On the eve of the 20th anniversary of Optus being awarded Australia's first competitive carrier licence, Ovum has released a report on the impact of competition in Australia's telecommunications sector over the last two decades. The report, which was commissioned by Optus, brings together a wealth of information on influential industry and regulatory events, as well as key indicators of competition such as price, innovation and service.
The report found that the average mobile voice price declined by almost 50 per cent since the introduction of full competition in 1997. However in the fixed market, progress has been much less even. While significant prices declines have occurred in the areas where competitors could compete head to head, the basic access price (i.e. fixed line rental) saw prices rise 68 per cent in real terms between 1998 and 2010.
Lower prices were not the only benefit of a competitive telecoms market. Innovation, investment and better customer service were also by-products of competition. The industry has produced sustained investment over the last twenty years while innovation in new products and pricing, such as the introduction of mobile cap plans in 2004, has delivered huge consumer benefits. In recent years the telecoms industry has moved from providing innovations, to becoming the platform for innovation across the economy.
But it hasn't all been smooth sailing. David Kennedy, Research Director at Ovum and author of the report, found the decision in 1991 to merge the then national carrier, Telecom with the Overseas Telecommunications Corporation (OTC) - who held the monopoly in international communications - was seen as one of the key defining moments for the industry because it created a large incumbent which outstripped its competitors. Another defining moment was the cable wars of the mid-1990s. The cable roll-out created the appearance of burgeoning competition in the fixed line market. The 1997 reforms therefore placed great emphasis on commercial negotiation, with ACCC arbitration as a last resort. In fact, a stable commercial dynamic was never established, and arbitration was evoked again and again.
"The last 20 years can be categorised as a tale of two markets: a mobile market, where lower barriers to entry have led to a level playing field and a fixed market where the legacy of a vertically integrated incumbent has slowed the growth of competition," David Kennedy, Research Director and Principal Analyst, Ovum said.
Telecommunications will become an even more important platform for innovation with the next chapter in Australian telecoms history - the National Broadband Network (NBN). The rollout of the NBN will usher in a new phase of competition that will deliver new benefits to customers.
For the first time, the basic access network will be open to all service providers on the same terms, dramatically levelling the competitive playing field for basic services. But this new industry structure will have other, far-reaching effects. The focus of competition will shift to the new value-added services that exploit the NBN, such as high-definition content and so-called cloud services.
However, David Kennedy said, "While the National Broadband Network and the structural separation of Telstra will usher in a new wave of competition and deliver new benefits to customers, obtaining a truly level playing field in the Australian telecoms sector will demand perpetual vigilance.
"Vigilance is needed to ensure that the transitional separation arrangements for copper promote genuine transparency and equivalence of access, rather than leaving it to be achieved in the long-term by fibre; vigilance to ensure that new sources of market power do not arise in areas like content; and vigilance to ensure that the NBN is also bound to transparency and equivalence, and is subject to continued regulatory oversight."
Clare Gill, General Manager, Optus Government and Corporate Affairs said, "This report recognises the innovation and value that Optus and the industry has driven over the past two decades. It is also a timely reminder that getting the regulatory settings right first time is key to a successful and competitive market."
For a full copy of the report, please contact Liz Greene, Optus Corporate Affairs at firstname.lastname@example.org
Delphine Jersier, Ovum
Tel: 03 9601 6725
Optus Corporate Affairs
Tel: 02 8082 7850