The end of the MOCN deal – renewed push for regional roaming?

TLDR version: The Australian Competition Tribunal’s (ACT) confirmation of the ACCC’s rejection of the so-called MOCN deal between Telstra and TPG is a big win for the ACCC and Optus, and it reinforces the priority of infrastructure-based competition in telecommunications regulation. Telstra has alternative opportunities for spectrum access and will bid at the upcoming 3.4GHz auction. TPG may revive VHA’s lobbying for mandatory regional roaming.

ACT decision is a vindication for the ACCC

The MOCN deal would have given TPG access to the Telstra regional mobile network for 18% of Australia’s population and given Telstra access to TPG’s regional spectrum holdings. The latter element was the hook that got the ACCC involved, as it legally counted as an acquisition that required ACCC authorisation.

The ACT agreed with the ACCC that the proposed spectrum sharing (in the wider context of the deal) threatened infrastructure-based competition. It also rejected attempts to effectively re-open the ACCC’s inquiry. At this point, Telstra’s and TPG’s only remaining grounds for appeal are narrow legal ones.

We argued consistently that the ACCC would reject the proposed MOCN deal between Telstra and TPG. The basis of our argument is the ACCC’s consistent prioritisation of infrastructure-based competition in mobile over the last two decades. It is significant that the ACT also accepts that logic because this affirms and entrenches the ACCC’s approach – something that any other mobile sharing deals will need to reckon with.

The ACT’s support is a big win for the ACCC, reinforcing their authority over regulation of the telecommunications industry. The success of their arguments before the ACT also shows that the ACCC has learned the right lessons from their defeat over the TPG/Vodafone merger.

Why does this matter?

We argued all along that the ACCC rejection of the deal was inevitable, based on their commitment to infrastructure-based competition as the main driver of competition in the mobile market. With the confirmation of the ACCC’s decision, that commitment is now entrenched. So what next?

For Optus, this means that their investment in the expansion of their regional network will continue to deliver differentiation from TPG while eroding Telstra’s.

For the nbn Co, it means that neither Telstra nor TPG will be in a stronger position to pursue Fixed Wireless Access (FWA) in regional areas.

Telstra’s interest in the deal was always mainly about access to TPG’s regional spectrum. But Telstra has alternative opportunities for spectrum, principally the auction of 3.4GHz spectrum in metropolitan and regional areas due in October this year. We expect it to focus on those opportunities.

For TPG, the opportunities are fewer. It now remains the number three network with little prospect of expanding its network to match Optus’ (let alone Telstra’s). We think it likely that TPG will revive VHA’s traditional support for mandatory regional roaming, and it will have supporters amongst some regional lobbies. However, any renewed push for mandatory regional roaming will have to wait until the ACCC reviews the issue again – it rejected the idea in its most recent inquiry in 2017.

In the meantime, the ACCC is currently inquiring into roaming in emergency situations, something that supporters of mandatory roaming hope may be the thin end of the wedge. But after this emphatic affirmation of the priority of infrastructure-based competition we doubt that the ACCC will extend regional roaming beyond the bare minimum required for emergency communications.

More realistically, TPG may need to explore other less extensive sharing arrangements. Either Telstra or Optus could be partners, but the most practicable outcome here would be a commercial roaming deal, possibly with some infrastructure-sharing thrown in.

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