Liberalisation of the Australian

telecommunications industry

Richard Home

Senior Manager – Strategic Analysis & Development, Communications Group

Australian Competition and Consumer Commission (ACCC)www.accc.gov.au

Overview• Liberalisation process

• Results

• Scope for further liberalisation

• Lessons learnt

• Late 80s: formation of independent regulatory body, Telstra corporatisation

• Early 90s: licences provided to Optus and Vodafone (mobile) to compete with Telstra

• Late 90s: full competition allowed- licences more readily available- Telstra part privatisation- legislative changes: access regime, anti-competitive conduct,

etc

Liberalisation process

• Access regulation• Setting terms and conditions of access (both price

and non-price) in arbitrations/undertakings

• Enforcement• Prosecution of anti-competitive conduct

• Reporting

Role of the ACCC

Liberalisation results (fixed)• Telstra’s copper network still dominates access (87%)

- Optus HFC network main alternative (12%)

• Prices since 1997-8

- basic access 79% - national long distance 34%

- local calls 44% - international long distance 65%

• Retail market share in 2004-5

- basic access and local calls: Telstra 77%, Optus 12%

- long distance and fixed to mobile calls: Telstra 63%, Optus 12%

Liberalisation results (mobile)• Four mobile network operators and some resellers

• Prices have fallen 13% since 1997-8

• Now more mobile subscribers than fixed line services

• Retail market share dominated by network operators

- Telstra 45%, Optus 32%, Vodafone 17%, Hutchison 5%

(2005)

Liberalisation results (internet)

• Australians quick to embrace dial-up internet, but broadband slow to develop

• 650+ internet service providers

• Broadband now growing quickly

- growth really accelerated early 2004 - new entry and corresponding price reductions

- takeup is now close to OECD average

- some quasi-infrastructure competition since 2005 with competitors investing in DSLAMs

• Competitive pressure has led to Telstra considering a fibre-to-the-node network upgrade

Further liberalisation?• Objective is to remove regulation where

competition is effective and sustainable

• Competition is sustainable if benefits would not be lost if regulation was removed

Further liberalisation?• This has occurred to very limited extent in access

regime

- local calls and transmission services in certain areas

• Concerns

- many markets are still highly concentrated

- balance of re-sale vs infrastructure-based competition

- continued degree of horizontal and vertical integration of Telstra

- most competitors have to buy wholesale services from Telstra, but then compete with Telstra’s retail arm

- entrants’ investment vulnerable to foreclosure as a result of Telstra’s actions and responses

Further liberalisation?• Market entry already open to all

• Mandated structural separation of Telstra not a prospect

• Operational separation - but not strictly liberalisation

• Scope for existing regulation to be further pared back as competition develops – ie fewer services covered

• But some prospect of new technologies creating new bottlenecks – eg FTTN

• Trend towards Government funding of (broadband) services that may be otherwise uneconomic:

- HiBis

- Broadband Connect

- Metro Connect etc

Lessons learnt• Competition in this sector is a gradual process

• Regulating access to networks is very complicated, suffers delays and gaming

• Difficult to prove anti-competitive conduct

• Ideally would have competing networks - eg PSTN and cable

• Interaction between competition policy and social policy

Conclusion• Path to competition has been more difficult and has

taken longer than expected; but

• Competition has nonetheless delivered large benefits to consumers, such as lower prices and better services

• Benefits most evident in areas with infrastructure competition

• Still many risks to competition