Regional Australia needs roaming

Although national roaming has been positioned by some in Australia as rare or even outrageous, it is in fact incredibly common internationally.

Regional Australia is missing out. If you live in cities, you can take your pick of world class 4G networks. But if you live in regional Australia, you either haven’t had service or haven’t had a choice.

Simply put, there are fundamental competition issues in the mobile communications market in regional Australia. Since the communications industry is a key driver of economic growth, productivity and innovation, these problems deserve to be taken seriously. This issue deserves more than histrionic rhetoric. It deserves a detailed empirical examination and debate.

A country such as Australia, with its dense population pockets and large geographic footprint of more than 7 million square kilometres, makes it commercially challenging for mobile network operators to expand out of large cities and regional centres on their own.

The costs of mobile network deployment are very high in regional areas. When we build mobile towers, we need to connect these towers via transmission links to our network.

This transmission network largely consists of underground fibre optic cables running for vast distances from mobile towers back to various hubs across Australia.

Telstra, as the legacy provider of telecommunications in regional Australia, has existing transmission links to almost every town in Australia. Much of this transmission network was constructed with taxpayer funds when it was a government-owned corporation. It was built to support fixed line services and incrementally expanded to support mobile services as technology and consumer preferences evolved.

While the government has identified this problem and begun to implement some positive steps, such as the Mobile Blackspot Programme, the serious cost to the community and the drag on productivity demands faster action.

Although national roaming has been positioned by some in Australia as rare or even outrageous, it is in fact incredibly common internationally. There is a wealth of experience and data which contradicts the negative opinions which have been put forth this week since the ACCC announced it will look at regulating national roaming.

National roaming essentially means that mobile operators pay each other so that their customers can use each other’s networks. It can bring a substantial increase in competition for regional Australians who haven’t had a choice to date. It is common practice internationally for ensuring competition and choice in areas where there is no economic case to duplicate network infrastructure.

We believe that it is no coincidence that every other western economy with a large geography and areas of low population density (the USA, Canada and New Zealand) have seen fit to regulate national roaming on mobile networks. The USA regulated national roaming in 1981 and reconfirmed and extended their regulation from voice to data service in 2011. Canada introduced mandatory national roaming in 2008. New Zealand required it many years ago and decided in 2013 to continue to require it. Australia is in fact the outlier as it is the only one of the four which doesn’t regulate national roaming.

Some have claimed that the introduction of national roaming would have a substantial negative impact on incentives for investment, but history shows this is not the case.

There is in fact empirical evidence that national roaming, when properly regulated, has the potential to substantially increase incentives for investment. In the USA, in the three years before the extension of national roaming regulation, average mobile industry capital intensity was 13.2% of revenue. In the three years after the extension of national roaming to data services, average capital intensity increased to 16.2%.

National roaming can allow larger operators to increase investment as they receive payments from smaller operators which subsidise further network investment. It can allow smaller operators to increase investment as areas which were uneconomic outliers become feasible areas for increased investment.

For too long there has been a communications divide in Australia. National roaming has the potential to substantially reduce that divide. If it’s good enough for the USA, Canada and New Zealand, Australia needs to seriously consider it.

Vodafone will continue to support the Government’s efforts to improve the structure of the telecommunications market in Australia, including how to drive competition in areas where this is unlikely to occur without government intervention — in particular, regional Australia.

This is why together with groups across regional Australia, including the Regional Telecommunications Review Committee, Infrastructure Australia, the House of Representatives Agriculture Committee and farmers’ organisations such as the National Farmers’ Federation, NSW Farmers and the Victorian Farmers’ Federation we welcome the ACCC decision to consider regulating national roaming. This process will provide the opportunity to have a rational, sensible discussion based on facts — for the benefit of regional Australia.

As the VFF’s vice-president Brett Hosking said on Monday, the ACCC declaration of domestic intercarrier roaming would open up the nation’s mobile telecommunications market to true competition.

Dan Lloyd is chief strategy officer and corporate affairs director at Vodafone Hutchison Australia