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Telstra warns of untimely end to mobile coverage race if roaming is declared

Posted by on 18/07/2018

Telstra is the only mobile network in many parts of regional Australia. Should it be forced to let other carriers use it? Photo: Phil Carrick Regional groups are concerned Telstra will stop building and maintaining towers in the bush if the ”coverage race” ends. Photo: Tamara Voninski

 The race to build the biggest mobile network in Australia will come to an “untimely and unfortunate end” if carriers have to share their networks, Telstra has warned in its submission to a competition inquiry.

Telstra also argued that letting other carriers use its network would lead to “a loss of revenue due to lost market share” in both regional and metropolitan areas, because “roaming will neutralise the coverage advantage that has justified significant investment in regional and rural mobile infrastructure that is uneconomic on a standalone basis”.

However, Telstra’s submission blacked out estimates of actual revenues losses. It earned about $10 billion annually from mobile products.

“There is no plausible scenario in which Telstra, as a rational operator, would continue building in uneconomic areas if Telstra is unable to compete on its superior coverage because roaming is declared,” the submission stated.

While maintaining boasting rights of the biggest network was important “it is not important enough to substitute for a competitive dynamic where, in return for the investment, Telstra is able to earn more revenue”, it added. This meant Telstra would have to reduce prices if roaming was allowed because it could no longer charge a premium for access to the Telstra network.

The Australian Competition and Consumer Commission (ACCC) asked for feedback on a discussion paper about declaring mobile services, which would force Telstra to let competitors’ customers onto its network in regional areas.

Most of about 120 submissions supported the status quo out of fear Telstra’s coverage would shrink if it could not operate an exclusive network.

Submissions came from a range of sources, including large companies, regional politicians, farmers groups, individuals and lobby groups. Attempts to mobilise Telstra shareholders did not lead to a flood of letters.

Communications Minister Mitch Fifield made a submission warning declaration could discourage future private sector investment and consumers might expect government to make up for the shortfall.

“I therefore ask that any finding in favour of declaration be based on an overwhelming case for declaration and not simply on the balance of probabilities,” Senator Fifield wrote.

Telstra’s submission argued the idea it would “‘keep building regardless of roaming’ is an improbable scenario” and the telco declared that, if roaming was allowed, “the coverage race will have come to an untimely, and unfortunate, end”. It might also neglect upgrades on mobile towers in the bush.

Telstra argued roaming was a poorer experience because mobiles constantly switched between networks and used up battery power searching for networks. And without coverage differentiation, consumers could only select carriers based on “brand and other retail functions”.

Optus was also opposed to declaration. It had been investing heavily in mobile infrastructure and warned enforced roaming was “fundamentally at odds with the principle of infrastructure competition”.

Meanwhile Vodafone, which was leading the charge in favour of a declaration, submitted hundreds of pages. It included a diagram of what it called the “vicious cycle” of Telstra’s market dominance.

“In the Australian mobile market, there is a vicious cycle which started with a natural monopoly, has been exacerbated by substantial direct and indirect government subsidies, and exploited by an incumbent which is free-riding on taxpayer investment,” Vodafone’s chief strategy officer Dan Lloyd said. Vodafone argued Telstra had received $2 billion “in direct and indirect government subsidies”, which allowed it to expand and exploit its mobile network.

“Telstra’s mobile network is now over 1.4 million square kilometres larger than any other network, and its extreme dominance has gone too far to self-correct,” Mr Lloyd added.

However, most regional groups did not want to have roaming introduced, citing concerns Telstra would retreat from regional services and they did not trust any other companies would invest instead.

For example, Primary Producers SA wrote: “Only Telstra will provide the investment and rollout that we need, in the absence of huge government support – which while appreciated is not achieving what is needed! Any move to gift the other providers access will likely see a huge reduction in the Telstra investment!”

But the Victorian Farmers Federation supported roaming where it improved coverage and was the most efficient form of investment. To off-set the end of the coverage race, the VFF suggested mobile black spots and a rural infrastructure levy. A survey of 400 members found 91 per cent used Telstra for mobile services, often bundled with fixed services, and more than half complained their connection was too expensive and too slow.

Another in favour of roaming was micro-telco Pivotel, which said it was building mobile networks in remote mining sites and tourism sites and its ability to compete hinged on the ACCC’s decision. Telstra had made it “abundantly clear” that, without enforced roaming, it would not sell access to Pivotel or any other carrier, according to the submission.

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