Competition

in Regional

Australia

Dan Lloyd

Director , Strategy &

Corporate Affairs

Vodafone Hutchison

Australia

Numerous regional voices wanting a serious debate

around national roaming

• Peak Farmers’ Organisations

• House of Reps Agriculture Committee

• Infrastructure Australia

• Regional Members of Parliament

• Regional Telecommunications Review Committee

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Vodafone driving innovative roaming/infrastructure sharing

agreements across the globe

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Country Roaming/sharing agreement

UK 2G/3G/4G: Whole of UK split into 2 zones with reciprocal active sharing with 02

(Telefonica)

Spain 3G reciprocal active sharing on 4,000 regional/remote sites (Orange)

Italy 2G/3G/4G: Consolidation to common grid in areas <35k inhabitants (TIM)

India 2G/3G: Three way JV for world’s largest towerco “Indus” + reciprocal 3G national

roaming on full footprint (Airtel and Idea), & JV for joint Wifi deployment (Airtel)

Ireland 2G/3G/4G: Passive network and transmission sharing (3)

Greece 2G/3G active sharing (Wind)

Romania 4G Active sharing in rural and regional, plus common grid planning in urban

(Orange)

New

Zealand

Commercial agreement on full footprint national roaming (2 Degrees)

South

Africa

Commercial agreement on full footprint national roaming (Cell C)

National roaming often regulated, especially in larger countries

with low population density…

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Country Roaming regulation

USA National Roaming (for voice) mandated in 1981, reconsidered &

extended to voice and data in 2011.

New Zealand Mandated national introduced in Telco Act in 2001.

Canada Regulated roaming introduced 2008.

France Mandatory roaming introduced 2010. Regulator considers will

have achieved objectives and requirement could be phased out

after 12 years in 2022.

Norway Regulator’s draft decision in May 2016 recommends

introduction of mandatory roaming.

Land area and population density

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Canada

Aus

NZFrance

UK

USA

Are there indicators of serious structural

competition issues in Australia?

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Indicators of structural competition issues…

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Indicators of structural competition issues…

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Indicators of structural competition issues…

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Indicators of structural competition issues…

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Indicators of structural competition issues…

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$4

$234

Vodafone Group Telstra Corporation

2015-16 FINANCIAL YEAR - FREE CASH FLOW/CUSTOMER

Source: Annual Reports, Vodafone Analysis

Causes of structural competition issues in Australia

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• Telstra inherited extensive tax-payer funded core, transmission, fixed/mobile

networks

• Substantial direct subsidies into mobile network

• Effective subsidies from competitors – ACCC reduced price of regional

transmission by 78%... Competitors were paying 5x fair price, further subsidising

Telstra’s regional network

• Ongoing subsidies through $300m/year opaque USO scheme, over-

compensating Telstra and subsidising regional transmission & exchanges,

allowing mobile network deployment at far lower cost than competitors

• NPV $11bn subsidies from NBN payments

Has mandated national roaming actually

undermined incentives for investment?

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Impact on incentives for investment – France

Impact on incentives for investment – France

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Decision Jan

2010

Impact on incentives for investment – Canada

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Impact on incentives for investment

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“…argues that mandatory roaming will weaken host providers’ incentives

to invest because it impedes their ability to monetize their enormous

investment in broadband networks” by “depriving them of the ability to

compete on the basis of the scope and quality of their network coverage.”

Impact on incentives for investment

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“In this Order, we promote consumer access to nationwide mobile

broadband service by adopting a rule that requires facilities-based

providers of commercial mobile data services to offer data roaming

arrangements to other such providers on commercially reasonable terms

and conditions...

The rule we adopt today also serves the public interest by promoting

investment in and deployment of mobile broadband networks, consistent

with the recommendations of the National Broadband Plan”

FCC, Data Roaming Order, April 2011

Impact on incentives for investment – USA

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Impact on incentives for investment – USA

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Impact on incentives for investment – USA

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Proceedings

Decision April

2011

Impact on incentives for investment – USA

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Proceedings

Decision April

2011

Australia compared to UK

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Australia compared to UK

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Australia compared to UK

UK

• Australia 32x the size

• UK population density 84x Australia

• UK has already driven world-leading infrastructure sharing – 4 operators,

only 2 underlying mobile networks

• UK proposal fundamentally different – all operators not only to offer

national roaming, but all operators required to take national roaming

from each other

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Summary

• Australia’s geography and population density are extreme.

• Mandated national roaming very common in western economies with large land

areas and low population density: The USA, NZ, Canada, France, (Norway).

• No evidence that mandated national roaming has undermined investment.

• Vodafone has argued national roaming not necessary in smaller markets (UK & NZ):

– Neither of them have both a) large land area, & b) low population density.

– The proposed form of national roaming in the UK was fundamentally different (required to

offer and required to take).

• Telstra inherited, received, and continues to receive substantial subsidies.

• National roaming would give the roaming provider a reasonable rate of return.

• National roaming payments share the costs of network deployment, effectively

subsidising further network expansion.

• National roaming has the potential to substantially increase competition, finally

giving regional Australia a choice.

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