Monday , August 21 2017

Vodafone makes its case for regulated domestic roaming in regional Australia (and we support it)

Image Credit - @livetechau

As with many things in a continent like Australia, there’s a significant variance between what’s available in metropolitan (and outer metro) areas, versus what’s available in regional and rural areas, and mobile networks are one such area where the divide is real and significant.

In metro areas, we are spoiled for choice, with access to three major carriers and a good number of virtual network operators which piggy-back onto these carrier networks. However, once you go outside the metropolitan areas, quickly those network offerings start to reduce, until you end up in some regional areas where there might only be two networks operating, or worse, just one.

All too often, that “one network operating” is actually Telstra, which means that unless you’re a Telstra customer, or a customer of one of Telstra’s MVNOs that uses their network, you’re generally out of coverage altogether, unless your chosen carrier has a roaming agreement with Telstra. Vodafone does have (or did have) network agreements to roam onto Telstra’s network in some places, and it roams onto Optus in others, but these agreements are inconsistent at best, and don’t generally result in favourable mobile access anyway.

An argument for domestic roaming

Australia’s Competition and Consumer Commission is about to launch an inquiry into regulated domestic roaming, and Vodafone is making its case in support of the move. Cautiously, the case for regulated domestic roaming makes more sense than rejecting it, and here’s why.

Telstra has been the beneficiary of significant quantities of taxpayer funds over the years, from the time when it was a government-owned monopoly service provider, and even in more recent years where it has transitioned to majority private (non-government) ownership. As a result, Telstra has — unquestionably — the largest and broadest mobile coverage once you leave the metropolitan and major regional areas, and in many places, it’s the only coverage.

If money were no object, Vodafone and Optus would almost certainly expand their coverage into these areas to compete, but the playing field isn’t exactly level; Vodafone and Optus would have to spend their own money, whereas Telstra was able to fund much of this expansion with taxpayer’s funds, and equally, its own funds (because other areas of its operations were funded publicly).

However, money is an object, and because there’s an argument that Telstra’s network exists by virtue of public, taxpayer funding, in the interests of fairness, others should be allowed access to those network areas on competitive terms. At present, there’s no reason Telstra can’t permit carriers access to its network in particular areas, but there’s also no incentive for Telstra to do so on reasonable, competitive terms — there simply is no competitor for these carriers to turn to, which would drive prices down.

A regulated service declaration from the ACCC would mandate fair market access to these network areas, and the winner at the end of the day is the consumer, being offered more choice for their mobile services outside the big smoke.

An argument against regulated domestic roaming

That we can see, the major argument against this approach is from Telstra, and basically it is that the other carriers shouldn’t get a free ride. Telstra’s executives have variously made the following arguments:

“Regulated roaming would mean there was virtually no reason for any mobile phone company to invest in new coverage or better technology.”

– Tony Warren, Telstra Corporate Affairs, Group Executive, Blog, Telstra Exchange, September 2016

Of course, these arguments are rather easy to rebut. For starters, a regulated roaming agreement is more likely to encourage investment in new coverage and technology, because carriers like Optus and Vodafone would not be forced to spend money on (arguably unnecessarily) duplicating a network that’s already there. This would free up their capital to look at newer technologies and improving coverage where they can already — and fairly — compete.

“One can understand why some competitors would lobby for this – it would be a free Christmas present.”

– John Mullen, Telstra Chairman, Annual General Meeting, October 2016.

Telstra would take this viewpoint, but again, it overlooks the free Christmas presents that Telstra received for many, many years before it transitioned to private ownership. Of course Telstra — and it’s private owners / shareholders — would be upset about having to potentially wear the cost (read: not be able to charge a premium) of allowing carriers access to its network in regional areas, but if we’re being perfectly honest, a modicum of due diligence would have revealed that something like this was always a possibility.

In a truly free and open market, providers can charge what they like, or what the market will pay. That’s one of the tenets of our capitalist economy. However, ours is not a truly free and open market, because Telstra started with a significant publicly-funded advantage that the other players did not, and could not access. Thus, we — as the public — are entitled to expect some form of government intervention here to even up the playing field. Telstra are — to my mind — ignorant to argue otherwise.

“One of our competitors is seeking regulation to close this competitive gap by cheaply riding on our network to avoid spending their own money.”

– John Mullen, Telstra Chairman, Annual General Meeting, October 2016

Again, the only reason Telstra has been able to spend what it has in the regional and rural areas is because of the significant advantages it enjoyed from public ownership, and the advantages it now enjoys in its current form having inherited significant infrastructure from the public purse.

I can well understand Telstra and its shareholders being concerned about a likely drop in some earnings if other carriers gain regulated access to its network, but if Telstra really is as concerned about fair competition as it makes out in its arguments, it needs to consider what unfair advantages it is the happy recipient of.

Ausdroid’s take

Vodafone have said it most eloquently in their pitch, as set out by Dan Lloyd, Corporate Affairs Director:

If infrastructure is paid for or subsidised by the taxpayer and industry, which is the case with the incumbent’s mobile and fixed networks in Australia, there is a strong argument that it should be open-access.

We can only agree. Telstra has been very protective of the assets it inherited from public ownership, and has benefited immensely from some fairly ridiculous decisions in the past (some of the moves around the NBN are just woeful). Customers in regional and rural areas are starved for choice in mobile networks, and are often forced to pay Telstra’s premium prices for a network that increasingly (in recent years, at least) delivers a less than premium experience.

Let’s even up the playing field, and force Telstra to compete. Consumers win, the mobile industry wins, and ultimately Telstra wins in the long run too. It can have customers who want to be Telstra customers, rather than those who have no choice.

 
Vodafone's Pitch: Vodafone Red Wire.

Chris Rowland   Editor and Publisher

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12 Comments on "Vodafone makes its case for regulated domestic roaming in regional Australia (and we support it)"

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Taleim
Valued Guest
Taleim

Fantastic write up. To my knowledge, Australia is one of only a few countries that doesn’t have an agreement like this anyway. Telstra has had huge benefits from taxpayer money. Whilst I understand their reluctance as a business to do that, I’m not sure that we should care about their profits to the detriment of consumers. God forbid they should have to compete on anything but their network. Surely they have seen this coming and have a plan b though?

Really
Valued Guest
Really
I might get shot down in flames for this but all the carriers such as Vodafone charge extra for International roaming – you’d assume there is some sort on transfer pricing mechanism in place that compensates say Vodafone UK for Australian customers using the service? Why cant that be the case here across networks – Telstra allows Vodafone or Optus customers onto country and regional networks for a nominal cost, on an opt in opt out basis, not dissimilar to going to the UK or NZ and opting for the Vodafone roaming option. Ultimately you can’t penalise a company for… Read more »
Miffy92
Valued Guest
Miffy92

Because the telcos want money, and what better way to get it than *not* partner up with existing telcos in the same area?

Legit, tho – this is a good idea. It’s just that people up in places of good money want more of that good money.

Chris
Valued Guest

Honestly, and cautiously, this does sound like a good idea. A dollar a day to use your Vodafone inclusions roaming on Telstra in rural/regional areas, with transfer pricing between the two carriers as well? Great idea.

Duncan_J
Valued Guest
Duncan_J

only for ppl visiting those areas, still wouldn’t give choice to people who live there

Really
Valued Guest
Really
This is my point – people predominately choose a network on price or coverage – unfortunately you cant have both – coverage costs money and as a rural customer I am already having my network towers subsidised across the Telstra customer base (city folk with higher density and therefore users per tower, lower cost per tower vs rural towers with lower density and higher costs). I have to also accept that I might be paying slightly higher (although not much these days) to access a superior network. People with Optus and Vodafone etc… cant have it both ways – there… Read more »
Member
There was an opportunity in the nineties to split Telstra into retail and wholesale companies and sell the retail. The wholesale would have been the NBN and all retailers would have been on equal terms and we would have had real competition. Imagine a world with only one mobile tower on each hill and one on every hill necessary. And the wiring would have been upgraded to fibre a long time ago without any political nonsense. But the pollies at the time had no foresight and could only see the dollars coming in from the sale. Short term thinking as… Read more »
Member

I’ve always said that it makes almost no sense to have overlapping mobile infrastructure, even in urban areas. There is limited spectrum available to operate in, and limited funds to build the networks. If one combined the spending of Telstra, Vodafone and Optus on hardware and buying spectrum into a single mobile network just imagine how much better it could have been for every customer!

Member

Indeed

Member
Yep, completely agree. If Vodafone and Optus were really smart about it, they could make an even stronger case for domestic roaming on the regional and rural network by agreeing to financially assist Telstra to augment this network, rather than wasting resources overbuilding the existing network. The regional and rural network services a rather small percentage of the Australian population but can easily be the difference between life and death when things go wrong. As such, this network is never going to be the source of a significant profit to any mobile provider. Given limited resources from each of the… Read more »
montalbert_scott
Valued Guest
montalbert_scott

i agree totally. I’m not surprised Telstra are not giving up easily though- they are a business but they cannot argue about companies wanting to use a network for our benefit, that we the tax payer helped build.

Member

“they cannot argue about companies wanting to use a network for our benefit, that we the tax payer helped build.”

The cost to the taxpayer for the NBN to access Telstra’s pits and ducts that were, largely, built before Telstra was privatised would suggest Telstra do not share your optimistic appraisal of the situation.

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