A game of phones: ACCC reviews existing regulation of telecommunications
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On 20 December 2023, the Australian Competition and Consumer Commission (“ACCC”) released a draft report about the combined declaration inquiry into nine wholesale telecommunications services (“Draft Report”), which are due to expire in 2024.
The nine declared services which are the subject of this inquiry are:
- Domestic transmission capacity service.
- Unconditioned local loop service.
- Line sharing service.
- Wholesale line rental.
- Local carriage service.
- Fixed originating access service.
- Fixed terminating access service.
- Wholesale Asymmetric Digital Subscriber Line (“ADSL”) service.
- Domestic mobile terminating access service.
As discussed in our previous article, access to telecommunications services is regulated under Part XIC of the Competition and Consumer Act 2010, which sets out the processes for the ACCC to declare a telecommunications service as an “eligible service”. The ACCC may declare a service if it is satisfied that the declaration will promote the long-term interests of end-users (“LTIE”).
If a service is declared, service providers must provide access seekers (i.e., other carriers and CSPs) access to the service upon request. They must also comply with other requirements that pertain to, for example, quality of service. The ACCC is able to set prices and conditions for access to declared services via a final access determination.
The ACCC commenced the public inquiry last year and released a Discussion Paper in late May 2023. The inquiries into the nine services were combined to enable the ACCC to conduct a more efficient, synchronised consultation process and lower the regulatory burden.
ACCC’s Preliminary Decision
The ACCC preliminary decision in relation to each of the declared services is outlined in the table below. The most significant change is the decision to redeclare termination of Application-to-Person (“A2P”) SMS.
|
Service |
ACCC’s preliminary decision
|
|
Resale fixed voice services (wholesale line rental and local carriage service)
|
Extend declaration for a further 5 years. |
|
Wholesale ADSL |
Extend declaration for a further 5 years. |
|
Network access services (unconditioned local loop service and line sharing service) |
Declaration should not be extended. The declaration of both the unconditioned local loop and line sharing services shall expire on 30 June 2024. |
|
Fixed voice interconnection services (fixed terminating access service and fixed originating access service) |
Extend declaration for a further 5 years. |
|
Mobile terminating access service (“MTAS”)
|
Extend declaration of MTAS for a further 5 years. It is also proposing to vary the MTAS service description to include A2P SMS termination (but not P2P SMS termination). The ACCC is also proposing changes to the MTAS service description to include reference to termination to a mobile number as opposed to a digital mobile network. |
|
Domestic transmission capacity service |
Extend declaration for a further 5 years and vary the service description. The ACCC is proposing variations to the service description to reflect changes in technology, and align the service description with commercial practice. It also proposes changes to the competition criteria to increase the focus on areas of monopoly infrastructure in regional areas. |
ACCC’s preliminary position in relation to MTAS
A central issue in the inquiry concerned whether the ACCC should vary the MTAS service description to include SMS termination. SMS termination is a service that enables the carriage of SMS from a point of interconnection to the subscribers of a mobile network operator (“MNO”).
While SMS termination had been included in the 2014 service description for MTAS, it was removed by the ACCC in 2019. At the time, the regulator considered that over-the-top services (“OTT”) were limiting MNOs capacity to exercise market power.
In this inquiry, the ACCC considered two types of SMS services, person-to-person (“P2P”) and A2P SMS. Importantly, the ACCC observed that due to technological advancements, it was now possible for MNOs to distinguish between P2P SMS and A2P SMS.
In its preliminary findings, the ACCC considered that OTT services were a close substitute for P2P SMS but not for A2P SMS.
The ACCC noted that the use of A2P SMS services has significantly increased since SMS termination was removed in 2019. In particular, it found that A2P SMS is popular for time-sensitive use cases and that A2P SMS appears to be the “single most important method” for multi-factor authentication in Australia.[1] It also found that demand for A2P SMS will continue to grow.
The ACCC also observed that, while the relevant wholesale and retail markets have not materially changed since 2019, prices for terminating A2P SMS have risen significantly. The ACCC is concerned that, without declaration, MNOs will have the means and incentive to increase termination rates, and this will lead to increased wholesale and retail prices going forward. This is because each MNO has a monopoly on termination of SMS for its respective subscribers.
The ACCC’s preliminary view is that varying the service description to include declaration of A2P SMS will promote competition in the wholesale and retail A2P SMS services market and encourage the economically efficient use and investment in infrastructure. This seems to be a reasonable conclusion to reach given the expert evidence before the ACCC which pointed to the competitive benefits likely to flow from regulation.
Submissions to the Draft Report are due by 16 February 2024. Should you wish to discuss the Draft Report further, or require assistance in making a submission, please contact Thomas Jones, Matthew Bovaird, or Dylan McGirr. This article was written with the assistance of Charlotte Ainsworth.
[1] Draft Report, page 67.
