COMMENT: The ACCC’s strike at competition benefits

Posted on: Tuesday, 10th March 2015

It’s hard not to read the Australian Competition and Consumer Commission’s latest annual report into telecommunications competition without breaking into a wry smile.

The report is the usual listing of the claimed successes for competition policy such as price reductions in various services, market share shifts away from Telstra and reduced complaints about service quality. And as usual, no attempt is made to delineate between the various inputs into such outcomes: for example, the proportion of price reductions that can be attributed to more efficient business processes resulting from retail market competition versus, say, reductions in technology price inputs or international bandwidth prices beyond Australian jurisdiction. Ditto on the consumer complaint side, where complaint numbers are often proportionate to the activism of the organisation receiving the complaints.

But the most bemusing aspect of the report is the reference to the ACCC’s “welcoming” of the Vertigan review, especially its recommendation for “infrastructure based competition.” The ACCC
sees itself as a “long-term advocate of infrastructure competition.”

Then, without apparently seeing the irony of its position, it goes on to endorse the idea of a wholesale-only NBN, a structurally separated Telstra and the imposition of wholesale-only requirements on “all other monopoly” providers of fixed telecommunications services.

One problem though. The Vertigan review didn’t quite see things the same way. Vertigan did not believe in a wholesale-only unitary NBN at all, instead recommending its break-up into technology-based or geography-based units in order to create a little more semblance of competitive tension and transparency. Neither was Vertigan so keen on prohibitions on competitors to the NBN, or what the ACCC sees as “all other” monopoly providers of fixed telecoms. And, indeed, Vertigan wasn’t too keen on the ACCC being the custodian of competitive safeguards in the telecoms market at all, believing it should lose its economic regulation role in the sector.

At least the ACCC wasn’t so shameless as to also welcome the Scales review into NBN policy process development. That report found that the ACCC overstepped its authority by advising the Conroy NBN panel of experts against FTTN and in favour of FTTH. As Bill Scales wrote, “In my examination of this unsolicited advice and intervention by the ACCC in the [NBN] RFP process, despite the ACCC’s view to the contrary, I cannot find any compelling reason why the ACCC decided it was in a position to make comments on this matter. I have not been able to find any evidence that the ACCC had been asked by the Panel or the Government to make this intervention, or that the ACCC had any particular expertise that would make it competent to make these comments.”

Interestingly, the ACCC’s latest competition report provides a slight hint of damnation of what was its own preferred approach and was still de facto public policy given the Turnbull multi-technology approach had yet to be implemented during the reporting period. Of the various sub-types of telecommunications service pricing it analyses, only one increased at a level equal to or greater than the consumer price index. That’s right: NBN-based services. Not that it mattered. NBN penetration was so low in the reporting period that its prices made up just 1.1% of the sub-index weight of the ACCC’s overall telecommunications services index. Thank the slow FTTH deployment for that.

One analysis I would like to see from the ACCC would proceed as follows.

Take the real and projected costs of its preferred FTTH NBN approach to date, in terms of both the cost to consumers as taxpayers of the billions spent already on a network that currently provides for just over one percent of the telecoms market and the billions more required to complete such a network over a decade or more. Compare that cost to the consumer effects of the general reductions in prices across legacy fixed/mobile and increasing NBN prices. I think one would find that those net consumer benefits would be comprehensively wiped out by the costs of the ACCC’s preferred NBN approach. Which begs the question of the ACCC: what has it all been for?

Grahame Lynch

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