Where ACCC went wrong on Telstra, TPG regional mobile deal

The two telcos have laid out their case as they attempt to overturn the ACCC’s pre-Christmas ruling that blocks the landmark mobile sharing deal.

Telstra says the ACCC has misunderstood the nature of the network deal. Picture: Carla Gottgens/Bloomberg

Telstra and TPG have argued the competition regulator has fundamentally misunderstood how their planned mobile network sharing arrangement across regional Australia will work, as they attempt to overturn the ACCC’s pre-Christmas ruling that blocks the landmark deal.

The telcos have also rubbished the ACCC’s ‘hypothetical’ that TPG, the owner of the Vodafone brand, would run to number two player Optus for a network sharing deal after being locked out of Telstra. This is the ACCC’s preferred course of events, with the regulator convinced that this would deliver a better outcome for Australian mobile phone users.

The comments by the telcos were made in newly released filings to the three-member Australian Competition Tribunal that has the power to uphold, vary or overrule the ACCC’s landmark decision around a mobile tower sharing deal. A ruling by the tribunal is governed by a strict timeline of within 90 days, or up to 120 days if new evidence is presented.

Telstra and TPG/Vodafone would look to share mobile infrastructure in parts of Australia. Picture: NCA Newswire

It is shaping up as a major decision in how the telco market is evolving in the world following the merger of TPG and Vodafone, with the ACCC fearing that a small decision today has the potential to give Telstra a significant structural leg-up particularly in regional Australia over time. And if this happens it also fears Optus will give up trying to carve out a credible market for itself in regional Australia given Telstra’s dominance.

At stake the tribunal will need to weigh up whether giving TPG’s own customers access to a superior network and 5G services today would leave the entire telco market worse off over the longer term.

Bigger network

Under the proposal Telstra and TPG would pool network resources, including the smaller telco’s holdings of unused spectrum and roll out ultra-fast 5G services across rural and regional Australia. TPG argued the move would give it inroads into the market and allow it to bundle its own NBN broadband internet offering in the regions.

The competition tribunal makes its own decision based on the same material submitted to the ACCC, although it has the discretion to allow or request new evidence that was not available at the time of the competition regulator’s decision.

A negative ruling against the telcos could also trigger an appeal to the full federal court, although the arguments will have to be made around points of law.

Telstra sees the agreement with TPG as critical in helping to fund improved network coverage in parts of Australia where returns are marginal or its spectrum holdings were reaching a limit. The two telcos planned to have the network sharing agreement in place for 10 years.

But in its application to the competition tribunal Telstra argues the ACCC has failed to grasp how the technology is being used.

Optus remains bitterly opposed to the network sharing deal. Picture: Brendon Thorne/Getty Images

“The proposed transaction does not involve any change in ownership, increased concentration in any market, or removal of TPG as an independent competitor in any relevant mobile services market in Australia,” Telstra says in its filing.

It also emphasises the network sharing deal operates in a limited area of mobile network coverage where only 17 per cent of the population lives, where pricing and product strategies are nationally focused.

Telstra points out under the type of agreement – known as a multi-operator core network – is different from a roaming agreement. The two only share the radio access to the network. This is the part of a mobile network that acts as an antenna to send and receive signals. Telstra is trying to make it distinct from the “core mobile network” that extends to all the equipment and infrastructure used to manage calls and data and control service levels for customers.

“This means that each party continues to operate as an independent mobile network, with separate and independent control over how products and service levels are defined and how customer information is handled and managed,” Telstra says.

It points to evidence from TPG’s chief technical officer Giovanni Chiarelli who has overseen the rollout of similar network agreements in South Africa and parts of Eastern Europe and has resulted in significantly improved customer service, including the elimination of frequent call failures; and the ability for each mobile operator to build, control and differentiate its own products.

Optus deal

Meanwhile TPG in its own submission takes aim at the ACCC’s firm belief the smaller telco would join forces with Optus.

“TPG considers it would not occur. It is speculative and inconsistent with the evidence that was before the ACCC,” TPG says.

In the unlikely event an agreement is reached with Optus, TPG asserts its mobile customers would be worse off with poorer coverage given a network deal would be struck on substantially inferior commercial terms.

TPG says any deal or roaming agreement would be limited to 4G services while 5G services would be delayed.

It also claims it has been engaged in a form of shadow boxing in trying to rebuffing the arguments of Optus, which remains bitterly opposed to the network deal.

“Significant parts of the ACCC decision are based on confidential evidence and submissions provided by Optus, much of which is largely redacted…TPG has not been provided with Optus’ confidential material, and therefore has not had an opportunity to review, respond to, or comment on it,” TPG says, adding it might need to take up the extension for 120 days for the competition tribunal to make its ruling.

Meanwhile, Telstra let slip it is also starting to feel the pressure on its mobile services of a population boost in rural areas where it only has limited spectrum.

Telstra faces an escalating challenge of increased network congestion and the resulting effect this has on service quality. This is due to growth in both the number of customers living and working in those areas (especially post COVID-19) and the demand by all mobile customers, including in regional areas, for increased data and network speeds.

Telstra points out it has less spectrum per customer than either Optus or TPG in the “17 per cent area”, the measure that determines the service quality, data speeds and coverage.

“Telstra is concerned that customer and government perceptions of poor network or service quality in regional areas are both commercially and reputationally damaging, given Telstra’s significant investment in, and associated brand identification with, good and reliable national (and regional) coverage,” Telstra said.

‘All in’ on hybrid

Meanwhile, new Telstra boss Vicki Brady has left little doubt among the telco’s 28,900 staff where she stands on working from home versus the office. “We are all in on hybrid,” Brady has posted on LinkedIn. The comments come as other corporations look to nudge their staff back to the office arguing it's the key driver for corporate culture and collaboration.

While the employment market remains so tight, employees remain in the box seat to outline the terms.

New Telstra CEO Vicki Brady. Picture: Sam Ruttyn

“Many of us (including me) are heading back to work this week – but what will work look like in 2023? Flexible and hybrid working has been pegged as one of the top business trends for this year,” she said.

“We know our people are at their best when they have choice, so we don’t waste time debating who should be in the office and when”.

Telstra had been trialling hybrid working for a number of years and was one of the first companies to adopt a full hybrid working policy when Covid-19 hit Australia.

Last year, Telstra also moved to “location agnostic” workplace contracts for a number of roles removing the clause that states where an employee’s place of work is from employment terms and conditions.

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Originally published as Where ACCC went wrong on Telstra, TPG regional mobile deal