Focused regulation necessary for telecommunications

Focused regulation was necessary to ensure that competition in the Australian telecommunications industry was sustained, Australian Competition and Consumer Commissioner, Mr Ed Willett, said today.* 

An effective access regime which was not susceptible to gaming was critical to ensuring that competitors could gain cost-based, non-discriminatory access to bottleneck telecommunications services.

"The ACCC has always held the view that regulation should target those areas which are least likely to be competitive, and that it should be progressively withdrawn from those areas which can support sustainable competition", he said.

Instances included the decision to allow the declaration of the mobile originating access service, for calls made from mobile phones to 13/1300 and 1800 numbers, to lapse last year; and the decision not to declare domestic inter-carrier mobile roaming.

"However, one area where the ACCC believes that regulation should continue relates to the mobile terminating access service [MTAS]", he said.

"The ACCC believes that all mobile operators – irrespective of their size – have control over access to all calls received on their individual networks". 

This control gives mobile operators market power over the provision of calls to their networks such that they are subject to very weak competitive constraints when setting prices for the service. 

"To the extent the price of the MTAS is set above cost, ACCC has consistently argued this will have negative impacts in downstream markets.  This is particularly so in the market within which fixed-to-mobile services are provided, where high termination prices end up being passed on to consumers in the form of higher prices for fixed-to-mobile calls. 

"The high termination costs also make it difficult for those providers of fixed-line services that do not own and operate mobile networks to compete with those fixed-line service providers – such as Optus and Telstra – that do". 

Having declared the service, the ACCC also made a pricing principle determination last year that indicated it believed the appropriate pricing methodology for the MTAS should ensure the price of the service should follow an adjustment path so there was a closer association of the price and underlying cost of the service. This pricing determination has been followed by a number of current regulatory processes before the ACCC regarding the MTAS, including two access undertakings and ten access disputes.

"The impacts of such a pricing principle, if implemented, are likely to vary amongst the different mobile operators - both in the short-term and the long-term.  For instance, in the short-term, the pricing principle determination would be likely to have a mixed impact on the overall profits of those mobile operators that also provide fixed-line services.

"Whilst reductions in the price of the mobile terminating access service would represent a reduction in revenues for the mobile arm of Telstra's business, it would also represent a decrease in input costs for the fixed line arm of its business".

*Mr Willett was addressing the Australian Mobile Telecommunications Association Annual Conference in Sydney. A full copy of the address is available on the ACCC website.