ACCC issues annual assessment of telecommunications competition

The Australian Competition and Consumer Commission today issued its annual reports on Telecommunications Competitive Safeguards and the Changes in Prices Paid for Telecommunications Services in Australia 2004-05.

ACCC Chairman, Mr Graeme Samuel, said that the reports show that the telecommunications industry continued to progress toward a more competitive environment in 2004-05.

"The changes observed in the industry over the past year signal that the industry is on the verge of making significant advancements in service delivery", Mr Samuel said.  "However, in spite of the positive developments observed, the ACCC remains concerned that various threats to existing and future competition exist.

"Key features of 2004-05 included the decline of high margin voice revenues across the industry, as substitution occurred between fixed and mobile segments, and within the fixed-line segment.

"There was also substantial growth in broadband take-up, where more than 100 per cent annual volume growth was observed in four consecutive quarters of the 2004-05 year.

"A number of companies have indicated that the increasing take-up of broadband services is helping to justify a transition from heavy reliance on Telstra's wholesale Digital Subscriber Line (DSL) services to their own DSL infrastructure for the provision of services".

Meanwhile, the development of technologies including satellite broadband, various forms of wireless and mobile broadband have the potential to allow competitors to bypass the existing fixed access network.

The report on prices paid for telecommunications services provides further insights into the state of competition in the telecommunications industry.

The overall average price paid by consumers for telecommunications services fell in real terms by 6.6 per cent in the 2004-05 financial year.  This overall decline was the result of a fall of 1.2 per cent in prices paid for PSTN services and a decrease of 13 per cent in prices paid for mobile telephony services.

"However, the decrease in prices paid for PSTN services was not reflected evenly across the residential and business segments", Mr Samuel said.

"The average prices paid by residential and business customers decreased by 0.3 per cent and 2.9 per cent respectively.  Therefore, as in previous years, falls for businesses continue to outstrip price falls for residential consumers in 2004-05".

The results within the business segment were even more disparate, with the index for small business consumers increasing by 15.8 per cent while the index for larger businesses fell by about 18 per cent.

"The increase in the small business index can be largely attributed to a decline in traffic volumes in this segment, rather than actual price changes in the carriers' tariff and small business pricing plans.

"Meanwhile, the strong bargaining power and tendering processes used by larger businesses to negotiate discounts with suppliers of PSTN services seem to have led to the significant fall in prices for this group".

In mobile markets, average prices paid by consumers for mobile services fell by 13 per cent in 2004–05.  Prices for GSM services fell by 12.9 per cent and prices for CDMA services declined by 13.8 per cent.

The fall in mobile prices was mainly due to the introduction of so called 'capped' or 'bucket' plans by carriers which resulted in large falls in prices paid by consumers for post-paid services.  Prices for post-paid GSM services and post-paid CDMA services fell by 15.3 per cent and 14.2 per cent respectively. 

Prices for prepaid GSM services declined by 5.6 per cent and prepaid CDMA prices fell by 12.4 per cent.  The larger fall for CDMA prepaid consumers was due in part to Orange significantly cutting short message service (SMS) prices and per minute charges for its customers. 

"These results suggest that carriers continue to compete vigorously in the mobile segment, as you would expect where there are multiple competing infrastructure networks", Mr Samuel said.

Background

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 Paid for Telecommunications Services in Australia 2004-05

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 to 1997-98 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).