ACCC issues annual assessment of telecommunications competition
The Australian Competition and Consumer Commission today issued two annual reports on issues relating to competition in the telecommunications industry in 2003-04.
The competitive safeguards report, which contains the ACCC's assessment of the state of competition, and the report on prices paid for telecommunications services will help inform the ACCC's approach to regulating the industry in the future.
An ACCC Commissioner, Mr Ed Willett, said the competitive safeguards report revealed that competition in the telecommunications sector had provided positive outcomes over the past seven years, but that the positive effects slowed in 2003-04, continuing a trend observed for 2002-03.
"The initial benefits of competition were delivered as competitors entered at the retail level, made use of interconnection rates and drove down retail prices", he said.
"Generally, however, competition on this basis has only allowed alternative providers in a number of markets to compete effectively at the retail level. Given this, further market advances, in terms of higher quality and more keenly priced services, will only be likely if there is an increase in competition further up the value chain in facilities or quasi-facilities-based markets.
"Without this development, competition in telecommunications markets remains fragile ", Mr Willett said. "Retail competitors in fixed-line markets that resell products may not have sufficient flexibility in determining the pricing, quality and functionality of services to substantially differentiate themselves. It is notable that where broadband providers have invested in their own infrastructure, competition is starting to emerge on the basis of product characteristics such as quality and speed, as well as price".
The report noted that encouraging the move towards facilities-based competition is dependent on overcoming the difficulties posed by Telstra's dominance in the customer access network and the fixed-line market.
"The ACCC will be placing considerable emphasis on ensuring that competitors are not frustrated in obtaining timely access to Telstra's underlying, regulated facilities".
2003-04 also saw interest in the impact of new technologies such as voice over internet protocol (VoIP) and wireless local loop, with some commentators suggesting that these technologies will break the dominance of the incumbent fixed-line network.
"The ACCC takes the view that, while there is the potential for greater competition as a result of these new services, their impact has not yet been demonstrated", Mr Willett said. "Importantly, technological developments have enabled greater amounts of information to be transmitted via the copper network, meaning that consumers can be provided not only voice products, but also broadband internet and eventually broadcasting services. The emergence of services such as ADSL 2+ and VDSL that use the copper network suggests that the competition issues around the local access bottleneck, that last mile to the customer, may continue for some years"
The report on prices paid for telecommunications services provides further insights into the state of competition in the telecommunications industry.
This report shows that, overall, average prices paid by telecommunications consumers decreased by 1.1 per cent during 2003-04.
This overall decline reflects the combination of a marginal increase of 0.2 per cent in prices paid for PSTN services and a decrease of 3.2 per cent in prices paid for mobile services.
"The marginal increase in prices paid for PSTN services was not reflected evenly across the residential, small business and large business markets", Mr Willett said.
The average prices paid by residential and small business customers rose by 1.4 per cent and 3.1 per cent respectively. On the other hand, the average price paid by large business consumers fell by 5.6 per cent.
"In recent years, average prices paid by residential and small business consumers have been going up, while the prices paid by large business consumers have been falling".
In terms of individual PSTN services, the trend of increasing basic access prices and falling per-call prices observed in previous years largely continued, with the average price paid for basic PSTN access rising by 6.8 per cent.
"Price increases for basic access for residential and small business customers were not offset by falls in the price of per-call services. In fact, the average prices paid for these two consumer groups increased for fixed-to-mobile and national long-distance calls. In contrast, the basic access increases for large business consumers were more than offset".
For mobile services, the 3.2 per cent decrease in the overall price paid was primarily due to lower prices paid by consumers for pre-paid services.
The prices paid for pre-paid services on GSM and CDMA networks fell by 5.6 per cent and 4.3 per cent respectively. Prices for post-paid services fell by just 1 per cent for GSM services and 1.5 per cent for CDMA services.
"The larger price falls for pre-paid services suggests that carriers are competing more intensively in this segment of the market", Mr Willett said.
The ACCC is required to provide two annual telecommunications reports to the Minister for Communications, Information Technology and the Arts, under Division 11 and 12 of Part XIB of the Trade Practices Act 1974: the competitive safeguards report under sub-section 151CL(1) of the Act; and the changes in the prices paid by consumers for telecommunications services report under paragraph 151CM(1)(a) of the Act.
Competitive safeguards report
This report comprises an overview of ACCC regulatory activities during 2003-04, including its responsibilities in relation to Parts XIB and XIC of the Act and under the Telecommunications Act 1997. It also includes an examination of the state of competition across various telecommunications markets. The markets examined in detail include:
fixed line;
mobile services; and
internet and data services.
Change in prices report
This report details how average prices paid for various telecommunications services have moved in real terms from one financial year to the next. The comparison dates back to1997-98 for most indexes, although some have a more recent base year.
The report measures average changes in real prices paid by consumers for telecommunications services. In this regard, real price movements for services may not necessarily follow the trend observed in nominal (or actual) price movements. In particular, by taking out the effect of inflation, real price movements are likely to overestimate price decreases and underestimate price increases.
The telecommunications services covered in the 2003-04 report include PSTN services, which are fixed-line services, and mobile telephony services provided by GSM (global system for mobiles) and CDMA (code division multiple access) networks.
For PSTN services, the average prices reported are split into three consumer groups (residential, small business and other business consumers) and five services (basic access, local call, national long distance, international and fixed-to-mobile services).
