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Telstra refuses to negotiate on SMS prices: Optus

Optus and Telstra have continued their debate over the regulation of SMS termination fees, with Optus claiming Telstra has refused to bring down prices in the last 10 years.
Written by Josh Taylor, Contributor

Telstra and Optus have continued to spar over the cost of sending text messages across each others' networks in letters to the Australian Competition and Consumer Commission (ACCC), with Optus arguing that Telstra is refusing to negotiate to reduce the cost of providing the service.

The competition watchdog is currently reviewing whether the Mobile Terminating Access Services (MTAS) needs to remain a declared service where the ACCC sets the price to ensure that the larger telcos do not overcharge the smaller telcos. The current declaration was extended in 2009, but is due to expire in June 2014.

As part of that review, the ACCC asked the industry whether SMS and MMS services should become declared, meaning that the regulator would set the price the telcos could charge each other and their wholesale customers for an SMS originating on another mobile network, but terminating on their own.

Optus, Macquarie Telecom, and iiNet argued that the rates are currently too high, and the ACCC should step in and regulate the market. Telstra and Vodafone argued that commercial arrangements in place are working, and that because users send SMS messages back and forth to each other, the costs are largely symmetrical between the mobile network operators.

After their initial submissions, Telstra earlier this month published a retort (PDF) to Optus' claim, stating that current commercially negotiated SMS prices "are both appropriate and working", with the issues faced in other countries that have regulated SMS termination rates not existing in Australia. Telstra said the SMS market is continuing to grow, with prices declining and more choices for alternatives to SMS becoming available through over-the-top apps like Skype, iMessage, Viber, and WhatsApp.

In response, Optus last week said (PDF) that attempts made by Optus to renegotiate the 10-year agreements in place over SMS termination rates had failed, and there are now commercial disputes over SMS termination rates.

"The current commercially negotiated SMS termination rate has not changed for over a decade, and is significantly above the cost to provide SMS termination," Optus' manager of economic regulation Luke van Hooft said.

"Optus' experience clearly shows that commercial agreements are no longer working, and there are market failures which need to be addressed. This implies that [mobile network operators] can and do exercise monopoly power over the termination of SMSes on their networks."

The current MTAS agreement expires on June 30, 2014. The ACCC has yet to indicate when it will make a final decision on whether to extend the declaration or include other services such as SMS in the declaration.

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