Mobile markets in Australia

Mobile markets in Australia

Table - MVNO density - 2014

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  Telstra (Telstra Corporation Limited),
  
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  Optus (Singtel Optus Pty Limited), and
  
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  Vodafone (Vodafone Hutchison Australia Pty Limited [VHA]).
  

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  3GIS Pty Limited
  
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    Shared radio network in a 50:50 partnership between Telstra Corporation Limited and Hutchison Telecoms Australia Ltd (HTAL) in 2004.
    
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    HTAL owned Hutchison 3G Australia Pty Limited (H3GA) which offered the first 3G mobile service in Australia, under the brand ‘3’ utilising this network.
    
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    H3GA renamed VHA, with 50% stake sold in 2009 to Vodafone Group (50:50 owners)
    
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    Sharing agreement continued until 2012, at which point VHA and Telstra divvied up the base stations between their separate mobile operations.
    
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  Hutchison Australia
  
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    CDMA (2G) mobile phone network operating from 2000 to 2003 in Sydney and Melbourne.
    
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    The transition to MNO was made possible by purchasing a license for the 850MHz spectrum in Sydney and Melbourne in 1999.
    
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    Services offered under the licensed ‘Orange’ brand which had previously been offered as a resold Optus GSM since 1998.
    
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  One.Tel GSM 1800 Pty Limited (service owned by Lucent Technologies)
  
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    GSM mobile phone network built by Lucent for $1.2 billion and rolled out in 2001.
    
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    One.Tel collapsed in 2001 before testing finished, allegedly owing Lucent $600m.
    
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  Personal Broadband Australia (PBA) Limited (service owned by Kyocera Corporation)
  
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    Subsidiary of Commander Australia Limited at the time.
    
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    Offered the Kyocera manufactured iBurst wireless broadband service.
    
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    Network shutdown in 2008 due to prevalence of competing 3G service uptake.
    
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    M2 Group bought strategic assets of Commander Australia Limited in 2009.
    

With spectrum licensing fees and infrastructure costs that run into billions of dollars, high network maintenance costs, and the strategic actions of established providers, it is generally accepted that it is not feasible for smaller telecommunications providers to compete directly in “Access Network” activities in Australia. MVNOs therefore need to rely on the “Big 3” for wholesale access to mobile networks, either directly to the MNO or indirectly through a MVNE.

Telstra, Vodafone and Optus independently operate 2G, 3G and 4G networks across Australia and their wholesale divisions offer differentiated products based on network speed generations. All of the “Big 3” have signalled their plans to discontinue 2G GSM services due to growth in 4G services and wishing to repurpose their licensed 2G frequency ranges for other more modern services. Telstra has indicated it will discontinue 2G network services in 2016, followed by Vodafone and Optus in 2018.

The dynamics of mobile network providers in Australia

Significant features of this landscape include the market power of the Big 3 providers, their relationships with various MVNEs, and the poor performance of MVNEs in the Australian market, as highlighted by the failures of ispONE in 2014 and iTelecom in 2015.

Concerns over the power of the Big 3 are demonstrated by the historical criticism of Telstra by industry analysts for excessive pricing pressure on retail operators who re-sold access to the Telstra 3G network. For example, Boost Mobile made large cuts to the data allowances of their $40 plan in early 2014, when there was media speculation that Telstra wanted to drive adoption of their 4G services by customers with heavy data usage and saw the Boost Mobile service as being “too attractive”²⁹. The absence of wholesale access to Telstra’s 4G network has contributed to some recent questions regarding fairness as demand has grown for superior data speeds and volumes.

Data allowances have often been contentious and have contributed to the dynamics of the market. For example, in 2013, Kogan Mobile won a court case against their wholesale provider, ispONE (a Telstra prepaid MVNE), for blocking and suspending accounts of high data usage subscribers. Shortly thereafter, in August 2013, when ispONE was unable to accurately forecast costs for their prepaid mobile service business and so failed to make timely payments to Telstra, Telstra terminated its supply agreement and ispONE collapsed. Consequently, Kogan Mobile had to withdraw from the prepaid mobile service market because it could not secure direct supply arrangements with any of the Big 3.³⁰ An ispONE partner-reseller, ALDIMobile (Medion Australia), did secure an agreement with Telstra, but this was at the cost of halving the data allowance of its “unlimited” prepaid plan.³¹

Following the demise of ispONE, its core assets (including retail MVNO brands One Seniors, One Mobile and One Telecom, ispONE’s 61,000 customers and the iBoss MVNE billing platform) were acquired by Conec2 Group, through its newly registered subsidiary AsiaPac Communications, in September 2013. However, iBoss and One Telecom were forced into administration in May 2014 after carrier service restrictions were placed on their supplier, Australasian New Energy Group (which was owned by Conec2 owner Cameron Adams), by Telstra Wholesale, AAPT, Optus and Vocus. Their failure led on to the failure of their parent company AsiaPac Communications and its parent company Conec2.

The cascading effects of MVNE dynamics on MVNOs and retail consumers continued when Vocus Communications acquired around 50,000 iBoss, One Telecom and OneSeniors customers in May and MyNetFone acquired the iBoss billing platform in July 2014.

Continuing the saga of failing MVNEs, the MVNE iTelecom Wholesale failed in January 2015. iTelecom had produced 97% of the revenues of the iVNX Group, and its demise led to the failure of other group entities, including iVNE (a reseller of Telstra network services), CoMobile (which sold Telstra prepaid) and iVNO. The MVNE Wireline promptly acquired iTelecom’s assets, including its customer and supplier contracts) but declined to bid for the other businesses.³² This led to the migration of iTelecom’s MVNO customers to the Wireline service activation and billing system.

The tumultuous fortunes of MVNEs and related businesses have impacted dramatically on the operations of MVNOs and their retail customers. While other businesses may be quick to acquire the assets of the failed operators, MVNOs and retail customers are often left without services. The many thousands of customers affected by the exits of ispONE, Conec2 and iTelecom, whether they were direct customers of the failed businesses or customers of MVNOs who had contracted with the failed MVNEs, did not enjoy contiguous services. The liquidations of ONESenior, One Telecom and iBoss voided customer contracts. While this gave customers opportunities to switch providers, even short term loss of mobile phone services can be costly.

Following the momentous entries and exits of MVNEs and some MVNOs through 2013-2015, Australia has experienced further consolidation in the telecommunications market, bringing about a substantial number of MVNOs under more concentrated control.

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  The ACCC approval of the acquisition of iiNet by TPG in August 2015 established the merged business as Australia’s second largest ISP. This merger influenced mobile service customers because both companies also operate as MVNOs. It also exacerbated earlier consolidation of providers because, previously, iiNet had made numerous acquisitions that are reflected in its continuing operation of subsidiaries and MVNOs under the brands Adam Internet, Internode, Netspace, TransACT and Westnet.
  
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  In September 2015, merger plans were announced for Vocus and M2. The merger is subject to a vote by M2 shareholders, scheduled for early 2016. If successful, this deal will build on a series of major takeovers that started with M2’s acquisition of Unitel Pty Ltd in 2008, following which M2 greatly expanded their M2 Wholesale subsidiary into the mobile sector and became the exclusively endorsed wholesale aggregator MVNE for Optus. M2 continues to provide MVNO services via the ClubTelco, Commander, Dodo, and iPrimus brands.