But who has won, if anyone, and where is the telecommunications market heading in Australia?.
For consumers, the repercussions of deregulation have been -pretty reasonable", according to Allan Horsley, Australian Communications Authority (ACA) board member. Competition, he said, has brought some dramatic price reductions and more choice.
But the monopolistic environment--which has led to one particular player making a motza--and the Government still having a finger in the Telstra pie, are two particular bones of contention amongst industry players five years down the track. In fact, monetary issues in general get the bellyaching going, especially amongst carriers that claim they aren't seeing enough of it.
-For the telcos, I guess large and small, the outcomes have not been what they expected," Horsely said. -Certainly the returns haven't been where they should have been."
AAPT, chief operating officer David Bedford, agreed with Horsley's view that consumers are better off than they were five years ago.
-A competitive environment delivers innovative products, quality service and better pricing," Bedford said. -In the last five years the Government's deregulation of the telecommunications industry has helped us make some progress towards this desired environment. It's resulted certainly in lower prices and a greater range of products and services more widely available than they were five years ago."
However, despite these improvements, Bedford said the industry is still a long way from the ideal telecommunications environment. He believes to achieve this ideal, telecommunications policy must be focused on continuing the development of a competitive market.
-We're still confronted by an industry with a leading player which looks as if it takes 100 percent of the industry profit," Bedford pointed out. The fact that the entity is still majority government-owned compromises the Australian Government's pro-competition credentials, he said.
-The sale of Telstra is essential for Government to focus on its public policy role to foster effective and efficient competition and for the benefit of all the end users."
Competition in the local arena, according to Bedford, will only be sustained if players can generate a return on their investment.
-If there can not be a return, because they are denied access to a central facility, or they are damaged by marketing or pricing behaviour of a dominant [player] they will not continue to invest. And no amount of deregulation or removed barriers to entry will compensate the absence of real competitors."
The price of regulation
From a mobile player's point of view, Vodafone's Graham Maher took an equally hard line on the role the Government plays in the Australian telecommunications market. -Frankly," he said, -the cost of government regulation and control has been horrendous".
Although a good outcome of deregulation is that there is some competition out there these days, the bad part of the equation, he said, was that competition has been driven by regulation not by consumer choice. -I think, particularly in a mobile sense, that the consumer has been the loser, or certainly has not been a beneficiary of competition in Australia. And we see that currently by [mobile] prices going up," Maher said.
-We need to see a dramatic change in the regulatory environment and move away from government intervention, and allow competition to happen for the consumer," he added.
At the same time, according to Maher, Australia's mobile players are acting like utilities, which are -specialists in designing pricing that means you're just not quite sure when you're being ripped off, but you know you are".
-At Vodafone we think this is unsustainable," Maher said.
Maher also pointed out that Vodafone has spent nearly AU$3 billion in investment. -So far we've returned to government 25 percent of that AU$3 billion and haven't had a cent," Maher said.
The future, he said is all about change - it's not about technologies but about applications and solutions -- and that change also includes government acting differently.
The ACA's Horsely also said new applications would play an important part in the future of a competitive telecommunications industry. -We certainly need some intense effort to develop new applications which increase facilities for network occupants, so the carriers can earn a quid and improve their financial returns," he said.
This sentiment was echoed by Telstra Wholesale's chief of commercial operations, Deena Shiff. New niche players coming into play with a regional or special interest base, she said, was encouraging. -Those services coming through will fuel a new growth phase - driven by lots of applications and things that excite consumers," she said.
However, Shiff pointed out that the industry has seen significant errors of oversupply of capital both domestically and internationally. -However, I don't think the future is bleak," she said, adding that more prudent investment was called for.
What bush competition?
Optus' Paul Fletcher took the opportunity to hit back at the national incumbent, offering a tongue-in-cheek congratulations for Telstra's announcement this week of its plans to spend AU$187 million on bush services.
-Congratulations to them for that but the whole reason the network needs an upgrade is because Telstra has a new monopoly in rural Australia," Fletcher said. -Poorer services and higher prices have allowed Telstra to [use] outdated equipment...that should have been replaced years ago."
According to Fletcher, rural services will only improve if there is real competition. -The fact is the government policy of current competition in the bush to date has failed," he said.
Fletcher said that one of the biggest impediments to competition in Australian telecoms is the massive cross-subsidies Telstra receives under the Universal Services Obligation. Last year, he said, Optus contributed AU$43 million to the cost of Telstra's rural services. -Telstra is four times the size of Optus, it made an approximate AU$4 billion and we made a loss and we have to and we have to pay them AU$43 million. This system is madness."
-There seems to be an unfortunate assumption in the present debate that the only way to improve services in the bush is through Telstra, in fact the best way to do it is through competition," Fletcher said.
Fletcher said he would like to see government policies directed towards encouraging infrastructure-based competition in rural Australia. -Critically that means funding Telstra's competitors to build infrastructure rather than just funnelling all rural telcoms spending directly through the incumbent," he said. -Of around AU$650 million of government funding for rural communications since 1997, we can identify very little that has gone to develop large-scale competitive infrastructure."
Fletcher referred to the Government's AU$150 million tender in 2001 to provide untimed local calls in rural Australia. That money went to Telstra and a -once-in-a-generation opportunity" was lost to develop infrastructure-based competition in rural Australia, he said.
More recently the government awarded a AU$23 million tender to increase mobile coverage, which again went to Telstra. -If there is to be additional funding for rural and regional telecommunications as part of T3, it is critical that that funding be directed to competitive infrastructure and that would be in our view a significant way to boost competition and take it to the next level," he said.
Corporate consumer concern
The Australian Competition and Consumer Commission's (ACCC) general manager of telecommunications, Michael Cosgrave, conceded that the government, the industry and the ACCC expected stronger outcomes from deregulation.
-An important point to be made is that the majority of services in the Australian telecommunications remain unregulated, should remain unregulated and will remain unregulated in the future," he said.
-It's clear from our perspective that effective competition is still a long way off in some markets; certainly in the local call services and access market, and certainly in other markets we see appearances of competition. We notice for instance in the mobile market a continuing, healthy level of competition at the retail level but competition amidst fixed to mobiles continues to be comparatively much less advanced."
Mobile services was one area, however, that corporate users saw little or no benefit from competition, according to research commissioned by the Australian Telecommunications User Group.
Whilst competition has been beneficial, a sample of top 100 ASX-listed companies also said they had three other areas of concern; Telstra's continuing dominance, an expectation that prices should fall further--especially since their spend has doubled on average over the last seven years--and the fact that broadband has been slow to develop given cost and supply constraints.
At the end of the day, five years down the track, the over-riding wave of dissatisfaction seems to be that competition has occurred but not to the extent anticipated, and Telstra's dominance remains an obvious bugbear.
-We think there are many challenges ahead. There is still virtual monopoly control of the local loop," the ACCC's Cosgrave said. The Commission's views, he added, was that the telecommunications market is in a constant state of transition.
