International experience shows having four mobile operators in a market delivers better outcomes for consumers, the chair of the Australian Competition and Consumer Commission has said, defending a decision to oppose a proposed merger between Vodafone Hutchison Australia (VHA) and TPG.
The ACCC’s decision has sparked legal action by VHA and TPG. ACCC chair Rod Sims has argued that the merger will prevent the emergence of TPG as Australia’s fourth mobile network operator, despite TPG’s decision to ditch its plans to operate a small-cell-based network.
“Australia already has a very concentrated mobile services market, with the three network operators, Telstra, Optus and Vodafone,” Sims told the 2019 Competition Law Conference.
“TPG has a proven track record of disrupting the telecommunications sector and establishing itself as a successful competitor in fixed broadband services,” Sims said. “This has had large benefits for customers.”
TPG has a fixed-line customer base of 1.9 million, as well as 400,000 mobile customers (which use the VHA network). It also owns 27,000-kilometres of fibre links, and licences for a significant amount of spectrum.
“Removing TPG as an independent player, with its customer base, backhaul infrastructure and spectrum, would, in our view, have a very negative impact on Australian consumers in this increasingly important markets,” Sims said.
International experience shows that “markets with four mobile players result in better outcomes for consumers,” Sims said.
“We see this currently playing out overseas in markets as diverse as Canada and France.”
The ACCC chair said that data gathered by Canada’s competition regulator shows mobile pricing is much lower in regions where there are four operators, while prices are high and stable where there are three players.
“A stable three-player market facing no threats will likely lead to stable and so-called rational pricing,” Sims said.
“The prospect of more rational pricing, meaning higher and stable pricing, was warmly anticipated by many analysts when this merger was first announced. Most commentators at that time, therefore, saw the merger as a long-term positive for Telstra and Optus.”
However, Sims said that “rational pricing” should not be confused with consumers’ interests.
Australians already pay more for mobile communication services than some comparable countries, Sims said.