The Australian Competition and Consumer Commission (ACCC) has made a decision to cut wholesale prices for the network transmissions which supply connections to regional mobile phone towers, opening up the way for Optus and Vodafone to push into less populated regions in Australia at rival Telstra’s expense.
The ACCC’s final decision on regulated prices for what’s known as the backhaul or Domestic Transmission Capacity Service (DTCS) network – the wholesale service used by telecommunications companies without their own infrastructure – will see the average price for low capacity services (2Mbps) fall by 22% in regional areas (and 13% in metro ones), while 100Mbps high capacity services costs will drop by a massive 78% in the regions and 76% in metro areas.
The decision not only hits Telstra’s bottom line, it also leaves the monopoly position previously enjoyed by Australia’s leading telco vulnerable to increased competition.
The ACCC regulates pricing on routes where there is low competition and the latest review, four years after the last determination in 2012, reflects the competition watchdog’s view that commercial prices have fallen considerably.
The regulated prices are based upon a benchmark of prices in more competitive areas such as the cities. The latest decision runs until the end of 2019.
ACCC Chairman Rod Sims said he expects to see increased competition and lower prices for consumers as a result of the decision.
“Because transmission is an essential input for many services, we consider that lower prices will promote competition in downstream markets and put more downward pressure upon wholesale transmission prices, particularly in regional areas,” he said.
“We expect that these lower prices will be passed on to end users in the form of lower prices and new, innovative services.”
But how much prices will fall in any given area by will depend upon the geographic route type, capacity, and distance of a particular service.
For example, the current failure of the Basslink cable to Tasmania will see the cost of repairs factored into the wholesale price.
The ACCC’s decision has been welcomed by Telstra’s rivals, and only came following extensive lobbying after the initial draft decision, released last September, was far less favourable.
Vodafone’s chief strategy officer Dan Lloyd said the ACCC decision was proof of the argument his company had put for many years and will see the business increase its presence in the bush.
“High transmission prices have been one of the biggest barriers to competitive telecommunications in regional Australia,” he said.
“This decision is a major win for regional customers as it will open the door to increased competition and greater choice of provider, leading to fairer prices.
“For Vodafone, it means we will be able to bid on sites under the Mobile Black Spot Programme which were previously unattainable.”
An Optus spokesperson told Business Insider they were pleased the ACCC had taken note of the industry’s concerns on the draft decision.