The Australian Competition Tribunal handed down it’s ruling over the proposed network and spectrum sharing deal between TPG and Telstra that was set to benefit regional Australians like never before, and it’s all bad news for Australia. That’s not how Optus see it, and Telstra is going to take some time before deciding if the battle is over.
This is all based on a business deal between Telstra and TPG (Vodafone). The two companies are not merging, but they have agreed to share some network facilities and spectrum. Optus heard this and went straight to the Australian Competition and Consumer Commission (ACCC) for a review.
The ACCC said no, it won’t be good for competition and will slow or end investment in regional Australia. Telstra and TPG took that to the Australian Competition Tribunal who then looked over all the submissions and yesterday handed down their ruling that they agreed with the ACCC’s decision.
In their summary findings the Tribunal state that “Overall, and on balance, the Tribunal is not satisfied that the proposed transaction would not be likely to substantially lessen competition, or would be likely to result in a benefit to the public that would outweigh the public detriment from the proposed transaction. “
Perhaps most interestingly, they go on to say this “In reaching these conclusions, the Tribunal emphasises that its concern is the protection of competition in the mobile telecommunications markets (at the retail and wholesale levels) and not the protection of Optus as a competitor in those markets. However, in circumstances where the retail market is served by three principal mobile network operators, is highly concentrated and Optus is the second largest competitor, a material reduction in the competitive constraint able to be imposed by Optus would be likely to have the effect of substantially lessening competition in the market. “
In essence, they are worried about the impact on Optus, and I wonder if they are worrying more about Optus than they are regional Australians.
I’ve read the entire summary, and it does not really address the consumer. In fact, it says “As a consequence, the competitive constraint that Optus currently imposes on Telstra would be likely to weaken, which would enable Telstra to maintain higher prices and margins than would otherwise be the case. The reduction in competitive constraint would also reduce the pressure that Telstra faces to invest in and upgrade its network. As such, the lessening of competitive constraints is likely to lead to a reduction in economic efficiency to the detriment of Australian consumers “
I don’t think I’ve read more rubbish in a long time. Where is the focus on the Australian citizen, the resident of a regional area, those most constrained by choice because of the perception that Telstra is the only choice.
Yesterday, at Optus HQ in Sydney, I asked Optus CEO Kelly Bayer-Rosmarin “what competition is coming to regional Australia?”. Ms Bayer-Rosmarin said “what they want is more investment in connectivity and more options. If you have a competitive market you maximise the chance of that occurring. And a competitive market means providing and incentive to as many providers as possible to invest in that region. the decision that’s been made by the accc and the tribunal maximises that. had they granted permission for Telstra and TPG to merge their regional networks, they would have created a scenario which entrenched Telstra’s dominance in those areas where you do only have one choice in regional australia, there would have been no possibility for anybody to compete with that in the future and as a result of that there would have been less investment going into regional australia and less choice.”
Ms Bayer-Rosmarin went on to say “I think if you’re in regional Australia, it’s a day for celebration – where you can rejoice and say we have a continued competitive environment that should provide greater incentive to all three providers of communications infrastructure in this country to invest and compete for our business, and to leverage new technologies to enhance that even further.
Interestingly, it’s not over for this deal though. Telstra CEO Vicki Brady said the “outcome was disappointing, particularly given the overwhelming support the proposal had received from regional Australia”But the big T isn’t going to lay down and take this as the end, they say “Telstra today announced it would carefully consider the Australian Competition Tribunal’s decision to not grant authorisation for their landmark Multi-Operator Core Network (MOCN) agreement with TPG“.
Telstra’s stake in this isn’t handing over customers in regional Australia, though I’m sure they know they’d lose a few. Telstra’s trade off is access to valuable and desirable spectrum in metro areas that TPG owns and was willing to let Telstra use. That alone is something Telstra will likely be keen to fight for.
So – where does this leave regional Australia?
Well in the eyes of Optus they have choice, they have competition – CEO Kelly Bayer-Rosmarin telling EFTM “unless you’re in the 1.4% of australains living in the most remote areas, you do have access to the Optus connectivity, and often our network is less congested and higher performing than what you are getting.”
TPG Telecom CEO Iñaki Berroeta gave a speech to a CommsDay event a month or so ago where he said “The status quo is not enough to meet the needs of Australia. The status quo enables so-called competition to be served, only while there is an established and unopposed market structure – with a major player who serves the high-end, another to take the middle, and a smaller player who fights for what’s left over.
But this is not true competition. It is a regulated class system. It restricts commercial growth and Australian innovation, collaboration, and customer choice. It’s a legacy system entrenched by inaction and an unwillingness to embrace change.“
And that’s the real issue here. Competition has existed in regional Australia for decades. But what has that given those in regional Australia?
What regional Australia needs – in my view – is a shot in the arm, something new. And while I supported Domestic Roaming (where all carriers share all networks), and that was rejected by the ACCC, this was a commercial deal that would have seen Vodafone and TPG spend big dollars marketing to regional Australians about choice.
If you’re a Telstra customer, on their cheapest plan, you’re spending $696 on mobile costs every year. Kogan Mobile, operating on the TPG network, offers a plan for $120 a year.
For those 1.4% living in regional Australia, that would be a total of $201,600,000 in savings per year. If we throw in the full 4.4 million people living in the regional coverage zone under debate by the ACCC, those savings would come to $2.5 billion dollars. BILLION.
Now that’s competition, and that’s an outcome for regional Australia worth fighting for.
Optus CEO Kelly Bayer-Rosmarin sees it much simpler – say says “if you’re in regional australia, you should be giving us a go” – and she’s right.
If you live in Regional Australia, try, try something else.
What next for TPG and Telstra? I’d expect them to reframe their agreement, and find a new way for both parties to get what they want from the deal. But we’ll have to wait and see.
Certainly from the Competition Tribunal’s perspective, the issue with the current deal was not the network sharing in regional Australia – it was the spectrum sharing that gave Telstra a competitive advantage – the summary findings stated “The Tribunal’s determination should not be understood as suggesting that network sharing arrangements between the mobile network operators would always have the effect of substantially lessening competition or give rise to net public detriments. The mobile network operators in Australia have historically shared aspects of their networks.