Current development surrounding C&W Optus could mean the end of competition in Australia – as well as the nail in the coffin of the regulatory system in Australia.
From the start of deregulation the government has been picking winners, rather than putting real competition in place. Instead of breaking up Telecom and OTC they bound them together, thus establishing an even stronger monopoly. At the same time, one other competitor was allowed into the market, and they were handed, in the form of a ballot, 10% of the Australian market. No competition was needed – it was just given to them. It is no wonder that for the first six years of competition Optus didn’t constitute any real challenge – they just stayed happily 10% under the prices charged by Telstra.
Service providers such as AAPT, Global One, WorldxChange and others didn’t even rate a mention in the regulations that were introduced in 1992 While this was rectified in 1996, at the same time the incumbent’s position was further improved by the self-regulatory system that the government introduced. This provided Telstra with the unique opportunity to frustrate and delay the introduction of competition by 3-5 years – a situation that still exists in late 2000.
On the mobile front, the government nurtured the happy triopoly by not forcing the operators to establish national roaming, number portability and optimal roaming.
Despite this, competition slowly began to make inroads in Australia, especially in the fixed voice market, since competitors were able to win customers by better prices and better services. However, all together, these competitors didn’t get more than 15%-25% of the market, as the incumbent has maintained its iron grip on the local loop and all the competitors are still dependent on them for access to this network.
In the meantime, to make matters worse, the market has moved on from voice to data services and suddenly both the nation and Australian businesses are beginning to see that access to the right IT&T infrastructure and services is essential if they are to remain competitive in a rapidly globalising world.
The national infrastructure has not previously been perceived as a national asset and the regulator has now discovered that Telstra, by virtue of its protected status, has not looked after the network, with the result that the high-speed services essential for the new economy are not possible in the foreseeable future. According to Telstra there won’t be more than 650,000 ADSL users by 2005. We estimate that at this very moment there is an unmet market of around 750,000 customers, if the price would be right (max $50 per month). But Telstra owns the network, they control it, and they therefore hold the country to ransom.
Revolt in the UK
Now, if you think that this is a doomsday prophesy, you only have to look at the regulator, Oftel, in the UK. The UK was the first to deregulate in Europe; however, they are now running well behind the rest of Europe and the British economy is beginning to be affected. And because of the economic importance of the situation – especially in the very competitive European market – the business people in Britain are now in revolt. They have even complained to the European Commission and it is very likely that the head of Oftel, David Edmonds, will be replaced.
The British business leaders blame Oftel for the lack of competition in the UK. Their major complaints are:
- no national competition;
- no competition in leased data lines; and
- far too slow introduction of ADSL.
Oftel is accused of following the lead of the incumbent rather than promoting competition. The level of competition in the UK is going backwards, especially in relation to high-speed services and BT’s competitors, as well as other businesses, are now threatening to take legal action.
Unfortunately, Australia finds itself in a similar position. At the recent World Economic Forum Australia was warned that it was lagging behind in the IT&T world. With Optus exiting the market, the market will once again resemble a one-horse race. The key issue continues to be the lack of access to high-speed networks. Telstra is adamant that it will not provide access to its competitors under the conditions that the ACCC has promulgated, and under the present regulatory regime Telstra can delay the process by 3-5 years. The question is how long will the Australian businesses and the Australian economy accept such a regime.