The Australian Competition and Consumer Commission (ACCC) has refused to authorise the proposed network-sharing deal between Telstra and TPG Telecom.
According to the nation’s consumer watchdog, the deal, which was signed in February and would give TPG access to 3,700 mobile network assets, would likely have a negative impact on coverage, network quality and innovation.
The proposal outlined that TPG would decommission 725 mobile sites it operates within Telstra's coverage area, while Telstra would gain access to and deploy infrastructure on up to 169 of TPG's existing mobile sites and some of its existing 4G and 5G spectrum in regional areas.
“We examined the proposed arrangements in considerable detail. While there are some benefits, it is our view that the proposed arrangements will likely lead to less competition in the longer term and leave Australian mobile users worse off over time, in terms of price and regional coverage,” said ACCC Commissioner Liza Carver.
“Mobile networks are of critical importance to many aspects of our lives, including our livelihood, our well-being and our ability to keep in touch with friends and family. Any reduction in competition will have very wide-ranging impacts on customers, including higher prices and reduced quality and coverage.
“Mobile network operators compete on price and a user’s package inclusions, but importantly, they also compete on coverage, speed and other quality dimensions that are directly influenced by the nature and extent of their underlying network infrastructure.”
Caver said short-term benefits included the improvement of TPG’s network coverage and the generation of some cost savings and efficiencies, but in the longer term, there would be a reduction in infrastructure-based competition and consumers would be worse off over time.
“Competition between separate mobile networks drives companies to improve coverage for mobile users and to offer new technologies to more areas. For example, when Optus improves its regional network, Telstra responds by improving its network to maintain its market position,” she said.
“Infrastructure competition is what drives investments by mobile companies in broader, deeper and faster mobile coverage. We have looked beyond the potential short-term effects to consider the long-term impact of the reduced incentive to innovate and improve networks. We have concluded the proposed arrangements would likely significantly weaken this competitive process.”
Furthermore, the ACCC also had concerns about Telstra claiming how it could use TPG’s spectrum to reduce congestion in regional areas and that it would lock up “valuable” spectrum with the major telco, according to Carver, “raising barriers to entry and expansion and reducing the incentives and ability of rivals to compete”.
“Telstra and TPG are proposing the arrangements at a time when each of Telstra, TPG and Optus are competing in the roll-out of 5G infrastructure including in regional areas,” she said.
“After careful consideration of all the information available to us, including internal confidential information from the carriers, we consider that there is a real risk that TPG and Optus will invest less in critical infrastructure than they would if the proposed arrangements do not proceed.”
The ACCC said it received over 170 submissions and 40 witness statements and expert reports on the deal, which held “strongly competing views”.
“When assessing the proposed arrangements, we are principally concerned with the impact on the competitiveness of the market overall, not the impact on any individual firm. It is the overall competitive process which protects the interests of consumers,” Carver said.
“While Telstra and TPG have claimed the agreements will immediately lead to more choice for customers and better coverage for TPG customers, this misses the more significant impact on consumers which is that the reduction in competition in the longer-term will likely lead to higher prices, less innovation and quality of service, and less competitive pressure to expand and improve networks.”
Additionally, while Telstra and TPG offered court-enforceable undertakings to address the ACCC’s concerns, such as proposing a reassessment of competitive effects of the arrangement within eight years, it wasn’t enough for the consumer watchdog.
“The proposed arrangements would have an immediate impact on infrastructure competition in Australia and that impact would endure. Even if the arrangements were terminated after eight years, it would be too late to unwind the negative competitive impact,” Carver added.
Telstra and TPG to appeal decision
In response, both Telstra and TPG said they would appeal the ACCC’s decision.
Telstra CEO Vicki Brady labelled the decision as “extremely disappointing”, claiming there was “overwhelming support” from regional customers and community groups that it consulted.
“This decision is a massive missed opportunity for the people, businesses and communities of regional Australia,” she said.
“This innovative agreement will deliver real competition-driven benefits for regional Australia, something recognised by the ACCC in its determination.
“It also delivers better use of the government’s spectrum assets by unlocking unused spectrum that TPG holds in regional Australia but isn’t using.”
Meanwhile, TPG CEO Iñaki Berroeta claimed that the deal’s authorisation “would have freed regional Australia from its current mobile duopoly”.
Optus also chimed in, claiming the decision was “a win for Australians”.
“By knocking back this deal, the ACCC has helped ensure that our regional communities will continue to benefit from competition in a sector that is fundamental to our digital economy and future prospects,” said Optus CEO Kelly Bayer Rosmarin.
Optus VP of regulatory and public affairs Andrew Sheridan added that the deal would allow TPG to “quietly exit regional Australia [and] would entrench Telstra’s dominance, especially in the regions”.
“The ACCC’s decision is a great outcome for regional Australians and upholds three decades of policy designed to promote competition in telecommunications,” he added.