Commpete calls out outdated policies and settings in the telco sector holding back innovation and competition

Commpete is an alliance representing challenger provider of retail and wholesale communications services. Commpete’s member organisations are Circles.Life, Field Solutions Group, Macquarie Telecom, Symbio, My Republic, Southern Phone, Superloop and TasmaNet.

“To date, government policy has assumed that there is sufficient competition in the mobile sector to meet customer demands,” Lim said.

“Nothing could be further from the truth. Commpete is deeply concerned about the lack of effective competition in the sector. Mobile communication has never been more important.

“In 2022, Australians rely on mobile devices and seamless online access for our personal and business lives in a way that could barely have been imagined when current regulations were put into place around 25 years ago. We are especially concerned about regional Australia being left behind.”

Commpete officially called on the Government and regulators to urgently review the mobile market and adopt a future focused approach to regulating the sector. Lim said implementing Commpete’s strategies to address the pressing issues the industry is facing will introduce genuine competition in the market and foster innovation, enabling greater flexibility and choice, and most importantly greater value for consumers and businesses.

Commpete’s top priorities

1) Competition in the mobile services sector

“There’s a dire lack of competition in the mobile sector. With the development of new technologies such as 5G, there are unparalleled opportunities for innovation and diversity. However, outcomes will be suboptimal if left to incumbent MNOs and MVNOs are not given the opportunity to actively participate to innovate,” Lim said.

“Challenger brands in Australia today still only command 9% market share and the regulatory settings unduly favour scale and incumbency. This is of great concern to Commpete, because mobile virtual network operators (MVNOs) rely on unregulated access to mobile network operators’ (MNOs’) infrastructure, despite MNOs being in a disproportionately strong bargaining position and largely able to dictate the terms of service agreements.

“The proposed Telstra/TPG deal will make it even more difficult for MVNOs to negotiate reasonable terms. Commpete is concerned that this will reduce competition in the market even further. TPG will be significantly reliant on receiving wholesale access to the Telstra network, meaning the number of mobile networks in Australia will effectively go from potentially four prior to the TPG/Vodafone merger, down to only two-and-a-half.

“The sort of dynamic, highly contested, innovative mobile market that should be expected in a country like Australia has failed to develop and it is clear that a more activist approach to regulation is required,” Lim said.

2) Neutral hosting model

Another big concern of Commpete’s is the lack of competition in regional Australia’s mobile sector, where choice and quality of mobile services are significantly limited compared to those in urban areas, Lim stated.

Extensive public funding for improved regional mobile infrastructure by all levels of government have failed to address this issue. Rather, funding has been pocketed by the major MNOs to build out their own networks, meaning consumer benefit from this spending has been limited and no increase in competition has resulted from this investment of public money.

“Commpete considers it critical that any public funding of mobile infrastructure mandates that access to such infrastructure is made available on an open access basis to maximise its competitive and consumer benefit. This could be facilitated by domestic roaming arrangements or a successful neutral hosting model. We call on the Government and regulators to take active steps to encourage the development and uptake of this approach,” Lim said.

3) Regulatory oversight of the NBN

One of Commpete’s measures for the success of NBN policy as well as the health and vibrancy of competition in the fixed telco market is the aggregated market share of challengers. Commpete adopted 30% combined market share as the benchmark of success, which was the outcome forecast by the government’s advisors 10 years ago. Yet, challengers are currently well below that benchmark, at about 11%, Commpete noted.

“We would like to see the government begin to think about and specify what the NBN Companies Act calls ‘unacceptable private ownership or control situations’. We would also like to see NBN Co significantly reduce its cost base and move to a flat rate pricing. We see one as enabling the other, because a lower cost base provides the headroom to lower pricing and to do away with any need for the variable connectivity virtual circuit (CVC) charge. Finally, we’d like to see the Australian Competition and Consumer Commission (ACCC) deal itself back into the game by ensuring any revised special access undertaking (SAU) gives the ACCC a greater regulatory oversight of NBN to ensure its costs are efficient, its pricing is reasonable, and its terms are fair,” Lim said.

4) Consumer Data Right (CDR) regime

The Treasury’s recent design paper regarding Consumer Data Right (CDR) reflects Commpete’s policy preferences. It is considering adopting a “de minimis” threshold for the designation of data holders who will be required to share CDR data under the regime (meaning that certain data holders would be excluded from these data sharing obligations based on their size). This is a sensible and workable approach reflecting what has already worked in other sectors, such as energy. Commpete’s concern now is to hold onto the win and avoid backsliding, the alliance stated.

5) Australia’s Numbering Plan.

Many of Australia’s regulatory policies and settings are outdated. The telco sector is changing at an increasing speed, however regulation has not kept up with these changes. Australia’s Numbering Plan is extremely out of date and no longer fit for purpose, Lim advised.

Commpete believes that infrastructure – whether it be mobile 5G, fixed wireless, satellite, Fibre to the Premises (FTTP) – should be increasingly treated as a technology agnostic platform. This would facilitate competition at the service layer and encourage our regulatory regime to slowly transition away from compartmentalised technology-specific regulatory silos.

Commpete calls on the Australian Communications and Media Authority (ACMA) and the government to fundamentally review the Numbering Plan as a priority with a view to making Australia’s numbering arrangements more forward looking and flexible to allow and encourage innovation in the sector, Commpete concluded.

Editorial analysis

There is a fundamental economic problem in Australia, we have vast stretches of land that are sparsely populated. Every fourth mobile infrastructure carrier has either failed, OneTel, or merged, Hutchison, in order to be profitable in this market. I’m on record, from the time TPG purchased their first mobile spectrum, forecasting that they were not going to enter the MNO market, rather they’d use their threat position to drive better MVNO terms or a possible merger.

One of Commpete’s members, Field Solutions Group, has been allocated mobile black spot funding and has actively pursued a position of allowing other carriers to utilise its network. Black-spot funding should have always been on the basis that those awarded provide access to other carriers on regulated commercial terms.

The ACCC decision on 121 NBN POIs, rather than the 14 POIs NBN was planning, is largely responsible for the consolidation of competition in the fixed market. This decision resulted in a significant fixed cost in establishing a national NBN offer, with scale required at all 121 POIs. This drove the extensive consolidation lead by TPG Telecom and Vocus acquiring many of the then tier two carriers. It also created barriers to entry for potential new entrants to provide NBN services. The decision was good for a handful of transmission providers and existing big telco’s but not good for consumer choice. If the ACCC had agreed with NBNs plan of 14 POIs it is probable that the market mix would look more like the numbers that Commpete considers ideal. That is not going to happen with the current market structure favouring scale operators.