How one decision could see us shortchanged by billions

The Federal Budget is under pressure, the global economic outlook is volatile and cost-of-living pressures continue to hammer Australian families. And yet the communications regulator is proposing the federal government on a policy approach which could forgo up to $3.2 billion in revenue.

The approach would also reduce competition among telecommunications providers and hamper the introduction of new technologies.

It all revolves around how the Federal Government approaches telecommunications spectrum licenses. Some 69 existing spectrum licenses across seven bands are due to expire between 2028 and 2032. Forty eight of these are held by three mobile network operators.

Spectrum is a valuable public resource. It must be managed carefully to ensure the proper functioning of commercial, government, military and emergency communications – everything from mobile phones, to radios, to televisions, to satellites, to submarines utilise spectrum to communicate.

It is the job of the regulator, the Australian Communications and Media Authority (ACMA), to assign spectrum. But their approach on this issue is baffling and potentially costly.

ACMA plans to renew expiring mobile spectrum licenses without a competitive auction, a decision that risks forfeiting between $2 billion and $3.2 billion in public revenue over coming years.

The cost has been estimated in independent economic analysis by Professor Richard Holden, Scientia Professor of Economics at UNSW Business School and editor of the Journal of Law and Economics.

Professor Holden says the failure to hold a competitive auction for spectrum is “based on flawed economic reasoning (and) may significantly undermine public trust, market competition, and the integrity of the regulatory process”.

In his independent analysis, commissioned by ACCAN, Professor Holden argues that by granting renewed access to existing telcos without testing the market through an auction, ACMA risks entrenching incumbent dominance, limiting opportunities for new entrants, and failing to ensure fair market value for a critical public resource.

Remember, this is a public resource which ACMA must manage in the best interest of the Australian people.

You don’t need to be an expert to understand that if you have an asset which multiple parties want to purchase, it makes sense to have a competitive process for its sale. Many of us act on this logic when we put our homes up for auction or other competitive sales approaches.

The failure of the regulator, ACMA, to understand this is bewildering.

One can only conclude that ACMA is more concerned about the welfare of the industry rather than the impact this proposal will have on the Australian public. As Professor Holden points out, if this proposed approach proceeds, it will likely be presented as ‘a textbook case of regulatory capture.’

Of course, it is not the first time this question has been asked.

And yet this is a time when we need a strong regulator to protect the public interest, more than ever. Trust in our major telcos is brittle.

Our research shows that 41% of consumers have limited faith in their telco to act in their best interest –and almost a third said the coverage they received didn’t match what they were told to expect.

The latest Morgan Poll placed the telcos just behind the major supermarkets in public trust.

This crisis of trust is not helped by news this month that the ACCC has fined Optus $100m, subject to court approval, for unconscionable conduct.

Unconscionable conduct is a high bar and one that Optus has spectacularly surpassed in its behaviour preying on some of our most vulnerable communities and consumers, including Indigenous communities.

The Telecommunications Industry Ombudsman has previously identified poor sales conduct — including misleading and high-pressure tactics — as the most common systemic issue it investigates.[1]

These concerns are not ‘academic’, they have a real world impact everyday for Australians.

To safeguard public revenue and promote competition in the telecommunications sector, the government must consider if ACMA’s intent to conduct auctions for expiring spectrum licenses is a suitable approach.

Australia must have faith in its telecommunications and an effective regulator is critical to this. We must also have faith that a valuable public asset is delivering full value to taxpayers and will continue to deliver the best and most advanced technologies to consumers at affordable prices well into the future.

Originally posted in The Canberra Times: How one decision could see Australians shortchanged on billions | The Canberra Times | Canberra, ACT

[1] https://www.tio.com.au/reports/submission-communications-alliances-2024-tcp-code-review