On 5 May 2017, the Australian Competition and Consumer Commission (ACCC) published its draft decision not to ‘declare’ a wholesale domestic mobile roaming service (domestic mobile roaming service). The ACCC’s inquiry into whether to declare a domestic mobile roaming service was launched on 5 September 2016 and considers whether the varying geographic coverage provided by Australia’s three mobile networks (Telstra, Optus and Vodafone) is impacting competition in mobile markets, and whether declaring a domestic mobile roaming service would promote the long term interests of end users (LTIE).
What is declaration?
The declaration process seeks to promote competition by facilitating third party access to certain services. If a telecommunication service is declared by the ACCC, then it will be subject to regulation under Part XIC of the Competition and Consumer Act 2010 (Cth) (CCA). This means that carriers and carriage service providers that provide the relevant declared service must supply the declared service to access seekers in accordance with standard access obligations. Non-carriers who own infrastructure, like private mobile tower operators, will not be bound by a declaration.
The ACCC’s power to declare a listed carriage service (which could include a mobile service) stems from section 152AL(3) of the CCA, which empowers the ACCC to make a declaration if it conducts a public inquiry, prepares a report, and is satisfied that the making of the declaration will promote the LTIE of carriage services or of services provided by means of carriage services.
The ACCC’s power to declare listed carriage services is part of Australia’s wider access regulation regime, which facilitates third party access to essential infrastructure in order to promote economically efficient outcomes.
Essentially, the declaration of domestic mobile roaming would allow certain mobile network operators to provide mobile services across a broader network footprint, by obliging their competitors to allow them to ‘roam’ onto their networks. Mobile network operators can enter into roaming agreements commercially between themselves, but there is currently no requirement for network owners to agree to negotiate with an access seeker who requests access.
How did the ACCC reach its conclusion?
As mentioned above, under the CCA the ACCC is required to consider whether declaring a domestic mobile roaming service would promote the LTIE. In determining whether this is the case, the ACCC must consider three factors, namely:
- whether declaration would promote competition in markets for telecommunications services;
- whether declaration would achieve any-to-any connectivity (ie the ability of customers of one network to communicate with customers of another); and
- whether declaration would encourage the economically efficient use of, and investment in, telecommunications infrastructure.
Would declaration promote competition in markets for telecommunications services?
In relation to wholesale roaming markets (markets in which operators supply wholesale roaming services to each other), the ACCC’s preliminary view is that declaration would be unlikely to promote competition. This is because declaration would not mean that operators would be better able to supply wholesale services than they currently are (due to the fact that declaration would not increase the area their networks cover). While declaration would be likely to promote improved outcomes in this market in terms of pricing and supply – because carriers who own large networks would have to supply services at a set rate – the effect of this would most likely be seen in the separate downstream retail market.
In relation to the downstream retail market, the ACCC’s preliminary view is that there is insufficient evidence that declaration will improve the current state of competition to a significant extent. This was for a number of reasons, including that:
- there already appears to be reasonably effective competition in the national mobile services market;
- declaration would remove a factor over which operators currently differentiate their services (geographic coverage). While this would improve operators’ ability to compete for consumers who value wide coverage, when considered in the context of the national market the overall impact this would have on competition is unlikely to be significant;
- it appears unlikely that declaration will lead to lower retail prices for consumers; and
- declaration is unlikely to significantly reduce barriers to entry for new operators.
Would declaration achieve any-to-any connectivity?
The ACCC considered that declaration is not likely to achieve this objective, but that nonetheless this factor should be given little, if any, weight as interconnection arrangements are already in place (ie this objective is already being achieved).
Would declaration encourage the economically efficient use of, and investment in telecommunications infrastructure?
The preliminary view of the ACCC is that while declaration may result in some efficiency gains (because access seekers could use excess capacity on existing infrastructure), it would be unlikely to encourage more efficient use of mobile infrastructure more generally. In reaching this conclusion, the ACCC referred to the strong relationship between competition and efficiency, noting that because declaration would be unlikely to significantly promote competition (for the reasons outlined above), it would also be unlikely to encourage a more efficient use of mobile infrastructure in general.
The ACCC also noted concerns from stakeholders about potential negative impacts on efficiency if a domestic mobile roaming service were declared. These concerns reflected a view that declaration may neutralise the competitive advantages enjoyed by operators with strong coverage, thereby undermining the business case for investing in regional areas.
Where to from here?
The ACCC is inviting submissions on the draft decision until 2 June 2017, after which the ACCC will publish its final decision.