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Keep the mobile status quo: Optus, VHA

Optus and Vodafone have appealed to the competition regulator to maintain the current rate mobile companies pay to connect calls between mobile networks, while Telstra has called for a slight price drop.
Written by Josh Taylor, Contributor

Optus and Vodafone have appealed to the competition regulator to maintain the current rate mobile companies pay to connect calls between mobile networks, while Telstra has called for a slight price drop.

The Australian Competition and Consumer Commission (ACCC) regulates the price that telcos charge one another for fixed-line and mobile calls that are made over each other's networks, known as the domestic mobile terminating access service (MTAS). The charge is incurred against the telco of the user originating the call. It first became a declared service in 2004 and the price was set at 21 cents per minute, but has been reduced over time to the current rate of 9 cents per minute.

In June, the ACCC announced it was reviewing the 9-cent MTAS rate as well as other prices in a discussion paper released in June. The ACCC argued that reduced operating costs and the investment in 3G and long-term evolution (LTE) infrastructure would lead to a lower cost for operators to provide the calls in question. This cost saving, the regulator believed, should be passed onto the consumer.

Optus said in its submission (PDF) that the 9-cent rate should be kept in order to "continue to encourage much-needed investment in critical mobile network infrastructure including the introduction of LTE technology, and thereby promote the long-term interests of all mobile consumers". Optus said it was concerned the ACCC had already made its mind up about cutting the MTAS rate without properly investigating the impact on telco revenues, which it said would be greatly impacted by any cut. It also said that contrary to the regulator's beliefs, although data usage had grown on its networks, providing voice services were still the source of significant costs for its network.

"The predominant drivers of costs are not related to traffic — they are related to providing coverage, primarily for voice services; hence common network costs should be included in the MTAS price," Optus said. "It would be wrong for the ACCC to conclude that the cost of providing the MTAS is below 9 [cents per minute], on the basis of a flawed and uncommercial approach to cost allocation."

Vodafone argued in its submission that as Telstra had not decreased its fixed to mobile call charge in line with the MTAS charge, the reductions since 2004 had not been passed onto the consumers, and only Telstra and other fixed-line operators would benefit from any further reduction in the MTAS rate.

Telstra, conversely, said MTAS should be dropped to 6 cents per minute, based on international benchmarking. The telco said that there should not be any reduction in the fixed to mobile charge because any MTAS charge decrease would have a "modest impact" on the costs imposed on Telstra to connect to mobiles from its fixed network.

Macquarie Telecom and Primus said the charge should be decreased to 3.5 cents per minute, while AAPT called for the MTAS and fixed-to-mobile charges to be dropped entirely by 2014.

While AAPT was in favour of the "Bill and Keep" proposal from the ACCC, whereby mobile networks could reduce their record-keeping costs by not charging each other for calls made between mobile networks, Optus said the idea was "extreme and clearly inconsistent with the legislative criteria". Telstra was similarly unimpressed, and argued if this was introduced, while it would drive down mobile plan prices, it would lead to people substituting fixed-line phones with mobile, and would lead to overuse of the mobile network.

"Moreover, [Bill and Keep] would provide little or no benefit in billing and transaction cost savings, as traffic in various classes would still need to be measured, and then a zero price applied where it originates on a mobile network," Telstra said. "If anything, it could lead to increased transactional costs as changes to billing and other systems would need to be made."

Similarly, Vodafone said there was no "coherent underlying economic rationale for a 'bill and keep' pricing approach".

Optus argued that Telstra would pocket any MTAS rate cut and that the interests of customers would be better serviced by fixed-line price reform, likely to result from the impending structural separation of Telstra's wholesale and retail arms.

Submissions for the discussion paper are now closed, and the ACCC expects to issue a draft determination by the end of 2011.

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