Strict competition standards for telcos a boon for consumers

Economy and consumers benefit from a competitive Australian telco sector

Commpete, an alliance which advocates competition within the digital communications sector in Australia, has welcomed a renewed focus on conditions perpetuating a ‘merger mentality’ by the big three dominant players within the  Australian telecommunications market.

Commpete revealed that a long history of research backs up the Australian Competition and Consumer Commission’s (ACCC) decision to take a steadfast approach to the appraisal of the proposed merger between TPG Telecom and Vodafone Hutchison.

A significant number of empirical studies found that reduced competition within a telco market may increase prices for consumers. Research reaching back over two decades, observed in more mature European markets - 33 OECD countries, 27 European Member States and 240 firms from 119 countries - found the effect of increased concentration led to higher prices of between 17-20 percent for consumers, and a substantial lessening of effective competition. 

For example, an analysis of the effect of mergers and new players to telco marketplaces within 27 European Member States by the Body of European Regulators of Electronic Communications (BEREC) found that reducing the number of dominant operators specifically from four to three created a heightened risk of long-run price increases.

“Commpete strongly objects to the TPG and Vodafone merger in its current form and advocates that merger decisions should not be made in haste – and never simply ushered through,” Commpete Chair Michelle Lim says.

“When the ACCC decision was delayed, there was much surprise throughout the industry. But I believe it’s an indication of how we have all become conditioned to think through the eyes of the incumbents.  That is, what is best for the incumbents is a fait accompli.”

The ACCC has announced it will hand down its final decision on the proposed merger between TPG Telecom and Vodafone Hutchison Australia on 9 May. In December last year,  following a 12-week review, ACCC Chair Rod Sims raised concerns the merger will substantially lessen competition.

If successful, the $15 billion merger would create a company with more than 27,000km of fibre networks and 5000-plus sites across Australia.

Commpete is confident that the ACCC’s application of strict competition standards to the decision will be good for consumers and highlights there are alternatives to further consolidation of the Australian telecommunications marketplace.

Mergers are permanent, but cost synergies are achievable through other arrangements such as network sharing. The benefit of network sharing is that either party can exit the arrangement if they wish to pursue a more unique network deployment. An example of this is when Telstra launched its NextG network independently from Hutchinson. 

Commpete firmly believes the structure of the Australian telecommunications market should be to the benefit of the consumer and that means more, not less, competition.