Two of the leading telcos in Australia, Optus and Vodafone, want expansion in the bush but how they intend to do this is quite different. At the moment, if you wander too far out into the bush and you are a Vodafone or Optus subscriber you may not get much of a good coverage, if anything at all. You won’t be too badly off if you have signed up to Telstra and even in some places there are breaks in the service. Overall, Telstra has the competitive edge, which is not surprising as it is partially subsidised by the federal government in initiatives like the controversial blackspot programme. It however controls a lot of the infrastructure, whereas the other key telcos do not.
The question that may soon be answered is how are Vodafone and Optus going to jump the hurdles and put an end to the almost monopoly situation that Telstra has acquired. This is due to historical factors such as Telstra in its earlier form was government owned and provided for everyone in a non-competitive situation. It would be nice if the consumer came first like it did in those days where phone lines were considered a necessity not a marketable commodity like they are today.
The Optus story
For its part, Optus is extending its own network and has made significant investments in Western Australia and parts of Northern Territory. even though it’s yet to be seen in the Blue Mountains of New South Wales. David Epstein, the Optus vice-president for regulatory and corporate affairs, believed quite correctly that the Australian market wants 24/7 connectivity across the available platforms and from a single provider. He has reported that Optus is chasing that goal through grabbing whatever it can of the market share using its own investment, but with a particular investment emphasis on regional mobile networks.
Where does Vodafone fit into the picture?
Vodafone is acting more pragmatically and wants Telstra to rent out its current infrastructure so it can use it without investing money in its own infrastructure like standalone cell towers. Vodafone wants the Australian Competition and Consumer Commission, the competition regulator, to demand from Telstra that it open up its system to other players so that it can extend its feelers without investment. Dan Lloyd director for Vodafone’s corporate affairs said that just about every western country had some type of domestic roaming with a large land area with a low population density. This would allow mobile calls to be transferred through any rural network which is similar to when calling while travelling abroad.
Overall, the opinion is that Vodafone’s roaming idea would be a deterrent to promoting competition and would not help when it came to network improvements. Optus believes that Vodafone as a large company has plenty of money to spend and should use it as investment dollars rather than relying on Telstra’s infrastructure.
However, from Vodafone’s point of view, it argues that Telstra’s coverage of 2.4 million square kilometres, or more using 8,500 transmission sites, most likely uses infrastructure that has been constructed with a significant amount of government financial support. This means the most important investor in regional Australia telecommunications has rested with the Australian taxpayer. It seems that Telstra has been the recipient of $2 billion in indirect and direct subsidies since 2006.
Telstra has an opinion too
Andy Penn, Telstra’s chief executive admitted that because its regional coverage is good with an area spanning a million square KMs, it does better competitively in the metropolises. This is not that surprising as metropolitan residents know that if they go bush Telstra will be there for them at least in the more urbanised areas in the regional areas. Mr Penn said that because mobile towers cost $1 million each at least and the average user pays about $65 a month, most of their towers in regional communities only offered a service that was not necessarily profitable.
Mr Penn stated that an ACCC imposed rent wouldn’t compensate Telstra properlybecause a regional network wasn’t really viable anyway economically.
We’ve got ourselves in a situation where no one has truly determined the role of communications in the world. This means, should it be driven as a service available to all at a reasonable price, or driven by the profit motive? Australia sold off its telco assets and is now confronted with the dilemma of either offering a competitive arena where many telcos bare their teeth at each other to get the lion’s share of the customers or to subsidise one company with the assurance that all that need the service will get it.