ACCC driving downward spiral of investment
New research from Europe confirms that the type of pricing policy being pursued by the ACCC is robbing Australians of investment in new competitive broadband infrastructure.
The study shows that reductions in regulated access prices canabilise the business case for new infrastructure investment because it becomes cheaper for competitive carriers to buy existing services than build new ones.
It says that product innovation and sustainable competition, providing the maximum benefit for society, comes from competition between different technology platforms, not dropping access prices. However, regulators in both Europe and Australia have favoured reducing prices at which competitive carriers can access incumbent carrier networks.
While this has increased broadband penetration based on intense price-based competition for "me too" type services, it is actually leading to an investment drought.
This is compelling evidence to support what we are already seeing in the Australian market - carriers like SingTel Optus are buying access to Telstra's network because it is cheaper than upgrading and extending their own cable infrastructure.
The ACCC's justification for giving competitors cheap access to Telstra's copper lines was the "stepping stone" theory - allowing new entrants to gain sufficient marketshare to invest in their own infrastructure as they step up the "ladder of investment". That theory has been completely shot down - if the evidence of the low levels of telecommunications investment in the chart (pictured above) wasn't enough.
Chart: Investment growth by industry "The ACCC hockey stick" (JPEG - 26KB)
The study, commissioned by the European Telecommunications Network Operators' Association (ETNO), and prepared by respected international consultancy LECG, says:
- a 10 per cent reduction in unbundled local loop (ULL) prices causes an 18 per cent fall in the number of subscribers on alternate infrastructure networks.
- a 10 per cent reduction in ULL would cause a 10 billion Euros (AU$16.3B) loss of investment in alternative broadband infrastructure in Europe over a 9 year period.
This loss of investment would have a flow-on economic effect:
- reducing GDP by more than 30 billion Euros (AU$49B)
- see an average 27,000 fewer jobs a year
Download a copy of the report: