Reviewing the regulatory framework

There are several important policy processes underway that will influence future regulatory arrangements. In particular, the Independent Cost–Benefit Analysis and Review of Regulation (Vertigan Review) and the Competition Policy Review (Harper Review) are examining the regulatory settings within the sector and the broader Australian economy. These reviews may have significant implications for the regulation of the telecommunications industry and competition law and policy in Australia.

The Vertigan Review examined the future regulatory and policy framework for the communications industry. The ACCC’s submissions to the review focused on the dynamic efficiency that is driven by infrastructure-based competition, which is likely to promote the long‑term interests of end‑users. We also noted that where efficient network duplication can occur, competition between networks can drive product differentiation, innovation and timely investment.

The ACCC welcomes the Vertigan Review’s recommendation that infrastructure-based competition be the guiding policy for the delivery of services in the sector. We consider that NBN Co should put in place arrangements that will allow for future separation of NBN Co at an appropriate time. We also support the review’s recommendations for promoting a pro‑competitive industry structure and an effective regulatory framework.

We consider that the telecommunications regulatory framework must be capable of ensuring continued competitive access to existing networks, a smooth transition process as the NBN is deployed and an effective regulatory framework for the NBN as a monopoly wholesale provider.

The Harper Review is the first comprehensive review of Australia’s competition laws and policy in over 20 years. The review is examining not only the current laws but the broader competition framework to increase productivity and efficiency in markets, drive benefits to ease cost of living pressures and raise living standards. This review will have implications for competition across the broader Australian economy.

Periodic reviews of regulation are necessary to identify redundant regulations and to streamline processes. We contributed to the government’s deregulation agenda by removing some ACCC regulatory requirements, for example some record keeping rules that were no longer considered to be necessary or efficient. We also contributed by providing submissions to external reviews.

While targeted, proportional and effective regulation plays an important role in promoting competition and protecting consumers, we recognise that reviewing the effectiveness of regulation is important to reduce the regulatory burden.

1.3 Ensuring compliance with the Competition and Consumer Act

While a competitive market can deliver benefits to consumers, the ACCC also works to protect consumers by investigating and taking action against potential breaches of the Australian Consumer Law (ACL). Consumer protection in the telecommunications sector remained a priority for the ACCC’s compliance and enforcement work during the reporting period.

Some important enforcement outcomes during the reporting period include:

• 
  A High Court ruling against TPG Internet Pty Limited which reinforced the importance of accurately stating the full cost of bundled plans to consumers in headline advertising.
  
• 
  A court enforceable undertaking from Apple Pty Limited, seeking to ensure Apple provides remedies equivalent to those in the consumer guarantee provisions of the ACL at any time within 24 months of purchase (and for some products, beyond 24 months).
  
• 
  The first case pursued by the ACCC exclusively about the unfair contract terms provisions of the ACL, where the Federal Court found that a number of clauses in Bytecard Pty Limited’s standard form consumer contract were unfair.
  
• 
  A Federal Court order against Startel Communications Pty Limited for misleading indigenous consumers about their ACL rights when cold calling consumers to sell mobile phone plans.
  
• 
  A Federal Court order against Zen Telecom Pty Limited regarding its unsolicited telemarketing practices. Zen Telecom engaged in misleading conduct and made false and misleading representations that it was acting on behalf of Telstra or a business or company associated with Telstra, when it did not have any such affiliation.
  

We also investigate and take action against potential anti-competitive conduct in the telecommunications sector in accordance with the telecommunications-specific provisions (Part XIB) and general provisions (Part IV) of the CCA. We undertook one investigation into alleged anti-competitive conduct in the telecommunications sector during the year.

2 Competition in the telecommunications industry

This chapter outlines competitive developments in the telecommunications industry in 2013−14. We examine consumer trends, infrastructure investment, market concentration and price changes to assess the state of competition. We also look at the types of matters that are concerning consumers.

Competition continued to develop during 2013−14. For example, price competition started to pick up after remaining subdued for the past few years. Real prices for fixed line and mobile voice services have now halved since competition was introduced in 1997−98.⁹

Market developments discussed in this chapter include:

• 
  consumer trends (section 2.1)
  
• 
  competitive developments in fixed line markets (section 2.2)
  
• 
  competitive developments in mobile and wireless markets (section 2.3) and
  
• 
  telecommunications complaints (section 2.4).
  

As at June 2014 mobile phone services in operation (SIOs) were 2.5 times higher than the number of fixed line voice connections.¹⁰ Figure 2.1 shows a comparison of mobile and landline services in operation from June 2008 to June 2014. It shows that mobile phone SIOs increased slightly during the year, while fixed line telephone subscriptions continued the downward trend observed since 2005.¹¹

Source: ACMA Communications Reports and ABS Internet Activity Australia (8153.0).

The number of consumers relying solely on a mobile phone keeps growing. The Australian Communications and Media Authority (ACMA) estimated that the number of adult Australians with a mobile phone and no landline telephone at home increased 33 per cent in the year, reaching a quarter of the adult population. This trend is closely related to consumers’ age. More than half of the mobile-only consumers were aged between 25 and 34, whereas only 7 per cent were aged over 65.¹²

For most consumers, mobile services continue to complement fixed line telephone services, rather than be a complete substitute. Some consumers are hesitant to go ‘mobile-only’ because of higher mobile charges or concerns about the reliability and coverage of mobile networks. Further, some pricing features of fixed line services, such as the untimed local call feature, are unlikely to be replicated by mobile services.

Consumers are using mobiles for more calls

Mobile phones are being used for a greater proportion of voice calls. Figure 2.2 shows the continuing shift from landline telephones to mobile phones to make voice calls.

Source: Telstra’s annual reports and ACCC RAF RKR reports for Telstra, Optus and VHA.

The total number of call minutes has declined in recent years, suggesting that consumers are also using alternative technologies to communicate.¹³ While mobile phones are the most popular (used by 93 per cent of Australian adults for voice calls) other services such as email, text messaging and fixed line telephone calls are also used by the majority of consumers. In the six months to May 2014, 63 per cent of consumers used five or more separate communications services to meet their communications needs.¹⁴

The use of over-the-top voice over internet protocol (VoIP) services is also growing. According to the ACMA, the number of VoIP users grew 6 per cent during the year. In particular, there was strong growth in mobile VoIP usage with the number of VoIP users via smartphones and tablets increasing 41 per cent and 48 per cent respectively over the year.¹⁵

Consumers are upgrading their mobiles

The growth of mobile subscriptions has been slowing in recent years and declined marginally in 2013−14. This suggests that mobile subscriptions are reaching saturation levels.

Despite this trend, mobile handsets with internet access increased 5 per cent during the year, reaching 20.6 million at June 2014.¹⁶ This indicates that consumers are upgrading their mobile phones to internet-enabled devices. According to the ACMA, 74 per cent of adult Australians used smartphones as at May 2014, compared to 64 per cent in May 2013. Further, the proportion of adult Australians using their mobile phone to access the internet grew 8 percentage points in the year to May 2014, reaching 70 per cent of the adult population.