Competition in the 5G age

Competition is the only way in which Australians will continue to enjoy high standards of mobile services, says the ACCC’s Rod Sims.

In a sign of how seriously regulators are taking the provision of communications in the modern world, ACCC Chairman Rod Sims took to the stage to address delegates at the ACMA’s recent RadComms 2018 conference to outline his views on competition issues and the 5G spectrum.

“5G will need a diverse range of spectrum to support its different use cases: low, high and very high band frequencies to provide coverage, high speeds, low latency and to carry large amounts of data along the network,” he said.

“Along with this greater demand for spectrum comes significant implications for competition. One of the challenges will be making sure that those who need spectrum get enough of it to be effective competitors in retail markets,” Sims added.

Sims said there is a lot of preparation happening across the industry and government to make sure networks are ready to support the transition and 5G compatible devices.

“This includes work for the ACCC to make sure our regulatory settings are fit for purpose and flexible enough to support the transition to 5G,” he said.

The importance of competition

“We know that 5G is going to lower the cost of delivering data, but those changes will be accompanied by large capital and operating costs; operators will need to acquire new spectrum, densify their networks by building more mobile towers and make sure their transmission can support delivery of new services,” Sims said. “So what is going to drive this investment? Competition of course.

“Australia has some of the best mobile networks in the world. Why? Because competition created the environment that led to these services being developed and delivered to the Australian consumer,” he added.

“As the competition regulator, we want to make sure markets are working for consumers, now and in the future. Part of this is about preserving the competitive environment so that it is attractive for investment. One way we do this is by seeking to minimise regulatory risks and barriers for entry for existing and new operators.”

Sims said that the ACCC looked very closely at the relationship between competition and investment in its regional mobile roaming declaration inquiry.

“We found that the declaration of access to a mobile roaming service would be likely to distort the incentives for Telstra, Optus and Vodafone to make continuing efficient investments to strengthen and expand network coverage.”

Sims added that “if we want to see more competitors in mobiles we need to think carefully about how to best achieve sustainable competition and minimise barriers to entry”.

“We expect calls to share network infrastructure are likely to increase in a 5G world because of the capability offered by 5G to allow greater independence to operators who may share a radio access network, and the costs and difficulties involved in rolling out a dense mobile network, particularly in the cities.”

Network sharing

Sims pointed out that there is a degree of passive network sharing in Australia, where operators share mobile towers, or other assets, and that this is regulated to an extent under a Facilities Access Code. “As we move into a 5G world, the need to densify networks, particularly in highly populated areas, may encourage more tower sharing,” he said.

Sims also said that with 4G LTE technology, radio access network (RAN) sharing has become more sophisticated, and operators are more able to distinguish between and maintain control over their respective services and offerings. He said that bilateral RAN sharing arrangements have the potential to save operators from 20% to 40% on network costs.

Some countries have been looking at fundamentally altering the structure of their mobiles market, moving from multiple competing mobile networks to a shared wholesale network where operators simply buy capacity from one or two network providers.

“I do not think that we will see this in Australia to any great extent but there may be benefits to 5G active network sharing, particularly where it encourages smaller players to invest and roll out new services while also enabling them to keep control over and differentiate their services, and so be active independent competitors,” Sims said.

Sims said that while there are many potential benefits of network sharing — including more efficient asset utilisation and lower costs for operators, faster and wider deployment of new technologies, and greater spectral efficiency — there are also adverse consequences for competition and consumer outcomes if, for example, “we end up with a sluggish, ill-managed monopoly network provider that stifles service competition. Where smaller players are sharing networks there is also a greater risk of tacit collusion depending on the extent of sharing and a stifling of investment.

“We need to ensure our regulatory framework is flexible enough to facilitate the potential evolution of competition, and new innovative services/technology that might develop, while mitigating against any potential anti-competitive behaviour. This includes ensuring operators have access to network infrastructure (either through some active or passive sharing) and competitive backhaul is available,” he said.

“Ultimately, we want to see consumers benefit and we want to see network owners incentivised to invest, which is why we will take a close examination of any proposals for active network sharing.”

Sims concluded his presentation by saying that if there was one thing he wanted delegates to take away from the conference, it would be “competition, competition, competition”.

“If Australians are to keep the high standards of mobile services that they currently enjoy, competition is the only way to achieve that. We cannot become complacent.”

This is an edited version of a speech given by Rod Sims at the ACMA RadComms 2018 conference. The full speech can be found on the ACCC website.

Image: Rod Sims, courtesy ACCC.

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