The ACCC is concerned that a Vodafone-Hutchison merger will stifle mobile competition, but after new figures reveal systematic deception by carriers it's prudent to ask: could the merger really make things any worse than they already are?
As Australia's telco community braces for this week's
impending NBN announcement, it's prudent to consider the seeming
contradiction that emerged last week in the mobile
infrastructure debate.
On the one hand, we have the announcement that the ACCC is concerned about the
potential for the Vodafone-Hutchison merger — intended to create a
$4 billion carrier called VHA with 6 million customers — to reduce
competition between infrastructure operators; give VHA an unfair
planning advantage through existing 3G network-sharing agreements
with Telstra and Optus; and push up the prices consumers pay for
mobile services.
To pump up their coverage
figures, carriers appear to be simply plonking a single mobile
tower in a town, then calling it a day... Is this any way to build
a national mobile footprint?
On the other is a new report from Market Clarity, a telecommunications
analyst group that has invested significant time and effort into
creating a map of Australia's telecommunications networks. Market
Clarity alleges that our mobile carriers
are, perish the thought, exaggerating their coverage in promotional
strategies and are based more on marketing than, you know, truth.
Their sin, Market Clarity alleges, lies in their habit of
counting a town as "covered" if punters can get a signal in their
main street — even though residents in other outlying areas, and
there are a lot of them, are left without a signal. Actually
counting coverage in areas where people live, as opposed to
counting town centres with coverage, leads to a huge discrepancy in
coverage: Telstra's claimed 99 per cent coverage becomes 96.33 per cent, Optus'
claimed 96 per cent becomes 82.65 per cent, Vodafone's claimed 80 per cent becomes 50.96 per cent,
and Hutchison's 60 per cent claim is revised downwards to just 20.
These figures confirm what many mobile users in regional areas
must have known all along: mobile infrastructure outside the
capital cities (and, indeed, in many parts of those cities) is
still sorely lacking. To pump up their coverage figures, carriers
appear to be simply plonking a single mobile tower in a town, then
calling it a day. Cows, sheep, horses and the people that
raise/shear/ride them, are left in mobile-free dead zones.
Is this any way to build a national mobile footprint?
Back to the proposed creation of VHA. The ACCC is concerned that
removing one mobile infrastructure operator will reduce competition
and make it all but impossible for another mobile network to ever
be built. The implication is that the Voda/Hutch merger would be
like combining the NAB and Westpac, thereby defeating Australia's
long-standing "four pillars" philosophy of banking.
One slight problem with this theory, of course, is that the
carriers don't actually own all of their towers: multinational
infrastructure operator Crown Castle International actually
operates a sizeable portion of Australia's mobile towers (including
those of Vodafone and others), leasing
space to carriers in a way that certainly wouldn't preclude
another operator from doing the same.
The rub, of course, is that I'd be willing to bet Crown
Castle's footprint in under-served regional areas is as poor as
that of those facilities installed by the carriers themselves:
commercial returns, after all, are indeed a real issue for
everybody and even that company's website advertises its presence
in "prime locations" that presumably don't include a cow paddock
20 clicks west of
Oodnadatta.
In this context, it seems hard to support the idea that a
Vod/Hutch merger could seriously impact infrastructure. While there
will never be another Telstra, ample availability of mobile phone
towers means there could always be another Three — offering
cut-price mobile services to customers in key metro areas. In the
meantime, I'd bet my hat that most of the 20 per cent of Australia's
towns served by Three are also served by Vodafone, which will next
month extend this footprint into many
of the regional and rural centres in which the current operators
already fallaciously claim to have a strong presence.
Instead of duplicating each other's footprint in populated
areas, the merger would give the company the financial backing and
competitive imperative to branch out into more poorly-covered
regional areas — and to do it properly this time. This would not
only bring rural dwellers an alternative to Telstra for the first
time, but it would lend more credibility to innovative offerings
such as the 3G-netbook offerings I recently discussed.
A serious number-three telco
will light a fire under Optus, which — judging by the all too
regular failures of its 3G network — has become too complacent in
its number-two position
The introduction of a serious number-three telco will light a
fire under Optus, which — judging by the all too regular failures
of its 3G network — has become too complacent in its number-two
position and failed to keep up its infrastructure investments.
Optus could only counter the threat posed by VHA with a serious
network investment, which in turn would bring smiles to the faces
of more than a few iPhone owners I know.
For these people, the price of mobile services is far less important
than whether they actually work — and are available where they're
needed. It is in this area that the existing carriers have simply
failed to deliver, which is why the ACCC needs to consider the
implications for coverage as well as the implications on price. The
money will always take care of itself — but only real competition,
and the threat of being left behind, will force carriers to expand
and invest as they need to.
It is a big change, of course, to scratch one entrant in a
four-horse race. But considering that so much of Australia is still
unserved, and that our very top-heavy market has so far failed to
deliver on the promises it is making, the merger seems like a
natural step that will finally foster real competition by giving
Telstra and Optus a competitor they — finally — can't afford to
ignore. Hutchison shareholders agree, and
it will be interesting for all to see whether the ACCC follows
suit.
Should Vodafone and Hutchison merge? Can you think of a
reason why they shouldn't?
