Mobile prices could drop 5.6 per cent nationally, saving consumers more than $650 million collectively every year, if the competition watchdog forces Telstra to share its regional mobile network, Vodafone claims.
However, Vodafone’s own report and Telstra are warning roaming could introduce two tiers of pricing: national prices and city-only prices. The price cuts would come if Telstra lost its exclusive coverage advantage and was forced to match competitors’ prices, according to Vodafone. There would also likely be more mobile companies as any provider could get access to nationwide networks.
“If the domestic roaming service is declared and operators apply nationally consistent pricing, we estimate that there would be a considerable reduction in the prices faced by consumers of national products (minus 8.1 per cent),” Frontier Economics wrote in a report commissioned by Vodafone for the Australian Competition and Consumer Commission.
“In contrast, however, there could be a small increase in the prices faced by formerly urban-only customers (0.1 per cent). This is because these customers now have access to services in roaming areas, whether or not they wish to use these.”
The regulator is expected to publish other final submissions and will make its final decision in coming months. It doesn’t usually change its position between draft decisions and final decisions.
A spokeswoman for Telstra said it agreed customers could face higher or two-tier prices if roaming is declared.
“If nationally uniform pricing continues under declaration, [wholesale customers] would be likely to raise their prices to recover the costs of paying for wholesale roaming, and to reflect the higher quality of service they are able to offer,” she said.
Optus’ head of corporate and regulatory affairs, Andrew Sheridan said Vodafone’s previous claims “have been built on sand, and haven’t held up under scrutiny”.
“Roaming will not lead to price reductions. In fact, the ACCC’s draft decision recognised that it may result in higher prices for regional consumers,” he added.
But Vodafone’s chief strategy officer Dan Lloyd described Vodafone’s final submission as “compelling” and “sophisticated” evidence, and believes it could sway the ACCC’s final decision.
“I am not sure how you can ignore [the evidence],” Mr Lloyd told Fairfax Media.
The Frontier Economics paper notes domestic roaming could lead to “de-averaged” mobile plans. This means consumers could pay for an “urban only” plan that operates on a city-only network, or a “national plan” that works around the country roaming onto whatever network is available.
The ACCC draft decision was to not “declare” wholesale a domestic mobile roaming service, out of concern it might push prices up if telcos have to start including roaming fees in monthly plans. It found that Telstra’s prices for country customers are constrained by competition in urban areas because mobile companies charge the same price nationwide.
However, it noted that while competition for mobile services was reasonable, “there is often little choice of effective network operator for those consumers who value geographic coverage”.
Also, TPG’s decision during the inquiry process to build its own mobile network proved to the ACCC there are no barriers to entry.
Tabling its submission, Vodafone has for the first time argued it cannot invest in more mobile coverage because Telstra has already occupied areas where only one network is commercially viable, and Optus has already captured the areas where only two networks are viable.
“The perception that VHA [Vodafone Australia] is to blame for its lack of geographic coverage because it has ‘not invested” is therefore demonstrably wrong,” its submission states.
“VHA has invested and continues to invest as far as it can in the circumstances that it is in.”
Frontier Economics noted it was only asked to investigate the impact on consumers, not the impact on investment by network owners.
Vodafone believes the ACCC’s inquiry process was flawed and on June 2 took legal action against the ACCC in the Federal Court . The ACCC considered pausing the inquiry while this legal action ran its course, but decided on June 14 to proceed, two days before submissions were due.
Vodafone’s final submission also states the ACCC was too easily swayed by Telstra’s argument it would stop rolling out and upgrading regional networks if it had to sell capacity to other companies.
“As the ACCC is no doubt well aware, Telstra’s ability to threaten an investment strike arises because of Telstra’s monopoly,” Vodafone argues. Source: Brisbane Times