Telco’s brace for ACCC draft report
David Tudehope: An absence of competition allows poor customer service to continue
The ACCC will release a draft report on competition issues in the telecommunications sector within days, just as the industry labours under a barrage of bad publicity following the revelations of a huge jump in complaints to the ombudsman.
Macquarie Telecom chief executive David Tudehope says competition issues and market failures are at the heart of the shocking increase in consumer complaints to the Telecommunications Industry Ombudsman, and the market structure failures associated with the giant NBN project.
He says consumers are right to be angry, and that the industry has failed the Australian community.
Notwithstanding the bad publicity that followed an ABC Four Corners program from Monday that highlighted the NBN’s significant shortcomings, Mr Tudehope says the mainstream media has underplayed the problems that were highlighted by the TIO complaints.
“As an industry we have failed the Australian population and we have failed Australian businesses,” Mr Tudehope.
“The fact is that we have four times as many complaints to the Telecommunications Industry Ombudsman as banking industry customers have complained to the banking ombudsman. I think this underlines the fact that as an industry we have failed,” he said.
“The banking industry was going to get a royal commission [as a result of the complaints]. It is extraordinary that this [telco] industry has not had a greater focus on the back of the [TIO] report.
It is a startling concession from one of Australia’s most senior telecommunications industry leaders.
Not that the Mr Tudehope wants a royal commission inflicted on the sector. But there are glaring competition issues that need to be addressed, and the Australian Competition and Consumer Commission draft market report should provide an insight into how to fix this failure.
The ACCC has confirmed it will publish its draft report on the telecommunications market by Tuesday 3 October.
“We are certainly looking forward to seeing the ACCC report on the telecom industry and its competitiveness,” he said, with the expectation that it will shine a light on the links between very poor customer service outcomes and competition.
He is looking forward to recommendations that would lead to structural, sustainable change.
“The ACCC is very capable of identifying the issues, you don’t need a royal commission for that.”
“Our perspective is that competition deals with most of the challenges being experienced. And the absence of competition allows poor customer service to continue,” he said.
“[Competiton issues] lets parts of our industry see customer service as a cost, rather than an opportunity – and the focus then becomes how to manage the media on a particular cycle rather than actually changing the experience of the customer.”
“Where you have a concentration of market power, you have reduced incentive to improve customer service or improve prices. The incentive to improve innovation isn’t there,” Mr Tudehope said.
Macquarie Telecom believes the efforts toward increased vertical integration in recent years by four large players – Telstra, Optus, TPG and Vocus – was having a damaging impact on the market.
“By vertical integration they seek to consolidate market power, which from a consumer point of view means they don’t have to take action on service, and there is not the same pressure to innovate.
“These normal drivers that you get in a competitive environment are not present.”
The industry consolidation, coupled with the structure of the NBN Points of Interconnect (PoIs) had led to fewer wholesale providers on which the success of retail service providers has relied.
Macquarie says there is no competition in wholesale providers in a large proportion of the PoIs, and certainly the number of wholesalers providing backhaul services is not what it was “six or seven years ago.”
“That’s a market failure that has been created by the government allowing these companies integrating themselves vertically and then reducing the wholesale supply.”
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