The Australian Competition and Consumer Commission (ACCC) released its 2015-16 report on competition in the Australian telecommunications sector and price changes for Australian telecommunications services on 8 March 2017.
The report relates to the 2015-16 financial year and is so dated, but does provide some useful insights. In releasing the report, the Chair of the ACCC, Rod Sims, noted that consumer demand, particularly the increasing consumer appetite for data, is driving changes in the sector. Generally prices for services have fallen in real terms, but internet services prices have increased. Although some consumers may be paying more for internet services, the report states data allowances significantly increased over the year. The ACCC also found that the market for retail services is competitive, notwithstanding some industry consolidation and the ongoing transition to new cost structures. On enforcement issues, the ACCC warned industry participants the telecommunications sector will be a key focus for the ACCC's consumer protection activities in 2017.
Further comments on key competition issues raised in the report, the consumer protection action taken by the ACCC in 2015-16 and upcoming regulatory action to be aware of are set out below.
The report shows the increasing importance of services provided over the National Broadband Network (NBN), as NBN service connections doubled over the year and have increased even further since that time. As at the end of June 2016, there were approximately 1.1 million activated NBN services. These services were predominantly in regional areas and used almost exclusively for residential services. As at April 2017, there were approximately 2 million activated services, with services provided in urban areas increasing. The changing nature of the end users (including a higher proportion of businesses) now connecting to the NBN may result in changes to market structure, arising from the types of services demanded and impacts on the service provider market.
Competition in the provision of services supplied over the NBN is a key issue. The ACCC's review indicates that Telstra (48%), TPG, which incorporates iiNet (26%), Optus (14%) and Vocus, which incorporates M2 (6%) are the main acquirers of wholesale NBN access services. This reflects the relative shares of those providers across the fixed line market generally, as these four providers are the dominant providers in this sector.
As at 30 June 2016, 94% of Australians had access to three 4G mobile networks (Telstra, Optus and Vodafone). Although the OECD has recently expressed the view that Australia should have four mobile networks to further improve competition, the existence of three networks with such broad coverage means there is significant competition in the mobile services market for most Australians. In the mobile handset services market, Telstra is the dominant provider (with a 45% share of the market), followed by Optus and Vodafone (27% and 18% respectively).
The ACCC believes that competition in the retail market has been resilient, with market shares remaining stable, though there have been shifts in the wholesale markets, not only arising from migration to the NBN but also as a result of mobile virtual network operators (MVNOs) moving between mobile networks.
The level of competition in the telecommunications sector is reflected in the fact that overall prices paid for telecommunications services fell in real terms by 1.5% in 2015-16. Both voice and mobile services prices fell, though internet service prices increased in real terms by 2.7% (as a consequence of increases in the prices for wireless and NBN services). But data inclusions for wireless and NBN internet services increased significantly, arguably meaning an overall benefit for consumers of those services.
The ACCC undertook a wide range of regulatory action to promote competition during 2015-16. This included but was not limited to working with NBN Co and Telstra to put in place arrangements to address concerns arising from service delivery agreements between those parties, making a new access determination for regulated domestic transmission capacity services and declaring a new superfast broadband access service. Telstra is unsuccessfully challenged the access determination made by the ACCC during 2015-16 for the wholesale fixed line services that underpin retail voice and broadband services on Telstra's network. Telstra may appeal that decision.
Consumer protection action
The ACCC is vigilant in its consumer protection activities in relation to the telecommunications sector, as demonstrated by the actions it took in this area in 2015-16. In that year, the ACCC undertook 15 major investigations under the Australian Consumer Law (ACL), having received 2,775 complaints and enquiries during the year. Those investigations were primarily focussed on complaints of misleading and deceptive conduct and false or misleading representations.
The actions that the ACCC took as a result of its investigations fall into three categories.
Litigation: The ACCC commenced Federal Court proceedings against the SoleNet and Sure Telecom group and the director of those companies in 2016. The Federal Court recently imposing significant penalties on the companies and the director, including aggregate fines of $250,000, after making findings that the companies had engaged in unconscionable conduct and undue harassment.
Infringement notices/enforceable undertakings: During the year, the ACCC issued 5 infringement notices to Optus after determining that it had reasonable grounds to believe Optus could have made false or misleading representations about its cable broadband services and also obtained an enforceable undertaking in relation to the relevant conduct. An infringement notice was issued to Voiteck in respect of conduct relating to internet and telephone services which the ACCC considered could be misleading and deceptive.
Informal action: Exetel agreed to compensate impacted consumers when, following investigation, the ACCC took the view that a clause in its standard residential broadband agreement might be an unfair contract term and its advertising of the relevant plans could be misleading. Vaya agreed to address concerns raised by the ACCC that it had engaged in misleading and deceptive conduct by refunding impacted customers and providing information to customers on their legal rights.
Things to watch out for ...
There are some key telecommunications related issues that are on the ACCC's radar for the next year:
Broadband performance monitoring and reporting (BPMR) program: The ACCC undertook a pilot BPMR program in 2015 and will now roll out a full scale program for use with its recently released guidance on broadband speeds claims. The program will run for a period of four years, costing approximately $7 million. Information on speeds and other metrics will be available from the second half of this year, allowing consumers to make better informed decisions when selecting au internet service providers.
Communications market study: The ACCC is undertaking a communications market study. This was announced in late 2016, with submissions closing on the ACCC's issues paper in October 2016 and further consultation now being undertaken. The ACCC's draft report is due to be released in August 2017, to allow consultation and finalisation by the end of the year. The study is intended to identify issues that may prevent relevant communications markets delivering efficient and competitive outcomes and suggest options to address any such issues that are identified. The study looks likely to focus on telecommunications service providers and possibly over the top providers, rather than a broader range of communications sector participants, which would include traditional media or content providers.
Declaration inquiry in mobile roaming: This inquiry, which follows earlier inquiries in 1998 and 2005, has created a great deal of angst in the telecommunications sector, with many stakeholders supporting the Telstra and Optus position that declaration of a wholesale domestic roaming service is unnecessary and will have a chilling effect on investment. However, the key champion of a declaration, Vodafone, does have its supporters. It is not clear when the ACCC will make a decision on this issue, though the ACCC indicates this will be by the end of April 2017.
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