Regulator slaps telcos for high SMS fees

Rates for terminations have no relation to actual cost, ACCC finds

Mobile customers in Australia could see SMS rates plummet after a decision by the Australian Competition and Consumer Commission (ACCC) to regulate prices for SMS termination.

Under current arrangements, the receiving mobile phone operator of an SMS charges a termination fee to the carrier who sent the message. The sending carrier then passes down the cost to the end user who composed the SMS.

The ACCC announced the decision as it concluded an inquiry into the regulation of mobile terminating access services (MTAS). The ACCC also decided to continue regulating the termination fees for MTAS voice calls for until 30 June 2019.

“The ACCC expects to see SMS termination rates reduce which should lead to lower SMS prices for consumers,” said ACCC Commissioner Cristina Cifuentes.

In the inquiry, the ACCC discovered that the termination fees for SMS had not changed for more than a decade and that the rests were many times higher than the actual cost of providing service. In addition, it found that commercial negotiations had failed to lower rates.

“The ACCC has found that mobile network operators (MNOs) have a monopoly over the voice and SMS termination services on their networks and that, currently, there are no effective substitutes for such services,” the regulator said in its report.

“As a result, the ACCC is of the view that MNOs have the ability and incentive to deny, or set unreasonable terms of access to these termination services in the absence of declaration.”

Cifuentes said the telcos have used their power to keep wholesale SMS prices high.

“The ACCC is concerned that mobile network operators are able to keep wholesale SMS termination rates significantly above cost,” Cifuentes said.

“The ACCC considers that this is having a negative impact on competition in wholesale and retail markets. In particular we are concerned that these rates are affecting SMS prices available to low income consumers.”

The ACCC has commenced a public inquiry into making a new final access determination for MTAS. The existing determination will apply until a new one is released, it said. The ACCC said it will release a discussion paper on MTAS pricing “shortly.”

While supporting the decision to continue regulating MTAS, Telstra said there was no point to start regulating SMS prices.

“We see little benefit in regulating wholesale SMS as our customers already have access to unlimited SMS on our most popular plans and can choose from a host of alternatives with the emergence of smartphones, message applications and social media,” a Telstra spokeswoman said.

However, Telstra’s rival Optus applauded the decision as a win for competitors that will allow Optus to continue to provide unlimited texting plans.

“Optus welcomes the decision of the ACCC and looks forward to substantially lower termination rates, which should increase retail price flexibility for mobile providers,” an Optus spokesperson said.

“The trend is clear: customers want simpler, more transparent telecommunications pricing. This decision will help deliver that outcome.”

But another competitor, Vodafone, agreed with Telstra that SMS price regulation is not necessary.

"The declaration of SMS termination introduces unnecessary red tape as the majority of Vodafone’s plans already include unlimited SMS usage," said Vodafone general manager of public policy, Matthew Lobb.

"What we believe needs urgently addressing is the impact from Telstra’s high fixed-to-mobile voice rates. These have not fallen in line with the substantial MTAS reductions of the last decade and have already cost consumers more than $1.4 billion."

Vodafone has long complained that Telstra has failed to pass on to customers savings received from cost reductions for calls from fixed lines to mobile phones.

The Australian Mobile Telecommunications Association declined comment.

Today’s decision is available on the ACCC website.

Adam Bender covers telco and enterprise tech issues for Computerworld and is the author of dystopian sci-fi novels We, The Watched and Divided We Fall. Follow him on Twitter: @WatchAdam

Follow Computerworld Australia on Twitter: @ComputerworldAU, or take part in the Computerworld conversation on LinkedIn: Computerworld Australia

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Tags regulatorypricesratesregulationbill shockTelcotelecommobileAustralian Competition and Consumer Commission (ACCC)sms

More about Australian Competition and Consumer CommissionAustralian Competition and Consumer CommissionAustralian Mobile Telecommunications AssociationOptusTelstra CorporationTelstra CorporationVodafone

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