for at least some areas, the market can most efficiently be served by a single network."
The regulator is looking into whether Telstra has a monopoly on the telecommunications market in regional areas, and uses that to charge more for its services where there is no competition to bring down pricing.
"The ACCC generally considers that declaration is likely to promote the LTIE where infrastructure facilities are enduring bottlenecks and exhibit natural monopoly characteristics," it noted.
"While some consumers (particularly those in metropolitan areas) may choose to pay a premium for the benefit of more extensive coverage, others (particular[y] those located in Telstra only areas) do not have the choice of lower-priced plans.
"An important question in this respect is whether Telstra has been able to charge a higher price because it is the only MNO that is able to offer extensive network coverage in many regional areas, or whether it is constrained by its competitors but is able to charge more because it offers a higher-quality service."
The paper noted that Telstra has reported it will spend AU$5 billion on its mobile network from the three years to June 2017, while Vodafone Australia invested AU$3 billion in the three years to July 2015 and Optus will spend AU$1.7 billion on both its mobile and fixed-line networks over the next year.
The ACCC is seeking submissions on whether competition will change if roaming is not declared; whether government funding programs, such as the mobile blackspots program, have assisted MNOs in building out regional networks; the impacts of declared roaming services overseas and whether this is relevant; whether a roaming declaration would allow a fourth MNO to enter the market; whether a declaration would help achieve any-to-any connectivity; and whether a declaration would disincentivise telcos from investing in regional networks.
Among other issues, the regulator also wants to hear on whether more stringent requirements on mobile infrastructure collocation could effectively substitute for declared roaming; whether the facilities access regime encourages mobile network access; the geographic scope of a possible roaming declaration, and how to determine the boundaries; whether roaming agreements could be made between telcos; whether there is effective competition in regional areas; whether a telco's geographic coverage affects its ability to compete on a national scale; the barriers to extending a mobile network to regional areas; and whether there are incentives to extend a network into low population density areas.
In regards to Telstra's possible monopoly, the ACCC is seeking submissions on the ways in which Telstra's coverage advantages it on the national scale and in regional areas; why Telstra is able to charge higher prices; whether regional consumers see Telstra as the "most viable" telco; whether its position as being the "first mover" telco gave it an advantage in rolling out a network to regional areas; and whether it would be economically efficient for Vodafone and Optus to extend their networks into areas served only by Telstra.
The ACCC is accepting submissions until November 25, with a draft decision expected early next year and a final decision prior to July 2017.
Telstra, Optus, and Vodafone Australia have been debating the matter since the ACCC announced its investigation last month, with Telstra immediately saying that such a program would stymie competition and investment in regional and rural areas.
"One of our competitors is seeking regulation to close this competitive gap by cheaply riding on our network to avoid spending their own money," Telstra chair John Mullen said, referring to Vodafone.
"One can understand why some competitors would lobby for this -- it would be a free Christmas present."
Declaring a roaming service would remove any incentive Vodafone has to make such an investment, both Optus and Telstra argued last month, which would in turn remove the incentive for Telstra to invest in its regional network.
Optus vice president of Corporate and Regulatory Affairs David Epstein said a large multinational company such as Vodafone should not be "loathe to invest" in its own regional network.
Speaking in the context of roaming declarations in comparable nations, Epstein said Australia has unique circumstances that precludes those arguments from succeeding here.
"US and Canadian grounds for roaming do not apply; there are no licensing or spectrum reasons for limiting national network coverage. Elsewhere, roaming comes with obligations on access seekers to encourage the late entry of new players, typically a third or fourth new player," Epstein explained.
"In this regard, I'd point out that Vodafone Hutchison Australia in various guises has been operating for around 20 years in Australia, so it can hardly be classified as a new entrant."
Conversely, Vodafone Australia chief strategy officer Dan Lloyd used the same argument of different environments to argue in favour of roaming.
"Australia's geography is clearly extreme. Mandated national roaming is very common in countries with similar geographic and economic characteristics -- large land area, low population density," Lloyd pointed out.
"There's no evidence on the track record in the many countries that introduced it that it has a significant negative impact on investment, and in fact, particularly out of France and the US, there's evidence that it in fact unlocks incentives to invest, and drives the industry in a positive direction."
Lloyd said Telstra only wants mobile roaming to remain as is because it has the advantage of more government assistance in rolling out networks to uneconomic areas.
"Telstra inherited, receives, and continues to receive significant subsidies that mean its cost of network deployment is exponentially lower than competitors," he said.
"National roaming, if it was introduced, would give a reasonable rate of return to the roaming provider, and you can only, I believe, object to that if you believe that someone should be entitled to continue to earn an unreasonable rate of return."
Last week, Vodafone CEO Inaki Berroeta called roaming the "hot topic" of the industry, labelling responses to the enquiry as "bordering on hysterical".
"We need to step back from the emotion, threats, and scare tactics, and look at the long-term opportunity in a rational, fact-based manner," Berroeta said.
"The bottom line is, the opportunities for infrastructure duplication drop off dramatically outside metropolitan areas as distances increase and population density decreases. In these areas, the only sustainable, long-term way to balance incentives for infrastructure investment and competition is infrastructure sharing."
Berroeta argued that despite "emotional" responses from Telstra and Optus to the contrary, there is no evidence that a declaration of domestic roaming would decrease investment in mobile infrastructure.
"Contrary to what some will have you believe, the sky won't fall in," he said.
"I have to say, I am puzzled as to why the incumbent's infrastructure is seen by some as somehow sacred."