AFR: ACCC fails to push for competition

You expect a competition regulator to make decisions that promote competition. Last week the Australian Competition and Consumer Commission did the opposite, approving a deal between Optus and the government-owned NBN Co, under which NBN Co will pay Optus $100 million and Optus will cease serving customers on its cable broadband network.

In the telecommunications and broadband sector, increasing competition has been the central public policy objective for more than 20 years. Unfortunately, the governments of Kevin Rudd and Julia Gillard abandoned that objective since the hastily devised April 2009 announcement that it would spend $43 billion to build the national broadband network. Since then the prime objective of its telecoms policy has been to shore up NBN Co's hopelessly weak business case. Labor's solution was to force every Australian to use the NBN by arranging for NBN to pay both Telstra and Optus to shut down their networks and cease serving retail and small business customers directly. No one could criticise Telstra or Optus for agreeing to these deals.

The public policy question, though, is what best serves the community's interests. Ordinarily, these interests would be served by the operation of competition law, but the Rudd and Gillard governments abandoned competition principles and it
seems the ACCC is falling into line. Its decision to grant authorisation quite correctly highlights the public detriment the deal will cause: it will "remove a source of competitive tension" and therefore will have negative consequences for price and non-price competition at the retail level" and remove indirect constraints on NBN Co in the wholesale market (in other words, it will be easier for NBN Co to jack up its prices.)

Less competition, less choice and higher retail and wholesale prices: rejecting this deal should be an open and shut case for the ACCC. But it says this detriment is outweighed by the magnificent public benefits the deal will offer. It cites the "cessation
of continuing HFC [hybrid fibre coaxial] expenditure requirements" (that is, Optus will not have to keep spending money on the HFC network); cost savings through coordinated migration of Optus HFC customers to the NBN (that is. NBN will save on sales and marketing); and "environmental benefits'. The fact that Optus and NBN Co will save money offers no evidence of "public benefit".

By the same reasoning the ACCC should approve every merger it sees on the grounds that mergers deliver cost savings to the two companies involved. As to NBN Co saving money on sales and marketing, this is a consequence of weakened competition, which again is an indicator not of public benefit but of detriment. And for a competition regulator to cite environmental benefits is not a relevant consideration. And how is the ACCC qualified to make such an assessment? The sad reality is that the ACCC has squibbed it. It waved through a deal that reduces competition presumably because it knows that is what the government of the day wants it to do.

Paul Fletcher is a Liberal MP and a former Optus Executive.