Optus is celebrating an early Christmas present and Telstra has vowed to fight on, after the ACCC blocked its proposed mobile network sharing arrangements with TPG Telecom that, the regulator concluded, would hurt competition and leave regional Australians “worse off”.
In May, TPG and Telstra proposed an arrangement in which TPG would consolidate its mobile network with Telstra, then lease access to its mobile infrastructure in a ten-year, $1.8 billion agreement.
Telstra would gain access to TPG’s licensed mobile spectrum in “certain regional and urban fringe areas”, while TPG would transfer up to 169 of its existing regional mobile sites to Telstra, and decommission the others – reducing the number of mobile networks in regional areas.
In exchange, the move would have given TPG access to around 3,700 Telstra towers, increasing its overall mobile coverage from 96 per cent to 98.8 per cent of the population; both companies would continue to operate their own networks in metropolitan areas.
Although “there are some benefits” to the proposal, ACCC commissioner Liza Carver said as the decision was announced, the deal “will likely lead to less competition in the longer term and leave Australian mobile users worse off over time, in terms of price and regional coverage.”
Because mobile operators compete on price, coverage, speed, and other dimensions, Carver argued, the proposed arrangements “will represent a significant change to the structure of the market that would have long-term consequences.”
Those changes would include reducing infrastructure -based competition – the building of multiple mobile networks by competing carriers – “which would make consumers, including those in regional areas, worse off over time,” she said.
Although Telstra had argued the deal would help it alleviate congestion on the limited mobile infrastructure in many regional areas, the ACCC found that the company “has alternative ways to alleviate that congestion,” Carver explained.
“It is unlikely that the proposed arrangements would materially improve Telstra’s ability to serve regional Australia. Instead, it would likely reduce the incentive for mobile companies to improve their service and coverage in regional areas.”
Telstra vows to fight
Rejection of the proposal was welcomed by Optus, which as one of hundreds of interested parties has vociferously opposed collaborations between two of its mobile network rivals.
The Telstra-TPG deal would, vice president for regulatory and public affairs Andrew Sheridan argued, “entrench Australia’s dominance, especially in the regions” – and called the decision “a win for Australians”.
“All Australians benefit from competitive investment in telecommunications services,” said Optus CEO Kelly Bayer Rosmarin, who has largely laid low since the infamous Optus breach.
“By knocking back this deal, the ACCC has helped ensure that our regional communities will continue to benefit from competition in a sector that is fundamental to our digital economy and future prospects.”
The ACCC’s decision came as no surprise to telecommunications consultant Paul Budde, who said Telstra “played it the wrong way” and argued that it had been “very obvious from the beginning” the proposed merger would never fly because it contradicted three decades of well-established telecommunications regulatory policy designed to promote infrastructure competition.
To avoid problems, Telstra should have come up with a strategy for an “open wholesale arrangement” that would allow any company to use its network on a commercial basis, rather than pushing for an exclusive arrangement with TPG.
Despite the decision, Budde said, it is time for the industry and ACCC to “sit down and work out a new regulatory system that takes into account the reality that the future of telecoms competition will be played out on the services side of the market and less so on the infrastructure side.”
Industry brainstorming may have to wait, however: even as TPG shares fell after the announcement, Telstra announced that it will appeal the “extremely disappointing” ACCC decision – which CEO Vicki Brady called “a massive missed opportunity for the people, businesses and communities of regional Australia.”
The proposal would “deliver real competition-driven benefits for regional Australia,” Brady said, and “deliver better use of the Government’s spectrum assets by unlocking unused spectrum that TPG holds in regional Australia but isn’t using.”