1. Liberalisation of the Australian telecommunications industry Richard Home Senior Manager – Strategic Analysis & Development, Communications Group Australian Competition and Consumer Commission (ACCC) www.accc.gov.au

2. Overview Liberalisation process Results Scope for further liberalisation Lessons learnt

3. Late 80s: formation of independent regulatory body, Telstra corporatisation Early 90s: licences provided to Optus and Vodafone (mobile) to compete with Telstra Late 90s: full competition allowed - licences more readily available - Telstra part privatisation - legislative changes: access regime, anti-competitive conduct, etc Liberalisation process

4. Access regulation Setting terms and conditions of access (both price and non-price) in arbitrations/undertakings Enforcement Prosecution of anti-competitive conduct Reporting Role of the ACCC

5. Liberalisation results (fixed) Telstra’s copper network still dominates access (87%) - Optus HFC network main alternative (12%) Prices since 1997-8 - basic access  79%- national long distance  34% - local calls  44%- international long distance  65% Retail market share in 2004-5 - basic access and local calls: Telstra 77%, Optus 12% - long distance and fixed to mobile calls: Telstra 63%, Optus 12%

6. Liberalisation results (mobile) Four mobile network operators and some resellers Prices have fallen 13% since 1997-8 Now more mobile subscribers than fixed line services Retail market share dominated by network operators - Telstra 45%, Optus 32%, Vodafone 17%, Hutchison 5% (2005)

7. Liberalisation results (internet) Australians quick to embrace dial-up internet, but broadband slow to develop 650+ internet service providers Broadband now growing quickly - growth really accelerated early 2004 - new entry and corresponding price reductions - takeup is now close to OECD average - some quasi-infrastructure competition since 2005 with competitors investing in DSLAMs Competitive pressure has led to Telstra considering a fibre-to-the-node network upgrade

8. Further liberalisation? Objective is to remove regulation where competition is effective and sustainable Competition is sustainable if benefits would not be lost if regulation was removed

9. Further liberalisation? This has occurred to very limited extent in access regime - local calls and transmission services in certain areas Concerns - many markets are still highly concentrated - balance of re-sale vs infrastructure-based competition - continued degree of horizontal and vertical integration of Telstra - most competitors have to buy wholesale services from Telstra, but then compete with Telstra’s retail arm - entrants’ investment vulnerable to foreclosure as a result of Telstra’s actions and responses

10. Further liberalisation? Market entry already open to all Mandated structural separation of Telstra not a prospect Operational separation - but not strictly liberalisation Scope for existing regulation to be further pared back as competition develops – ie fewer services covered But some prospect of new technologies creating new bottlenecks – eg FTTN Trend towards Government funding of (broadband) services that may be otherwise uneconomic: - HiBis - Broadband Connect - Metro Connect etc

11. Lessons learnt Competition in this sector is a gradual process Regulating access to networks is very complicated, suffers delays and gaming Difficult to prove anti-competitive conduct Ideally would have competing networks - eg PSTN and cable Interaction between competition policy and social policy

12. Conclusion Path to competition has been more difficult and has taken longer than expected; but Competition has nonetheless delivered large benefits to consumers, such as lower prices and better services Benefits most evident in areas with infrastructure competition Still many risks to competition