Australian mobile users could benefit to the tune of $658 million in savings every year if domestic roaming services are regulated, according to a new independent study by a London-based economic group commissioned by Vodafone Hutchison Australia.
VHA says the study independently confirms that domestic roaming would be a game-changer for regional Australia, saving consumers millions annually and providing the best opportunity to drive mobile coverage expansion.
VHA commissioned the study in response to the Australian Competition and Consumer Commission’s draft inquiry into domestic roaming and had asked the Federal Court for judicial review of the ACCC’s inquiry, saying it didn’t believe the inquiry had been carried out properly.
The competition watchdog made a draft decision last month not to declare wholesale mobile roaming services, saying there was insufficient evidence that declaration would improve competition amongst telcos.
{loadposition peter}But, the ACCC requested that VHA provide new evidence that domestic roaming would benefit consumers, and did so against a backdrop of key industry players, including VHA, angered by what they see as the continued market monopoly of dominant telco Telstra.
Telstra had argued strongly against any decision to declare mobile roaming services, maintaining that declaration would stop coverage being a differentiator in the Australian market and “remove the key rationale for investment in regional Australia for all operators".
In its draft decision, the ACCC said that declaration in regional, rural and remote areas may not reduce Telstra’s retail mobile prices to a significant extent and could well result in overall “higher prices if other service providers raise their retail prices to reflect the cost of roaming access prices, for example”.
{loadposition peter}But VHA described the decision not to declare wholesale mobile roaming as a missed opportunity, denying mobile consumers the benefits of increased coverage, competition and choice.
VHA chief strategy officer Dan Lloyd said the ACCC called for even more evidence, so Vodafone delivered.
“The savings for consumers have been independently calculated to be $658 million per year. That’s an extraordinary amount of money that could be staying in the wallets of consumers, instead of lining Telstra’s pockets with no added value.
“The benefits are so large that regulated domestic roaming is a ‘no-brainer’ for regional Australia.”
Lloyd said VHA found the ACCC’s draft decision baffling, “particularly since many of its comments strongly support the case for regulated domestic roaming”.
“We couldn’t agree more with the ACCC that roaming wouldn’t undermine Telstra’s incentives for expanding coverage, as taxpayers have been footing the bill for that for years. The ACCC also admitted that regional Australians are paying too much for mobile services.
“We also agree with the ACCC’s view that Telstra has been running a scare campaign about regional investment. Telstra’s campaign is clearly designed to confuse regional Australians, and put public and political pressure on the ACCC.”
According to VHA the $658 million consumer savings figure following regulation of domestic roaming has been independently calculated by Frontier Economics (London) and reconciles closely to analyst estimates of the consumer benefit/Telstra net EBITDA loss, including Goldman Sachs ($546 million per annum) and Macquarie ($590 million per annum).
VHA says the figure also closely correlates to actual Telstra share price movements following the ACCC draft decision.
Lloyd also said the draft decision appeared to ignore the significant regulated roaming experience overseas.
“In New Zealand, the US, Canada, Spain, France and South Africa, regulated domestic roaming has boosted mobile investment, meaning more coverage in more places,” he said.
“Over the past ten months, no one has put forward any evidence that domestic roaming would have a negative impact on investment. There have only been empty threats.
“Telstra tries to convince everyone it is regional Australia’s knight in shining armour. But even the ACCC admits Telstra doesn’t have any incentive to invest in regional areas unless taxpayers cough up.”
VHA notes that its latest submission highlights the mobile market in New Zealand where three carriers, including Vodafone, recently put forward a proposal to government to jointly build a vastly expanded regional network – and that the proposal would increase land area coverage by 25% and provide a roaming signal to all three operators.
“This is the sort of collaboration that domestic roaming encourages and it’s sad that a lack of collaboration in Australia continues to hold the country back when so many similar economies are moving forward.”
Lloyd said VHA is also concerned that disproportionate weight has been given to Telstra’s scare campaign.
“Domestic roaming is too important for regional Australia to get wrong. The communications future of regional Australia can’t be determined on the basis of a survey or a popularity contest.
“We hope the ACCC has not been influenced by public, or indeed political, pressure placed on it by Telstra’s so-called ‘investment strike’.
“VHA says the criteria for declaration are met and declaration of domestic roaming in regional Australia should occur,” Lloyd concluded.