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Telcos band together to oppose removal of competition laws

A lack of competition laws could enable Telstra to behave in an anti-competitive way without timely intervention from the regulator, according to Vodafone, Optus, Macquarie Telecom, MNF, and the small business council.
Written by Corinne Reichert, Contributor

A consortium of non-Telstra telecommunications carriers have banded together to object to the Australian government's proposal to repeal telco competition laws, saying this could reinforce Telstra's dominance in the marketplace by removing the ability of the regulator to intervene in a timely way.

Vodafone Australia, Optus, Macquarie Telecom, MNF, and the Council of Small Business Australia (COSBOA) have called on Parliament to discard the Bill, saying that it is taking away the power for the Australian Competition and Consumer Commission (ACCC) to step in "quickly and decisively if it believes Telstra is behaving anti-competitively".

Under the proposed laws, the ACCC would have to take any complaints through the slow-moving court system.

"In the fast-moving world of modern communications, that is untenable," the consortium said.

"These changes would occur in the context of alarming evidence that Telstra is increasing its market power, market share, and profit.

"Telstra is already the most powerful and profitable telecommunications company of all its peers in the OECD, and Australian consumers pay commensurately high prices compared to the rest of the world."

COSBOA CEO Peter Strong suggested that the changes are only being implemented due to pressure on government from Telstra.

"We know from hard experience that when a big dominant business wants a change in regulation it is never for the good of the community," Strong argued.

The federal government in November announced that it would introduce legislation repealing the telecommunications anti-competitive conduct laws due both to a strengthening of the general misuse of market powers law and to significant changes in the telco sector since the laws were introduced in 1997.

The laws, contained under Part XIB of the Competition and Consumer Act 2010, are to be replaced by the amendments being made to the general misuse of market power laws under Section 46 of the same Act due to overlap.

"The telecommunications sector has changed significantly in the past 20 years, and competition is much further advanced than it was at that time," Communications Minister Mitch Fifield said at the time.

"The government is confident that broader competition law will be effective in preventing anti-competitive conduct in the telecommunications sector."

Telstra last year welcomed the decision, calling it a "positive example of regulatory reform".

Another consortium of non-dominant telcos slammed the government's decision, saying it would "gut protections from anti-competitive conduct by Telstra", while Optus and Vodafone put forth submissions in favour of retaining Part XIB in order to foster industry competition.

Vodafone has also argued that the government is reinforcing Telstra's dominance through both the universal service obligation (USO) and the mobile blackspot program, by funding Telstra to continue building out and providing coverage to remote areas.

The USO reinforces Telstra's "monopoly" over telecommunications provision, Vodafone chief strategy officer Dan Lloyd said earlier this month, as it allows the telco to use its fixed-line network to build mobile infrastructure at a lower cost compared to its competitors.

"When Telstra comes to deploy a regional mobile network, their costs of deploying it is exponentially lower than anyone else's, because they've already got the sunk cost of the transmission, the sunk cost of the regional exchange, and putting a tower on top of the regional exchange is available to them at a far lower incremental cost," Lloyd said.

"So even if you don't think [the USO] is a direct subsidy [of Telstra building out mobile services], the competitive impacts of this, the barriers that it raises to anyone else deploying competitive infrastructure ... means that the market is not able to drive the infrastructure to the level that it should, and therefore creates artificially a bigger gap in universal service than would otherwise be there."

Telstra's monopoly is being even further entrenched thanks to the mobile blackspots program, Lloyd said, as Telstra has been allocated around 75 percent of the sites under rounds one and two: Vodafone will build out just four mobile base stations under round two, after being responsible for 70 under round one.

By comparison, Telstra is responsible for 148 blackspots under round two, and 429 under round one.

Vodafone is also arguing in favour of the government declaring wholesale mobile domestic roaming, whereby it would be permitted to piggyback off Telstra's mobile infrastructure.

Telstra claims to cover 99.3 percent of the population with its mobile network, but according to the Productivity Commission's draft report into the USO, this accounts for 31 percent of the nation's landmass. Vodafone covers 96 percent of the population, or just 7.5 percent geographically.

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