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Vodafone, Optus demand fair competition

Vodafone and Optus have both submitted their responses to the Competition Policy Review outlining that Telstra's market dominance is impeding on their shot to increase any market power in the telco sector.
Written by Aimee Chanthadavong, Contributor

Both Vodafone and Optus have called on Australian competition policy to be revised to encourage more competition in the telco sector, insinuating Telstra is part of the problem, as part of their submissions responding to the Competition Policy Review.

The independent review led by Professor Ian Harper commenced in March this year, following an election promise that the Liberal Party had pledged during its 2013 election campaign after recognising the Australian economy has changed since the last major review of the competition policy in 1993.

In its submission (PDF), Vodafone pointed out that Australia's competition policy institutions requires "reinvigoration", recommending a competition policy review and development entity should be created to independently advise the various governments, and to formally review all regulations against competition principles.  

Vodafone described Australia's current approach as "ad hoc" and that there is a lack of assessment of how individual regulatory decisions are limiting competition.

"A more principled approach to sectoral regulation is required, consistent with competition policy objectives," it said.

Vodafone draws on Telstra to exemplify how the Australian telco market remains "highly concentrated by global standards", and that Telstra's profits is a "detriment of Australian businesses, consumers and overall economic productivity and welfare". It highlights that Telstra's share of total telecoms revenue in Australia is 68 percent, its share of industry EBITDA is 75 percent, and its share of industry operating free cash flow is 85 percent.

Similarly, Optus proposed in its submission (PDF) that Australia needs to adopt an interventionist ex-ante regulatory framework, similar to the scheme adopted in the European Union, to focus on operations with significant market power (SMP).

"The limitations of the current regime have previously been highlighted by the ACCC. In a report to the Minister for Communications in 2003, it identified that Telstra's market dominance gave rise to competition concerns in the  markets for Pay TV content and the bundling of communications services. However, the ACCC noted that it could not address these issues under its existing powers," Optus said.

"The tools available under an SMP approach would provide the ACCC with the flexibility to address such competition concerns."

Additionally, Optus said given that Telstra's engineers are involved with the day-to-day operation of NBN services, there needs to a deeper revision to ensure that Telstra's retail units operate separately from any units that supply services to NBN Co. This is despite Telstra already agreeing to do so last June after the ACCC found it had breached competition rules.  

Reining in Telstra has long been on the radar of all Australian telcos, as well as the ACCC, which had previously noted that Telstra is leveraging its advantages and monopoly profits in the fixed-line industry to subsidise its activities in other, more competitive markets. 

In its defence, Telstra said in its submission (PDF) that the current competition policy framework is "relatively sound and is affording the key competition-related institutions appropriate powers and flexibility to implement competition policy". 

Telstra suggests that the competition policy review panel should consider deregulation opportunities to make sure that it is clear that "a regulator's role is both to regulate to stimulate competition and deregulate once market has become competitive".

"Telstra believes that these measures would appropriately ensure efficient regulatory outcomes are achieved and that deregulation opportunities are appropriately considered which will allow markets to operate freely, without regulatory intervention where there is no clear market failure."

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