Competition in the Australian telecommunications sector

The Australian Competition and Consumer Commission (ACCC) released its 2015-16 report on competition in the Australian telecommunications sector and price changes for Australian telecommunications services on 8 March 2017.

                                                                            The report reindexlates to the 2015-16 financial year and is so dated, but does provide some useful insights. In releasing the report, the Chair of the ACCC, Rod Sims, noted that consumer demand, particularly the increasing consumer appetite for data, is driving changes in the sector. Generally prices for services have fallen in real terms, but internet services prices have increased. Although some consumers may be paying more for internet services, the report states data allowances significantly increased over the year. The ACCC also found that the market for retail services is competitive, notwithstanding some industry consolidation and the ongoing transition to new cost structures. On enforcement issues, the ACCC warned industry participants the telecommunications sector will be a key focus for the ACCC’s consumer protection activities in 2017.

Further comments on key competition issues raised in the report, the consumer protection action taken by the ACCC in 2015-16 and upcoming regulatory action to be aware of are set out below.

Competition

The report shows the increasing importance of services provided over the National Broadband Network (NBN), as NBN service connections doubled over the year and have increased even further since that time. As at the end of June 2016, there were approximately 1.1 million activated NBN services. These services were predominantly in regional areas and used almost exclusively for residential services. As at April 2017, there were approximately 2 million activated services, with services provided in urban areas increasing. The changing nature of the end users (including a higher proportion of businesses) now connecting to the NBN may result in changes to market structure, arising from the types of services demanded and impacts on the service provider market.

Competition in the provision of services supplied over the NBN is a key issue. The ACCC’s review indicates that Telstra (48%), TPG, which incorporates iiNet (26%), Optus (14%) and Vocus, which incorporates M2 (6%) are the main acquirers of wholesale NBN access services. This reflects the relative shares of those providers across the fixed line market generally, as these four providers are the dominant providers in this sector.

As at 30 June 2016, 94% of Australians had access to three 4G mobile networks (Telstra, Optus and Vodafone). Although the OECD has recently expressed the view that Australia should have four mobile networks to further improve competition, the existence of three networks with such broad coverage means there is significant competition in the mobile services market for most Australians. In the mobile handset services market, Telstra is the dominant provider (with a 45% share of the market), followed by Optus and Vodafone (27% and 18% respectively).

The ACCC believes that competition in the retail market has been resilient, with market shares remaining stable, though there have been shifts in the wholesale markets, not only arising from migration to the NBN but also as a result of mobile virtual network operators (MVNOs) moving between mobile networks.

For More Information:- Angela Flannery

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