Domestic roaming to save Australian mobile users $658 million per year: Frontier Economics

Vodafone’s expert evidence in response to the ACCC draft decision

It has been independently confirmed that domestic roaming would be a game-changer for regional Australia, saving consumers $658 million per year and providing the best opportunity to drive mobile coverage expansion.

In its submission to the Australian Competition and Consumer Commission’s draft inquiry report, Vodafone Hutchison Australia provided substantial new evidence that domestic roaming would mean significant consumer benefits, lower prices and improved network coverage.

Vodafone Chief Strategy Officer Dan Lloyd said the ACCC called for even more evidence, so Vodafone delivered.

“The savings for consumers have been independently calculated to be $658 million per year. That’s an extraordinary amount of money that could be staying in the wallets of consumers, instead of lining Telstra’s pockets with no added value,” Mr Lloyd said.

“The benefits are so large that regulated domestic roaming is a ‘no-brainer’ for regional Australia.

“We found the ACCC’s draft decision baffling, particularly since many of its comments strongly support the case for regulated domestic roaming.

“We couldn’t agree more with the ACCC that roaming wouldn’t undermine Telstra’s incentives for expanding coverage, as taxpayers have been footing the bill for that for years. The ACCC also admitted that regional Australians are paying too much for mobile services.

“We also agree with the ACCC’s view that Telstra has been running a scare campaign about regional investment. Telstra’s campaign is clearly designed to confuse regional Australians, and put public and political pressure on the ACCC.”

Mr Lloyd said the draft decision appeared to ignore the significant regulated roaming experience overseas.

“In New Zealand, the US, Canada, Spain, France and South Africa, regulated domestic roaming has boosted mobile investment, meaning more coverage in more places,” he said.

“Over the past ten months, no one has put forward any evidence that domestic roaming would have a negative impact on investment. There have only been empty threats.

“Telstra tries to convince everyone it is regional Australia’s knight in shining armour. But even the ACCC admits Telstra doesn’t have any incentive to invest in regional areas unless taxpayers cough up.”

Vodafone’s submission highlights the mobile market in New Zealand where three carriers, including Vodafone, recently put forward a proposal to government to jointly build a vastly expanded regional network. The proposal would increase land area coverage by 25 per cent and provide a roaming signal to all three operators.

“This is the sort of collaboration that domestic roaming encourages and it’s sad that a lack of collaboration in Australia continues to hold the country back when so many similar economies are moving forward, “Mr Lloyd said

Mr Lloyd said Vodafone is also concerned that disproportionate weight has been given to Telstra’s scare campaign.

“Domestic roaming is too important for regional Australia to get wrong. The communications future of regional Australia can’t be determined on the basis of a survey or a popularity contest,” Mr Lloyd said.

“We hope the ACCC has not been influenced by public, or indeed political, pressure placed on it by Telstra’s so-called ‘investment strike’.”

VHA says the criteria for declaration are met and declaration of domestic roaming in regional Australia should occur.

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Background

Vodafone Hutchison Australia has asked Federal Court for judicial review of the ACCC’s inquiry because we do not believe the inquiry has been carried out properly. Given the issues we have raised about the inquiry, and the importance of the inquiry to regional Australia, we disagree with the continuation of the inquiry untirelationl the court has considered the matter. However, in good faith, we have made a submission on key points that we consider so fundamental to the inquiry and regional Australia that they should be considered by the ACCC.

The $658 million savings figure following regulation of domestic roaming has been independently calculated by Frontier Economics (London) and reconciles closely to analyst estimates of the consumer benefit/Telstra net EBITDA loss, including Goldman Sachs ($546 million per annum) and Macquarie ($590 million per annum). The figure also closely correlates to actual Telstra share price movements following the ACCC Draft Decision. This figure is within the estimate of Telstra’s substantial price premium in retail mobiles which was independently quantified by The Centre for Independent Economics at $1.4 billion per annum. Four separate experts all point to the same conclusion – there is a major consumer benefit which is likely to flow from regulated domestic roaming.

VHA’s full submission is available on the ACCC’s website.