The ACCC is also proposing that regulation of the MTAS for SMS services not continue, due to increased competition from messaging services like iMessage and WhatsApp.
The ACCC states
The MTAS is a wholesale service that allows consumers on different mobile networks to make calls or send SMS to each other. The ACCC has regulated the MTAS since 2014 to ensure calls can be made, and SMS can be sent, between consumers on all mobile phone networks. In August 2018, the ACCC launched a public inquiry examining whether the current regulation, or declaration, of voice and SMS MTAS should be revoked, extended or varied after it expires on 30 June, 2019.
The ACCC now proposes to continue the declaration of voice services, while removing regulation of the SMS termination service.
“Many consumers with smartphones are now using over-the-top messaging services such as iMessage and WhatsApp as alternatives to SMS. Importantly, we have also found that the majority of mobile plans now on offer in the market offer unlimited SMS,” ACCC Chair Rod Sims said.
“Our decision to regulate SMS appears to have had the desired effect. We are therefore proposing to remove regulation of MTAS for SMS services as we do not think continued regulation is necessary to promote competition.”
“However, over-the-top voice services are not yet substitutes for mobile voice calls as they do not offer the same quality or access to services such as Triple Zero,” Mr Sims said. “We are therefore proposing to continue declaration of MTAS for voice services.”The draft report states
The Australian Competition and Consumer Commission (ACCC) is of the draft position that the declaration of mobile voice termination remains in the long-term interests of end-users (LTIE). However, there is less evidence that this remains the case with regard to short message service (SMS) termination.
The ACCC considers that, while mobile network operators (MNOs) continue to have a monopoly over the provision of mobile voice and SMS termination services on their own networks, there have been significant changes in relevant retail markets since the 2013-14 inquiry. The most notable for the purposes of this inquiry is the increased use of over-the-top (OTT) messaging and voice services by Australian consumers. A key question in this declaration inquiry is whether OTT services are now effective retail substitutes for mobile voice and/or SMS services such that regulatory intervention in the wholesale market is no longer required to promote the LTIE.
Mobile terminating access service (MTAS) voice termination
The ACCC has come to the draft position that there are no effective substitutes for voice calls for which voice MTAS is an essential input. While OTT voice calls are increasingly used by end-users, their effectiveness as a substitute is limited due to both functionality and consumer behaviour. Therefore, in the absence of regulation, MNOs have the ability and potentially an incentive to exercise their market power in the wholesale markets to deny the provision of this input on reasonable terms, or to set the price of access to inefficiently high levels.
As such, the ACCC’s draft position is that extending the declaration of mobile voice termination is likely to promote the LTIE as it would:
- promote competition in the retail markets for mobile services and fixed voice services by ensuring, along with regulated prices in the MTAS Final Access Determination, that wholesale mobile voice termination charges are aligned with the efficient cost of the service,
- promote the achievement of any-to-any connectivity by ensuring that MNOs are not able to set unreasonable terms or conditions of access to mobile voice termination services, and
- promote the efficient use of, and investment in telecommunications infrastructure, as in the absence of declaration, MNOs have incentives to set above cost pricing.
MTAS SMS termination
On the other hand, the ACCC is of the draft position that OTT messaging services are now effective substitutes for SMS services for which SMS termination is required to supply.
The ACCC has examined the need for declaration in regards to both person-to-person (P2P) SMS and application-to-person (A2P) SMS services. Unlike OTT voice services, there are few limitations to substitution between P2P SMS and OTT messaging. Therefore, in the absence of declaration, there is less incentive for MNOs to exercise their market power to deny supplying SMS termination on reasonable terms, or to set the price of access to inefficiently high levels. This also means that the removal of declaration is unlikely to materially affect the state of competition in the provision of A2P SMS services for which SMS termination serves as a possible input.
As such, the ACCC’s draft position is that extending the declaration of SMS termination is not necessary to promote the LTIE because it is no longer required to:
- align wholesale prices more closely with efficient cost of the service to promote competition in the downstream markets,
- achieve any-to-any connectivity by ensuring that no MNOs are able to set unreasonable terms of conditions of access to SMS termination services, and
- promote the efficient use of, and investment in, telecommunications infrastructure as, in the absence of declaration, MNOs have limited incentives to set above cost prices for SMS termination.