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Australian Competition and Consumer Commission, Domestic Mobile Terminating Access Service Declaration Inquiry (draft decision), December 2013

 
What You Need To Know

• On 13 December 2013, the Australian Competition and Consumer Commission (ACCC) released a report of its draft decision for the domestic mobile terminating access service (MTAS) declaration inquiry. In the report, the ACCC formed the preliminary view that: 
  • the declaration of the domestic MTAS should be extended for five years; and
  • the MTAS service description should be varied so that it not only covers mobile voice termination services but also short message service (SMS) termination services. In its previous MTAS declaration inquiries, the ACCC had not considered that declaration of SMS termination services was in the long term interests of users. 
• The ACCC considered that mobile network operators (MNOs) have a monopoly over the provision of voice and SMS termination services on their networks and that there are no effective substitutes for such services, or for the voice or SMS services that termination services are used to supply. Accordingly, the ACCC was concerned (as in previous inquiries) that MNOs have the ability and incentive to deny, or set unreasonable terms of, access to these termination services in the absence of declaration. 
• The ACCC intends that the varied and extended MTAS declaration will commence in July 2014 and expire in July 2019. The ACCC had expected to release a report and final decision in early 2014 (with submissions on the draft decision closing on 14 February 2014) but has not yet done so.

Background

 
Since 1997, the ACCC has regulated the termination of calls on mobile phone networks (the domestic mobile terminating access service or MTAS). The MTAS is a wholesale service provided by mobile network operators (MNOs). The service is essential for calls to be made between subscribers connected to different mobile networks, and for calls to be made from fixed networks to mobile networks. Since each MNO has exclusive control over the termination of voice calls on its own network and because a caller cannot select the MNO that will terminate his or her call, the ACCC had previously found that each MNO has a monopoly over access to users of its network. This means MNOs have the ability and incentive to deny, or set unreasonable terms of, access to these termination services.

 
The ACCC has regulated the MTAS since 1997 to ensure that:

• anyone can call any mobile phone user in Australia, no matter what fixed or mobile network they use; and
• the prices for telecommunication services remain competitive.

 
In 2009, the ACCC held its most recent MTAS declaration inquiry and extended the existing MTAS declaration until 30 June 2014. In May 2013, the ACCC commenced an inquiry into whether the MTAS declaration should be extended, varied, revoked, allowed to expire or a new declaration made. On 13 December 2013, the ACCC released a report of its draft decision (subject to submissions from stakeholders).

Should Mobile Voice Termination Services Continue To Be Declared?

 
In its draft decision, the ACCC formed the preliminary view that voice termination on a mobile network should continue to be a declared service as it is in the long-term interests of users. It formed this view on the grounds that:

• the MTAS remains necessary to provide voice calls to users connected to each MNO’s network;
• there are currently no effective substitutes for the voice termination service or for fixed-to-mobile or mobile-to-mobile voice calls; and 
• the wholesale market for mobile voice termination services on each MNO’s network is not competitive: the fixed line voice market is “highly concentrated”, with Telstra retaining a market share of 66%.

 
In light of the above, the ACCC considered that declaration would continue to ensure access to the MTAS is not denied to any party and that prices for the services will be set closer to the underlying costs, promoting competition in the downstream markets for mobile retail services and voice services.

 
Should The MTAS Service Description Be Varied To Cover SMS Termination Services?

 
Short message service (SMS) termination services are wholesale services provided by an MNO to other MNOs, to receive and terminate an SMS on their network. SMS termination is required each time an end-user sends an SMS to an end-user connected to a different mobile network. As with mobile voice termination services, the “calling party pays” also applies to SMS messages.

 
In its draft decision, the ACCC decided to extend the MTAS service description to include SMS termination services. While it had previously decided not to regulate SMS termination services, its change in approach was based on the grounds that:

• as with mobile voice termination services, SMS termination is an essential bottleneck service for which there are no substitutes; and 
• SMS termination rates have not changed for many years, commercial negotiations have been unsuccessful in lowering these rates, and SMS termination prices are priced above efficient levels (as evidenced by the fact that although there has been a continual increase in SMS use by consumers since 2003, SMS termination rates have remained constant in that time).

 
In light of the above, the ACCC considered that declaration of SMS termination services, when coupled with price regulation in a final access determination, will ensure that access to SMS termination services is not denied to any MNO and that the services are provided on reasonable terms and conditions. Further it will lead to a closer association between wholesale charges and the price of providing the service. While this is unlikely to increase competition in the wholesale markets for SMS termination services, as each MNO will maintain their monopoly over the service, it will promote competition in the downstream market for retail services.

 
Other Issues

 
In its draft decision, the ACCC declined to declare MMS termination services on the basis that it was not in the long-term interests of end users: there were no concerns that MMS services were above cost or that MNOs were otherwise using their monopoly power to restrict access to MMS termination services.

 
The ACCC is satisfied that new voice termination services offered over 4G networks or originating on the NBN are already covered by the MTAS service description.

For futher information, please contact:

Khai Dang, Partner, Ashurst 
[email protected] 

Tanvi Mehta, Ashurst
[email protected]

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