Optus Opposes Telstra TPG Network Sharing Deal

Optus Opposes Telstra TPG Network Sharing Deal

Optus wants the ACCC to stop Telstra and Vodafone from sharing mobile networks

Optus has complained to the Australian Competition and Consumer Commission (ACCC) about a network sharing agreement between Telstra and TPG Telecom. Optus claims the deal between the two major telcos will reduce competition and create a monopoly in rural areas.

We reported about the 10-year network sharing deal that Telstra and TPG telecom reached a few weeks ago. The agreement grants TPG Telecom access to some Telstra mobile sites, giving TPG Telecom a significant coverage boost in rural Australia. Telstra will also gain access to some TPG mobile infrastructure as well.

With the two major telcos agreeing to share their networks, Optus, the third major Australian telco, is left standing alone. Optus believes the move will give Telstra an unfair advantage by essentially eliminating TPG Telecom as a competitor, leaving Optus to fight against both TPG and Telstra while those telcos work together.

Optus’s concerns on the matter are not surprising. The ACCC also expressed similar concerns when the network sharing agreement was announced. ACCC boss Rod Sims said the deal, if approved, could reduce competition and increase SIM plan prices.

In this article, we’ll break down the Telstra and TPG Telecom network sharing deal, and explore Optus’ and the ACCC’s concerns.

Network sharing agreement between Telstra and TPG Telecom

Both Telstra and TPG Telecom have a lot to gain from their network sharing deal. While both will see an increase in network coverage, TPG Telecom will gain the most in that regard because Telstra already has the widest country in the country. Telstra, on the other hand, will gain a lot in revenue throughout the 10-year lifespan of the agreement.

Here’s a closer look at what Telstra and TPG Telecom get from the network sharing deal:

  • TPG Telecom will get access to 3,700 Telstra mobile 4G networks across specific regional and urban fringe areas. This could potentially boost TPG Telecom’s mobile coverage from 96 per cent to 98.8 per cent, catapulting the telco’s coverage ahead of Optus.
  • Telstra forecasts AU$1.6 billion to AU$1.8 billion in revenue over 10 years resulting from the deal. In addition, TPG Telecom will also grant Telstra access to some of its own 4G and 5G network to boost Telstra’s coverage and bandwidth even more, and allow Telstra install equipment on as many as 169 TPG mobile sites.

Note, however, that this deal has to be approved before it goes into effect. And so far, with the ACCC boss and Optus in opposition, we’ll have to wait and see what happens next.

Optus and the ACCC are against Telstra and TPG Telecom network sharing deal

When Telstra announced the network sharing deal with TPG Telecom, the outgoing ACCC boss Rod Sims voiced some concerns. Mr. Sims stated that, “Vodafone, of course is paying money to Telstra, so it has to recover that. We really need to understand the impact on prices because at the moment, you’ve got a bit of a competitive dynamic. We’re concerned about whether that dynamic will disappear.”

Mr. Sims concerns are centered on the idea that less competition could result in an increase in prices of SIM plans. If Telstra shares its network with TPG Telecom, then the incentive to compete is reduced. Therefore, both telcos could increase prices without worrying about the other gaining more customers with cheaper SIM plans.

Optus has now voiced complaints to the ACCC that echo Mr. Sims position. Optus vice president of regulatory and public affairs, Andrew Sheridan stated to the ACCC that Telstra and Vodafone’s network sharing “…partnership overturns 30 years of competition policy by eliminating one of Telstra’s competitors and seriously placing Telstra’s main competitor, Optus, at a disadvantage.”

Optus’ complaints also center on reduced competition in rural areas. The telco claims that if Telstra and Vodafone share their networks, then rural Australia would only have a single provider to choose from, which could result in a price monopoly. Optus is asking the ACCC to stop the network sharing deal from moving forward in order to maintain competition in rural Australia.

However, Optus’ position ignores the fact that Telstra has the strongest network in rural Australia. Even without the network sharing deal, Telstra dominates rural Australia. SIM plans in such areas are typically either from Telstra or one of their MVNOs. So it seems ingenuous to claim that Telstra will have a monopoly of rural areas if the deal is allowed to proceed, when the telco already has that monopoly. If anything, there will be more options for Australians in such areas because Vodafone will now have a wider rural coverage, and thus will be able to service the area, adding a new telco to the region (the opposite of a monopoly).

But the Mr. Sims has a valid point when showing concerns about a possible increase in SIM plan prices as a result of the deal. Right now, TPG Telecom is known as the most budget-friendly of the major telcos. They offer cheaper plans than both Telstra and Optus. But with the significant boost in network coverage that could result from their partnership with Telstra, TPG Telecom will no longer have the incentive to be the cheapest major telco in town – they will likely increase the prices of their SIM plans.

Final words

It’s no wonder Optus are annoyed by the announcement from TPG/Vodafone and Telstra on network sharing. After all, they have been thoroughly out-strategised. For as long as anyone can remember, there has been a simple pecking order around the quality of networks in Australia. It goes: 1. Telstra 2. Optus 3. Vodafone. But this network sharing partnership will change all of that if it is approved, and it’s almost impossible to underline the significance of it to the phone plans we will have available to us.

If the partnership is approved, the new TPG/Vodafone entity will finally have the scale required to operate in Australia. They’ve ‘gone around’ Optus and left them in third place. Optus’ only potential saviour is the ACCC, although after the ACCC’s last failed attempt at suing TPG, they might be a bit shy about another court case.

Optus’ application is not without merit, in my opinion. In all likelihood, this new network sharing agreement will leave us with bigger phone bills each month – with Vodafone now competing on network coverage rather than price as a differentiator.

Neil Aitken

Having worked in 3 countries for 4 telcos on both voice and data products, Neil is in a position to give you the inside track. Get beyond the marketing messages to the best plan for you.