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Figure 1.1:The communications supply chain—how voice and broadband services are delivered toconsumers over next generation networksAggregation servicesConsumerservicesAccess network servicesTransmission anddark fibre servicesService provider (SP) networksSatellitePeoplePOPs & corenetworkFixedPOIThe internetSP data centreswith voice,messaging,video and otherapplicationservicesPeeringTransitTHE INTERNETPremisesPOPs & corenetworkIoT DevicesData centreswith OTT, cloudcomputing ignificant change is affecting how this communications supply chain functions, including the natureand extent of competition in retail and wholesale markets. This change includes both structural reform,as a result of policy initiatives (at the centre of which is the rollout of the NBN) and the rapid pace oftechnological advancement and product innovation that is occurring globally.We have taken a five year horizon for considering likely competition and efficiency developmentsin communications markets. This time period covers the completion of the NBN rollout, theexpected initial deployment of 5G wireless technology and settling of the future market structurefor the wholesale provision of fixed broadband services as part of NBN Co Limited (NBN Co)’seventual privatisation.Reflecting the dynamic nature of communications markets, the period of the study has allowed us toobserve developments that have occurred in parallel including those prompted by some of the findingsand proposed recommendations in our Draft Report. We recognise that this report captures a snapshotof the communications sector at this point in time and that the markets we have assessed will continueto evolve, sometimes in ways that may not be foreseen. However, we consider that the regulatory toolswe have equip us to respond to changing market circumstances, address any market failure, promotecompetition, and benefit consumers.1.2Key points1.2.1Competition and the regulatory frameworkNotwithstanding considerable concentration in both fixed and mobile retail markets, there is evidenceof competition between the major service providers of broadband and voice services. Smaller providersand new entrants have the potential to provide additional competitive tension by exercising someconstraint on the larger providers.We have not found any major deficiencies in the current communications regulatory arrangements thatwe administer and consider that these have remained largely fit for purpose. In our view, the economicregulatory framework for the communications sector has proven to be capable of accommodatingmajor changes to the sector, including allowing for appropriate responses during the transition tothe NBN. In particular, we consider that Part XIC of the Competition and Consumer Act 2010 (CCA)2Communications Sector Market Study—Final report

provides the necessary tools for access regulation of monopoly and bottleneck communicationsinfrastructure, including that being built by NBN Co, and we do not find that there is currently a needfor significant changes to this regulatory regime.We consider that it is important that regulatory conditions do not stifle innovation and flexibility inemerging and developing markets. We consider there is far less need for up-front regulation of newercommunications services. Looking further ahead, if competition concerns arise in relation to theprovision of these services, we would address these concerns in the first instance through use of thegeneral competition law provisions in the CCA.1.2.2Progress on NBN issuesThe rollout of the NBN is a major investment in communications infrastructure and is having asignificant impact on the Australian communications sector. The changes within the supply chain andconsequential impacts on retail service providers and consumers have inevitably been a key focus of themarket study.The NBN rollout is now well advanced with over three and a half million premises activated and NBN Coprogressing at a rapid pace to complete its build by 2020.However, a number of competition and consumer issues related to the NBN transition have emergedand require immediate measures to resolve on the part of both retail service providers and NBN Co.Some of these measures are already underway with significant progress achieved since the publicationof our Draft Report in October 2017.We are taking actions to promote improved consumer and competition outcomes by ensuringavailability of reliable and useful information to support consumer choice. These measures includeenforcement of the Australian Consumer Law (ACL) including obtaining court-enforceable undertakingsand compensation from Telstra, Optus, TPG, iiNet, Internode, M2 Commander, Dodo and PrimusCommunications (iPrimus) for likely misleading consumers about maximum speeds they could achieveon certain NBN services. In response to our concerns, these service providers have undertaken that,where they advertise or otherwise represent to potential customers that they will receive a particularspeed, they will check each customer’s attainable speed within four weeks of connecting a new service.If it is below the advertised speed, they will notify the customer and offer remedies.We have also undertaken measures to promote improved broadband speed information available toconsumers for the NBN plans that service providers offer, including: our broadband speed claims guidance for service providers released in August 2017, which has led anumber of service providers to improve their marketing information and give consumers comparableinformation about typical busy period broadband speeds,1 and the introduction of our broadband performance monitoring and reporting program (MeasuringBroadband Australia), which released its first report in March 2018.In addition, we have commenced an inquiry into NBN Co’s Wholesale Service Standards, in linewith our proposed Action 6 of the Draft Report. This inquiry is looking at aspects of the NBN Cowholesale arrangements most likely to influence consumer experience and whether the service levelscurrently in place are appropriate and effective. As part of the inquiry, we will examine whether thereare appropriate incentives for NBN Co to remedy service failures and consider the adequacy ofcompensation available to service providers to enable them to provide appropriate consumer redress.Since the release of our Draft Report, the Government has also announced a range of new protectionsto ensure broadband customers get the level of service they expect from their retail service provider asthey transition to the NBN. These include the Australian Communications and Media Authority (ACMA)implementing new rules that will: specify the minimum information that service providers must provide about their network servicesbefore they sign consumers up specify minimum standards for service providers’ complaints-handling processes and a requirementfor them to report their complaint numbers to the ACMA so that changes can be monitored1We note, however, that some service providers accounting for approximately 16 per cent of the market are yet to provide typicalbusy period speeds information in their advertising.Communications Sector Market Study—Final report3

require service providers to undertake a series of tests after a consumer has activated their NBNservice to ensure that the service works and that faults are identified early require carriers and carriage service providers to provide continuity of voice and/or internet servicesif consumers experience issues when migrating to the NBN.NBN Co itself has undertaken a number of initiatives that address some of the issues identified in ourDraft Report. Notable among these are its new temporary prices to promote the 50 Mbps access virtualcircuit (AVC) tier and to increase the amount of connectivity virtual circuit (CVC) capacity provisionedper customer.2Many service providers have responded positively to the various ACCC and NBN Co initiatives, andadjusted their wholesale acquisitions and retail products, resulting in significant increases in CVCcapacity contracted. Evidence of this is a 37 per cent increase in CVC capacity acquired per customerbetween the end of September and December 2017.3 This has already led to a dramatic reduction incongestion on the network and should result in fewer speed complaints.NBN Co’s temporary prices mean that service providers and their customers are effectively gettingincreased data speeds at no (or limited) extra charge. Consumer willingness to pay additional chargesfor increased data speeds remains uncertain, and we are concerned that NBN Co’s longer-term targetsmay continue to create excessive uncertainty for access seekers. Further, achievement of efficientpricing outcomes will be constrained if demand for NBN services does not increase at the rate currentlyexpected by NBN Co in the next few years.1.2.3Wireless and 5G5G deployment could create significant opportunities for industry and consumers. However, at this earlystage, there is still uncertainty about the nature and timing of the deployment but it is anticipated that5G has the potential to accelerate the extent of fixed to wireless broadband substitution given its abilityto provide comparable speeds to fixed broadband services. In doing so, existing business models maybe disrupted, with the degree of substitution in part depending on the price and service performance ofNBN services.Future substitution will also depend on the nature of wireless service offerings from providers, whichare not yet evident. Although the amount of data included for wireless offerings has been growing, ingeneral, it is still typically less than 200 GB per month, while recent trends mean that most fixed lineservices now include unlimited data. If this divergence between data quotas continues in the future, itmay limit the substitutability of wireless for fixed line broadband for most consumers.1.2.4Changes to proposed actions and recommendationsOur Draft Report put forward a number of proposed recommendations and actions. Feedback fromsubmissions to the Draft Report has assisted us to confirm which areas of the sector require regulatoryattention, and which do not.Following consideration of submissions to the Draft Report, we have made a number of changes to ourfindings, actions and recommendations: On NBN pricing issues and cost recovery obligations our Final Report takes into account NBN Co’srecent pricing initiatives, which have demonstrated NBN Co’s ability to respond flexibly tostakeholder concerns. We have pointed to the importance of examining the potential for disaggregation of NBN Co prior toits privatisation as a means of facilitating greater infrastructure-based competition. In response to concerns about the potential for deterring investment at this nascent stage ofdeployment, we have decided to keep a watching brief on the deployment of dense small cellinfrastructure to identify any potential barriers impeding access to critical infrastructure.234Service providers acquire AVCs at a specified speed tier for each customer premises they supply over the NBN. They must also buyCVC capacity from NBN Co to carry aggregated customer traffic to the points that their networks interconnect with the NBN.Australian Competition and Consumer Commission (ACCC), NBN retailers acquired 37% more CVC, ACCC, 8 February 2018,viewed 19 March 2018.Communications Sector Market Study—Final report

In relation to e-SIMs, we will explore broader concerns that competition between mobile serviceproviders in the offering and use of e-SIM devices could potentially be impeded by the need to entercommercial agreements with device manufacturers. We propose to await the findings of the ACMA’s research on email portability before decidingwhether to undertake any further review of email retention offerings.1.3State of competition in the supply of broadband andvoice servicesBroadband and voice services are the essential communications services on which individuals andbusinesses rely. The retail provision of these services displays considerable concentration, with thefour largest providers accounting for 96 per cent of services to residential premises. Telstra’s fixedline dominance has not been significantly eroded so far in the transition to the NBN despite somelosses in regional areas where its dominance has been greatest. Competition for mobile services isconcentrated in the hands of the three mobile network operators (MNOs) that account for 91 per centof mobile services.However, we anticipate that the competitive dynamic in the supply of fixed line and mobile voice andbroadband services will increase following the recent entry of Vodafone into the provision of fixedline services and TPG’s deployment of its own wireless network. This will result in four major carriersproviding both fixed and mobile services, and potentially five major fixed line providers.Notwithstanding the high level of market concentration, there is evidence of competition in the marketsfor voice and broadband services, over both fixed and mobile access technologies. This is particularlyevident in the price competition between suppliers of both fixed and mobile services. However, theextent of non-price competition is greater in mobile, compared to fixed services as evidenced bysignificant product differentiation in mobile services. While there has been less differentiation in fixedservices we note that competition in relation to quality of service dimensions, such as broadband speedis beginning to emerge, including as a result of our recent guidance on speed claims.While there are signs of retail price competition occurring for fixed services, as noted above we initiallyheard from many service providers that the NBN wholesale pricing construct and level was constrainingtheir ability to provision greater capacity given consumers’ current willingness to pay. More recently,NBN Co has begun to respond to stakeholder feedback by introducing temporary pricing initiatives andis consulting with industry on longer-term pricing changes. The temporary pricing has already benefitedconsumers through enabling better quality broadband with less congestion during peak eveningperiods. However, it will be important that the long-term pricing changes also successfully addressthese issues.1.4Transitioning consumers to the NBNThe challenges faced by NBN Co include providing services that meet consumer expectations anddeliver an efficient use of the infrastructure being deployed while simultaneously completing the build.While the NBN experience of the majority of consumers is generally positive, there is a significantnumber of consumers for whom this is not the case who have reported unsatisfactory experience withthe NBN both during and after migration from the legacy networks. Two principal concerns arise in thisregard: issues faced by consumers during the migration of their services from legacy networks to theNBN, and the performance of services provided over the NBN not meeting consumer expectations.As noted above, we have commenced an inquiry into NBN wholesale service standards. This inquiry isexamining concerns about connection and activation problems at the time of migration as well as faultrectification after connection, missed appointments and unsatisfactory complaint resolution processes.We will determine whether existing wholesale service standards are appropriate and consider whetherregulation is necessary to improve customer experience. Concurrently, the ACMA is undertakingcomplementary work to implement a range of new rules requiring service providers to improve thecustomer experience in moving to the NBN, which are expected to come into place in mid-2018.Communications Sector Market Study—Final report5

In relation to the second concern, the adoption of our speed claims guidance by service providers is animportant positive step towards addressing consumer dissatisfaction with the speed of NBN services.The positive response by a number of service providers is resulting in the provision of improved retailplan information on speeds that supports consumers in making their purchase decisions, and throughretailers ensuring their retail NBN services typically operate in the manner advertised.Recent pricing and product development initiatives by NBN Co are encouraging the uptake andpromotion of higher speed services by service providers. We expect this to result in higher servicequality and improved consumer experience.1.5Medium term NBN issuesWhile the above measures are likely to lead to significant progress on improving consumer experience,it will take more time for the full effects to be evident. We acknowledge that these and proposed futuremeasures may not resolve all of the poor outcomes that are being delivered by retail markets.We welcome recent initiatives by NBN Co to work with stakeholders on these issues, for example, theflexibility shown by NBN Co in its new prices to promote the 50 Mbps wholesale tier and to increase theamount of CVC provisioned per service. These pricing initiatives implemented in December 2017 aretemporary measures and we also note that NBN Co is to introduce longer-term pricing changes.However, notwithstanding these developments, the willingness to pay additional charges for increasedthroughput remains uncertain, and we are concerned that NBN Co may continue to have difficultymeeting its financial targets. If demand for NBN services does not increase at the rate currentlyexpected by NBN Co, this may continue to create uncertainty for access seekers and has the potentialto constrain the delivery of efficient pricing of the NBN infrastructure.While there remain longer-term pricing issues to resolve, we provided additional flexibility to the partiesin negotiating pricing outcomes, through deferring our decision on the Special Access Undertaking(SAU) variation that NBN Co has submitted. NBN Co’s proposed SAU variation incorporates fibre to thenode (FTTN), fibre to the building (FTTB) and hybrid fibre coaxial (HFC) access technologies into theSAU, to reflect the current NBN model. If approved, the SAU variation would extend the current SAUpricing arrangements to these access technologies. We anticipate resuming our assessment of the SAUvariation when NBN Co has determined its longer-term pricing changes.The multiple and complex objectives tha

2016-17 24% in data quotas in 2016-17 49% real decline in prices in 2016-17 4.5% real decline in prices in 2016-17 3.1% 30% of fixed broadband subscribers would consider switching to a wireless service 100GB Download quotas on some wireless plans have reached over 100GB NBN available to 6.3 million premises with 3.6 million activations by .