David Havyatt
August 9, 2016

The ACCC, Comms and Innovation

Competition

The ACCC, Comms and Innovation

Rod Sims: Concern about the development of ‘over the top’ services

In announcing that the ACCC’s next market study will focus on the Australian communications sector, the Chair, Rod Sims, invoked “innovation.”

He noted, “The study will examine the changing landscape and identify any issues preventing the use of innovation and investment to deliver the benefits of competition to consumers.”

This is an interesting construction; the ACCC is only interested in the sector’s “use of innovation.” This is presumably an acknowledgement that the Australian communications sector is not innovative in its own right, merely a user of other’s innovation.

Nor does the construction take us anywhere near the question of how well our communications sector might support innovation in downstream markets. This, of course, is one of the dimensions of the debate about the adequacy of the MTM NBN rather than the original vision.

The question to be asked is what problem the ACCC is trying to identify and solve.

The big issue used to be industry structure, and competing against a vertically integrated incumbent.

Way back in 2003 when Sims predecessor Graeme Samuel had just commenced, my then new CEO Jon Stretch and I went to visit him. Graeme said to us that he really felt sorry for competitive telcos because we really had no real prospect until Telstra was structurally separated.

This comment followed the short lived 2002 Parliamentary Inquiry into the structure of Telstra. The inquiry, announced by Christopher Pyne, never took evidence nor prepared a report after the ALP shadow, Lindsay Tanner, released a report that acknowledged that the Government could not achieve the separation if shareholders didn’t agree.

In 2005 at a joint workshop on fibre access in Canberra organised by the Competitive Carriers Coalition with AAPT’s support, David Forman and I both posited that the structural separation of the sector should be achieved when a new access network was built.

This was, in part, a genesis of the ALP’s initial NBN policy which included in its objectives the separation of Telstra. (The language in the policy was “A pre-requisite for all proposals made under this process is that they submit to providing genuine open access to bottleneck fibre to the node infrastructure.”)

As we know, structural reform of telecommunications is finally being delivered, progressively, as the NBN is built. Another question would be industry concentration.

Back at the start of the millennium Minister Alston used to regularly cite the ever increasing number of licenced carriers as the evidence of competition. That number has contracted dramatically lately through a seemingly endless process of acquisition.

But this can’t be an issue since the ACCC hasn’t attempted to stop any because of their impact on competition.

The ACCC in its announcement has cited concern about the development of ‘over the top’ services.

However, in a nation that has been used to data caps the monetisation of increasing download volumes isn’t necessarily an issue. We are aware that the launch of Netflix in Australia has greatly increased download volumes.

But this surely can’t be an issue since the NBN Strategic Review cut NBN Co’s revenue forecast claiming the NBN Corporate Plan overstated the demand and availability of premium IPTV content in Australia.

Perhaps the issue is something to do with mobile networks, since Vodafone has been incessantly complaining about the need for backhaul and even mobile roaming.

The ACCC release listed a concern about “The increased use of mobile data by consumers and the increasing preference for mobile as a way to access the internet.”

The problem is it just doesn’t show up in the statistics. The ABS Internet Activity in Australia series (8153.0) makes it possible to calculate the monthly download per connection by connection type.

The reality is that it is fixed line that carries this load. Perhaps someone should have explained to the ACCC that using WiFi on your mobile device to access the internet is still using a fixed network connection.

ACCC chart

The two most vexed questions in the communications market are the high prices being charged by NBN Co for the CVC component, and the number of Points of Interconnect.

Your humble correspondent notes that those who reckon the ACCC got it wrong in requiring 121 NBN Points of Interconnect rather than 14 really wanted more of their backhaul pricing in the hands of NBN Co. Nevertheless, nothing reveals the sector’s opinion about the ACCC more than that decision.

The ACCC release indicates that the organisation has “had preliminary discussions with a number of stakeholders.”

This is an industry that has a good track record of delivering major reforms of and for itself, from number portability right through to its consumer protection code. But the ACCC hasn’t consulted with Communications Alliance before announcing this market review.

Economic growth is sluggish here and in other developed economies. If the communications industry market structure is an impediment to the ability of other industries to innovate and grow, then an ACCC market study might be a useful exercise.

But that is doubtful, and the ACCC review won’t impact on innovation in any way.

Innovation is really being held back by our lack of a ubiquitous high speed broadband network. We had a plan for that. We now have a second rate plan for that. Maybe our national public sector resources should be focussed on completing that job.

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