MARK GREGORY
June 5, 2017

Vodafone aims to fix ACCC blunder

TelcoLand

Vodafone aims to fix ACCC blunder

What a mess: Declaring domestic mobile roaming seemed like a no-brainer. Ka-ching

Vodafone Hutchison Australia (VHA) is to seek judicial review of the Australian Competition and Consumer Commission’s (ACCC) draft decision to not declare a wholesale domestic mobile roaming service.

The ACCC’s draft decision to cave in to pressure from the government, Telstra, Optus and mis-informed local government and community groups has set the scene for the Federal Court to find the underlying rationale for the decision.

In a blog post VHA Chief Strategy Officer Dan Lloyd said “many people living in regional and rural areas currently have no choice about which mobile provider they use and that they are forced to pay more than they should for their service.”

The Federal Court action should provide an opportunity for the ACCC’s decision making process to be scrutinised and for the process that led to the decision to be made public.

The ACCC’s draft report is a mish-mash of contradictory statements, much of which supports a wholesale domestic mobile roaming service.

What appears to have been the underlying reason for not declaring a wholesale domestic mobile roaming service was an over estimation of the potential effects of Telstra’s threat to halt infrastructure investment in regional and remote areas included in a wholesale domestic mobile roaming service.

In the months leading up to the public submission deadline, significant lobbying occurred by proponents for and against a wholesale domestic mobile roaming service. This is to be expected, as was the threat by Telstra to take its bat and ball and go home if the ACCC’s decision did not go its way.

In regional areas, the threat by Telstra that it would stop rolling out its mobile network, put on hold investment in 4G infrastructure, was taken literally by many organisations and local government.

The Australian Communications Consumer Action Network (ACCAN) made a submission in support of not declaring a wholesale domestic mobile roaming service because it considered any reduction in infrastructure spending to outweigh the benefits to consumers of domestic mobile roaming.

ACCAN and the other organisations and local governments spooked by Teltsra’s threats are wrong to have given in to corporate bullying.

The lack of a wholesale domestic mobile roaming service is detrimental to the long-term interests of end users. The current situation perpetuates the status quo, which is a lack of viable retail competition and significantly higher prices by international standards.

Telstra group managing director of networks Mike Wright stated, “if that ability to claim our coverage advantage was taken away, I can’t understand what would be the incentive for anybody to build new coverage.”

The political posturing coming from Telstra is nonsense. It is time that Telstra looked to the future and new applications and services rather than focusing on its diminishing infrastructure advantage.

If Telstra was to put on hold mobile cellular infrastructure investment in regional and remote areas, Telstra would be giving competitors, who will not stop building infrastructure where potential customer numbers justify investment, an opportunity to reduce Telstra’s mobile footprint advantage.

Telstra would also miss out on income in regional and remote areas from the growth in the Internet of Things, the machine to machine communications that will be used to connect cars and trucks to a dedicated mobile cellular network using spectrum that was recently allocated by the Australian Communications and Media Authority (ACMA), and revenue from the wholesale domestic mobile roaming service.

Telstra would also be setting the scene for a showdown with the Government like that which occurred during 2005-2007 when Telstra refused to upgrade the ADSL fixed access network, claiming at the time that it would not invest in infrastructure that would benefit its competitors.

Telstra’s actions during this period should have led to the company being forcibly separated into two companies, wholesale and retail, similar to what has happened to the incumbent Telco in New Zealand and the United Kingdom.

But Telstra was not split and we got NBN Co instead, a $60 billion debt and a second-rate National Broadband Network (NBN).

Whilst NBN Co is hamstrung with payments of about $1 billion annually to Telstra for infrastructure purchases and leasing arrangements, consumers will continue to be fleeced in one of the most expensive telecommunication markets in the world.

For the government, the best outcome from the ACCC would be for a wholesale domestic mobile roaming service to be declared.

If Telstra acted on its threat, the government would have a once in a generation opportunity to gain public support for Telstra to be split and for the new wholesale company to take over the NBN.

The new wholesale company, privately owned by the 1.5 million existing Telstra shareholders, would be in a much stronger position to pay back the debt accrued by government whilst building the NBN and still make a handsome return for shareholders.

Importantly, the chaotic Australian telecommunications industry, could move forward with a more balanced and open competitive retail environment whilst ensuring that growth in wholesale infrastructure investment occurs right around the nation.

There are many reasons why there should be a wholesale domestic mobile roaming service but it is sufficient to look at two reasons to gain an understanding why the ACCC’s draft decision is fundamentally flawed.

Over the past 25 years, Telstra has received billions of dollars of taxpayer funds from local, state and federal governments for mobile cellular infrastructure. Infrastructure built using public funds should be made available for the other mobile cellular operators to utilise at fair cost.

Failure to ensure that this occurs is a failure of both the government and the ACCC.

In the Federal Court action, VHA should request that the ACCC provide a detailed listing of all public funding received by Telstra for mobile cellular infrastructure and what was built using the public funds.

One would expect the ACCC to be in possession of this information, or how could it reasonably make a decision regarding the wholesale domestic mobile roaming service based on Telstra’s assertions that it would be disadvantaged by a declaration based on past investment.

In response to ongoing complaints about the public funding being handed to Telstra for mobile cellular infrastructure, the government introduced the mobile black spot program, with the first round commencing construction in 2015 and a second round commencing construction in 2017.

The commitment by the Federal Government to this program is $220 million and the total investment including contributions by the successful bidders will come to almost $600 million.

A key facet of the mobile blackspot program was to be the ability for mobile cellular operators to co-locate on the infrastructure being built by the successful bidders.

Yet in a nation with three mobile network operators at the time the first round commenced, it appears that there was a decision that only two operators would be able to co-locate on a tower.

In an unsatisfactory outcome for taxpayers and consumers, it appears that only 19 of the 429 towers built by Telstra under the first round of the mobile black spot program have co-location.

“We do not believe co-location as a means to drive infrastructure competition in regional areas is working,” VHA’s Dan Lloyd said.

"The joint objectives of the [mobile blackspot] program are to increase competition and coverage in regional Australia, but despite the best intentions of government, the program is not always delivering the best outcomes for consumers."

"The spirit of the program is one of collaboration, and while we have been enthusiastically offering co-location on our sites, we have encountered artificial barriers when seeking co-location.”

"We find it extraordinary that a company which is claiming it is possible for others to invest in regional Australia is doing everything it can to raise barriers to that investment, especially when taxpayers have paid for it."

Of the VHA towers built in the first round of the mobile black spot program it is working towards co-location at 43 of the 70 towers.

Telstra hit back at the VHA claims that Telstra was making it difficult to co-locate. “Essentially, when there’s a choice between investing and freeloading, they’ll [VHA] go for freeloading every time,” Telstra’s Mike Wright said. “Their whole campaign is essentially trying to ride on the back of a very significant investment that Telstra has made over a long period of time.”

Regardless of the increasingly bitter slanging match going on between the Telcos, It is nothing short of an outrageous proposition that $200 million of taxpayer funding under the Coalition’s mobile blackspot program is not adequately contributing towards increased competition in the mobile cellular market in regional and remote areas.

This is yet another failure of Coalition telecommunications policies and it is time that the Minister for Communications Mitch Fifield addresses the underlying cause for the government’s ongoing malaise in his portfolio.

For the ACCC, the substantial public funding received by Telstra over the past 25 years to build infrastructure that is not available for co-location and the failure of the mobile black spot program to increase co-location and competition should have been two substantive reasons supporting a declaration of a wholesale domestic mobile roaming.

VHA is right to ask for a judicial review of the ACCC’s draft decision, and it is important for consumers that VHA asks for a complete disclosure of what went on at the ACCC.

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