The chief executive of Vodafone owner TPG, Inaki Berroeta, has said that Australians are paying more than they should for internet and mobile plans, and has blamed the federal government’s policies to “tax everything that creates competition to the NBN” as the reason for those high prices.
He noted that Australian consumers were paying $8 extra a month – approximately 10% the cost of a 50Mbps broadband plan – to subsidise the government-owned telco NBN Co which he labelled as a “900 pound gorilla”.
In addition, high spectrum prices and an outdated auction process for spectrum were resulting in costs of over $10 billion for telcos over the last decade, which were being passed on to consumers.
“Paying some of the world’s highest prices for spectrum is unsustainable and only ends up hurting consumers when costs are inevitably passed on,” he told The Australian. “It is not just the high cost of spectrum that is hurting consumers and industry. It is the way spectrum costs are proportioned across the industry.
“Over a 15-year period, we have calculated that TPG spends about 11% of its annual mobile revenue on spectrum, Optus spends about 6%, and Telstra spends about 5%. This disparity does not support challengers and competition; it entrenches the status quo.
“This ultimately hurts competition and applies a hand brake to those wanting to use their precious capital to do things differently, to enhance their networks and serve customers better.”
TPG’s full-year results are expected later this week. However, in the six months to 30 June 2024, it reported service revenue of $2,327 million , up 1.7% over the corresponding period in 2023. Its growth was driven by a 7.2% increase in Mobile service revenue to $1,121 million, offsetting a 3.5% decline in Fixed service revenue (including data and internet).
Another factor that Berroeta cited which was stifling innovation overall in the telco industry was government bureaucracy. “We recently did a stocktake of all the laws, regulations, codes, and standards TPG is subject to, and the results were shocking. Many of these are well-meaning and serve important functions – but just as many are outdated and impose unnecessary cost.”
TPG operates Vision Network which serves as a competitor to the NBN Network. Last year, TPG agreed to sell its fibre and fixed network infrastructure assets to Vocus for $5.25 billion.
Berroeta noted that Vision Network was “entirely overbuilt by NBN”, which owns more than 90 per cent of the fixed broadband market. “While we agree that the NBN plays a vital role in our industry, the regulations designed to protect NBN at the expense of competition are counter-productive,” he said.
“Not only does Vision compete with the 900-pound gorilla of the NBN, but it must also pay a tax in the form of the Regional Broadband Scheme. Let’s not beat around the bush here, the RBS is a tax designed to protect and subsidise the NBN’s business case.”
“This regulation decreases competition by making private marginal investments difficult, particularly to compete against NBN in regional areas. It is also a poor deal for most broadband consumers as it costs them $8 a month on their home internet bill.”
“Taxing everything that creates competition to the NBN is not the answer, particularly as a significant number of wireless broadband customers are in regional areas. This is not a good outcome for our industry and certainly not for consumers”.
The government has pumped billions of dollars into NBN, including last month agreeing an additional $3 billion of federal funding to the NBN to upgrade its network as it aims to improve internet speeds at 622,000 premises via access to fibre connections.
That funding took the total equity injection from the government since the NBN’s launch in 2008 to more than $35 billion. The Productivity Commission in 2021-22 put the market value of NBN Co at $19.5 billion.
As for deals struck between private telcos, Berroeta pointed out that last year, the Australian Competition and Consumer Commission (ACCC), cleared a $1.6 billion regional mobile network and spectrum sharing agreements between TPG Telecom and Optus. Two years prior, the ACCC had struck down a similar deal proposed between TPG and Telstra.
“We asked for open access to regional networks but that was not supported by the ACCC (Australian Competition and Consumer Commission), then through a commercial agreement with Telstra which was knocked back by the ACCC. Our preference is always to seek to share through private arrangements where the commercial construct can be agreed by the parties, such as we did with Telstra and then Optus. What we need from government and regulators is their support to promote and approve sharing of telecoms infrastructure to benefit Australians.”
The TPG-Optus deal more than doubles TPG’s 4G coverage to 1,000,000 sq km, allowing it to reach 98.4% of Australia’s population.
TPG chief executive Iñaki Berroeta declared the telco’s latest agreement with Optus will end the “bush tax” that he says bigger rivals such as Telstra is subjecting customers to in regional Australia.
Apart from TPG, other telcos have come under fire for increasing prices. Telstra has been sharply increasing prices after its chief executive Vicki Brady stopped the practice of linking subscription prices to inflation last year. Telstra’s base sim-only mobile plan costs $65 a month for 50GB of data – more than 24% higher than a similar data offering from Vodafone.
Telstra has pointed out that its network is more than three times of Vodafone’s expanded footprint, and that there are significant costs associated maintaining those networks.
“We’re all for choice and competition, it’s what drives us to be our best, but let’s be clear about what best looks like,” said a Telstra spokesman.
“If you live or travel in rural and regional Australia, you know mobile coverage can’t just stop the moment you step out of town. Knowing you’re covered on the road, in the paddock and in more places across Australia is critical.
“Customers will always choose the option that best suits their needs, and we’ll continue to invest like we always have, so we can offer them the best choice.”
