The Australian Competition and Consumer Commission is holding public hearings into the mobile phone system. Those hearings are revealing that Australia has a flawed model of telephony. The flaws are not just in the mobile system, but extend to the ordinary network and to cable television.
At the hearings, Telstra objected to an idea put by the ACCC that the billion-dollar networks of Telstra, Optus and Vodaphone be opened to new players. The ACCC also wants to insist that the three networks open themselves to roaming, in effect ending the present tied system where a person has to choose a carrier and use it exclusively. Under the ACCC proposal people could choose one carrier for one call and a different carrier for the next.
All three carriers are happy to have roaming, but say it should not be mandated. New players AAP Telecommunications wants mandated roaming as do the equipment manufacturers, like Motorola and Ericsson.
On the opening up of networks to other carriers, Telstra, which has the biggest network, has the loudest objections and AAPT is the loudest proponent. Telstra points out that car companies and brewing companies are not required to open their plants to competitors. Having spent about $1 billion in creating the network, Telstra said it did not want to lose the competitive advantage that gave in getting and retaining customers.
Telstra’s points are reasonable ones. But they are arguments that should have been listened to and developed by the Australian government at the time the first privatised, competitive mobiles were introduced.
Telstra’s points reveal the weakness of the present structure. Competition has many benefits, but it was always absurd to allow three different companies to set up three different networks with wasteful duplication of resources. A healthy dose of pragmatism was needed. Socialists generally argue that all competition is a wasteful duplication of resources. Market theorists argue that monopoly, especially state-owned monopoly, is always bad, resulting in the stifling of initiative. With telephony and cable and satellite television Australia sadly went the whole market route.
It would have been much smarter to acknowledge that a $1 billion mobile telephone network in a country with a market the size of Australia’s is a natural monopoly. It need not be totally owned by the state, it could be partly or wholly privatised, but should be a statutory monopoly accountable to Parliament. The monopoly carrier would then allow up to perhaps half a dozen highly competitive service deliverers access to its network. It would be prohibited from entering the service-provision market itself. The same should apply for cable and satellite television and the general telephone network. Such a system would have reaped the undoubted benefits of competition and private ownership without the wasteful duplication, which is as mad as having two Hume Highways.
It is probably too late now, unfortunately, to go to that position without a lot of pain, though it may be a worthwhile long-term aim. The cries at the ACCC hearing illustrate the folly of competitive infrastructure. Newcomers, like AAPT and the equipment manufactures cannot get into the market, thereby depriving consumers of the very benefits that competition was supposed to bring.
The ACCC now faces a very difficult task in making recommendations that would create an ideal telecommunications system for Australia that would open the market to benefit consumers while enabling the creation of viable businesses. If one were to set out to create such a system, one would not start from here.