https://www.smh.com.au/business/companies/absurd-accc-s-destructive-telco-fantasy-will-only-make-things-worse-20190508-p51leo.html
> It’s off to court they go after the Australian Competition and Consumer > Commission announced, prematurely, that it opposes the planned merger of > Vodafone and TPG Telecom. > > After "inadvertently" - and embarrassingly - publishing its decision on its > website a day earlier than planned, the commission has blocked a merger that > would have created a more substantial and viable competitor to Telstra and > Optus in the wireless and fixed-line broadband markets. > > It has done so despite the reality, after TPG’s decision to abandon its plans > to build a 4G network, that Vodafone and TPG aren’t substantial competitors > in any market today and won’t be substantial competitors in any market in the > near future, if ever. > > There would be no substantial reduction in competition if they merged because > they don’t compete other than very marginally in fixed-line broadband, where > Vodafone has market share of less than one per cent. > > The ACCC appears fixated on a potential industry landscape that doesn’t and > probably won’t exist; a fantasy of its imagined perfect industry structure. > > TPG had plans to build a 4G wireless network, using small cell technology, > but abandoned them last year after Scott Morrison, acting as Home Affairs > minister, announced a ban on the use of Huawei technology in 5G networks on > national security grounds. > > Effectively barred from using the lowest-cost provider (from whom it had > already ordered more than $100 million of equipment that was now unusable) > and with a future upgrade path to 5G services cut off by the decision, TPG’s > David Teoh decided to cut his losses and abandon the planned network build. > > Thus, while at face value it might appear that the merger would reduce the > number of wireless network operators from four to three, increasing > concentration, the reality is that the fourth operator doesn’t exist. > > The ACCC’s opinion is that if it blocks the merger it might, substituting its > judgment for the commercial judgement of the TPG board and management. > > It wouldn’t be the ACCC, of course, having to contemplate forking out the > many billions of dollars required to be the very late starter in the scramble > to build 5G networks. > > The ACCC might wish for a different telecommunications landscape but that > doesn’t mean it would emerge. > > The commission says TPG has a commercial imperative and the capabilities to > roll out its own mobile network and that the merger would preclude TPG’s > entry, therefore substantially lessening competition. > > The ACCC might wish for a different telecommunications landscape but that > doesn’t mean it would emerge. > > Even had it been built, the aborted TPG network wouldn’t have been a > meaningful competitor to Telstra, Optus or Vodafone. > > The budget for the build was only $600 million, which would have supported a > few thousand small cell sites in the CBDs, not a national network. Telstra, > Optus and Vodafone are spending billions each year just to upgrade their > networks. > > > While TPG has been a disruptive, price-based competitor in fixed-line > services in the past, the amount of capital it would require to build a new > national 5G wireless network, from scratch, that would provide direct and > serious mass-market competition to the incumbents is probably well beyond its > financial capacity. That’s why its original plan was so relatively modest. > > It appeared TPG’s network strategy was designed to complement TPG’s > fixed-line strategies and offer some targeted competition to the national > broadband network – or, the more cynical have said, to encourage overtures > from Vodafone. > > Without the merger TPG would be relegated to being a declining fixed-line > business, suffering an intensifying margin squeeze as the NBN roll out nears > completion. > > While Vodafone would be cemented in as a poor (and unprofitable) third player > behind Telstra and Optus in wireless, with a market share of less than 20 per > cent against Telstra’s 44 per cent and Optus’ 29 per cent. > > In words, if the ACCC view prevails, the two companies and competition might > be diminished, not enhanced. > > If combined, and TPP’s large fixed-line customer base is brought next to > Vodafone’s wireless customer base -- within an entity with a far larger and > stronger balance sheet than either company has today -- they would be a much > stronger force in the market. They would have scale, financial capacity and > the ability to bundle products and services. > > The delay caused by the ACCC’s stance does represent a real setback for > Vodafone and TPG, given that Telstra and Optus are racing to layer 5G > services over their existing 4G infrastructure. > > Once 5G handsets are available from the major vendors, and regardless of > whether 5G applications are initially compelling, they will render 4G > networks increasingly anachronistic. > > That is why blocking the merger on the basis of an inferior network that will > never be built and a diminution in competition that wouldn’t have occurred is > an absurdity. > > The ACCC’s Rod Sims might like the telco landscape to be different but the > decision won’t make it so, at least not in a way that facilitates greater > competition. Indeed, competition in both fixed and wireless broadband is > likely to be lessened relative to what it might have been if the ACCC stance > holds. > > It may not. It is almost inevitable that, despite the lengthy delays and > costs, Vodafone and TPG will challenge the ACCC decision in the Federal > Court, where the ACCC’s record on major cases isn’t impressive. They should. -- Kim Holburn IT Network & Security Consultant T: +61 2 61402408 M: +61 404072753 mailto:[email protected] aim://kimholburn skype://kholburn - PGP Public Key on request _______________________________________________ Link mailing list [email protected] http://mailman.anu.edu.au/mailman/listinfo/link
