TPG’s recent takeover of iiNet has left a few people out of a job and more people just annoyed. While the transition hasn’t exactly been smooth, you’ll be pleased to know that Australia’s competition watchdog thought it went OK. But it won’t be happening again.
In his speech today to the Australian Communications Consumer Action Network (ACCAN) conference in Sydney, ACCC chairman Rod Sims told the assembled audience that it was, obviously, primarily concerned with competition — the lessening of which is generally a bad thing for consumers. TPG’s acquisition rocketed it into second place with 27 per cent of the fixed broadband market, behind Telstra’s traditionally dominant 41 per cent and ahead of Optus’ 14 per cent.
The acquisition did not cross the line as being substantially anticompetitive, according to the ACCC, but it was “extremely close to the line”. That is to say, it won’t be happening again — any further consolidation of Australa’s fixed broadband telco providers would be “no such comfort” as the ACCC experienced when TPG bought iiNet. The reason TPG’s sale went through was, basically, that there’s no black and white answer, but merely shades of grey. (Deep.)
Here’s the full extract from Sims’ speech:
TPG / iINet
Many of you will be aware of the ACCC’s recent decision on the acquisition by TPG of iiNet. The ACCC cleared the acquisition after closely scrutinising the competition effects in the fixed-line broadband market. We also looked at its impact on the wholesale transmission market, otherwise known as backhaul.
With the acquisition, the number of major suppliers in the fixed broadband market will reduce from five to four. TPG will be the second largest supplier with a market share of 27 per cent, behind Telstra (41 per cent) and ahead of Optus (14 per cent).
The question is where does the ACCC draw the line? Should it have drawn a line in the sand with respect to the TPG/iiNet acquisition, or will it be the next transaction? The answer is not black and white. There are shades of grey, but we are now extremely close to the line as things stand today.
In the TPG acquisition, the ACCC concluded that the removal of iiNet as an independent competitor would lessen competition in the relevant markets, but not substantially, which is the test to breach the competition law.
We took comfort that TPG would continue to face three major competitors after the acquisition. Clearly, we would have no such comfort in the case of any subsequent proposed acquisition involving any two of Telstra, Optus, TPG or M2, as things stand.
Maintaining a competitive backhaul market which includes non-vertically integrated suppliers of wholesale transmission services, such as Nextgen, is also important for fostering competition at the retail level. Independent suppliers have the incentive to encourage entry and expansion by smaller players who, unlike Telstra, Optus, and TPG, have little or no transmission infrastructure of their own.
Sims also talked about the ACCC’s ongoing move to push for an internet performance monitoring system — basically an Australia-wide government-mandated Speedtest — to add extra transparency to the question of fixed broadband speeds and reliability versus cost. That “asymmetry of information” between different ISPs unquestionably leads to confusion for consumers, who don’t have all the information they need to compare services.
Broadband prices have dropped hugely since 2007, where $30 per gigabyte was common — we’re now paying substantially less than $1 per gigabyte when both fixed and mobile broadband prices are taken into account. (Interestingly, we’re not far off those 2007 prices for mobile broadband alone in Australia at the moment.) The NBN, too, is set to make significant changes to the way we consume data in Australia, becoming far more of a utility — like gas or water or electricity — than an unnecessary modern convenience.
Competition In Communications Markets
In addition, since late 2013, the ACCC has consulted on the possible introduction of a fixed broadband performance monitoring and reporting program in Australia. We have looked at the technical and commercial aspects of such a program and anticipate this work will be published in the near future.
A broadband performance and monitoring program would promote competition and consumer outcomes by providing transparency over the quality of broadband services that are on offer to consumers. Consumers need this information to help them select the most appropriate service for their needs and to confirm they are likely to be getting the service for which they are paying.
Competition in the retail fixed broadband market in Australia is limited by an asymmetry of information between RSPs and consumers on service performance. This asymmetry of information also exists between RSPs, who may have information about the performance of their own networks, but not their competitors’ networks – which prevents them from effectively competing on service quality, not just price.
Broadband monitoring programs have been established in the United Kingdom (2008), United States of America (2010), New Zealand (2010) and Singapore (2011), with Canada poised to commence reporting on its program in 2016. While the particular models adopted by each country differ, they all share common aims of improving the transparency of information for consumers and encouraging performance-based competition for broadband services. This is an aim which the ACCC also supports.