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International Benchmarking of Australian Telecommunications International Services Benchmarking telecoms.qxd 9/03/99 10:06 AM Page 1 International Benchmarking of Australian Telecommunications International Services Benchmarking March 1999 Commonwealth of Australia 1999 ISBN 0 646 33589 8 This work is subject to copyright. Apart from any use as permitted under the Copyright Act 1968, the work may be reproduced in whole or in part for study or training purposes, subject to the inclusion of an acknowledgment of the source. Reproduction for commercial use or sale requires prior written permission from AusInfo. Requests and inquiries concerning reproduction and rights should be addressed to the Manager, Legislative Services, AusInfo, GPO Box 1920, Canberra, ACT, 2601. Inquiries: Media and Publications Productivity Commission Locked Bag 2 Collins Street East Post Office Melbourne Vic 8003 Tel: (03) 9653 2244 Fax: (03) 9653 2303 Email: [email protected] An appropriate citation for this paper is: Productivity Commission 1999, International Benchmarking of Australian Telecommunications Services, Research Report, AusInfo, Melbourne, March. The Productivity Commission The Productivity Commission, an independent Commonwealth agency, is the Government’s principal review and advisory body on microeconomic policy and regulation. It conducts public inquiries and research into a broad range of economic and social issues affecting the welfare of Australians. The Commission’s independence is underpinned by an Act of Parliament. Its processes and outputs are open to public scrutiny and are driven by concern for the wellbeing of the community as a whole. Information on the Productivity Commission, its publications and its current work program can be found on the World Wide Web at www.pc.gov.au or by contacting Media and Publications on (03) 9653 2244. FOREWORD Benchmarking of key infrastructure industries such as telecommunications services, where government has played an important role, provides essential information by which to judge whether services central to the well-being of Australians are being supplied at internationally competitive prices. This benchmarking study is part of a continuing program of research into the performance of economic infrastructure industries, which was commenced by the Bureau of Industry Economics. It is the third Telecommunications Services report in the cycle. The study builds on the two previous studies, by benchmarking residential as well as business telecommunications prices and expanding on the number of services considered. To do this, the Commission further developed the price comparison methodology. Regulatory arrangements were also examined for the first time, to help in the interpretation of price differences between Australia and other countries. The study was undertaken within the Economic Infrastructure Branch of the Commission. An officer of the Communications Research Unit (formerly part of the Bureau of Transport and Communications Economics) was seconded to assist with the price comparisons. The study could not have been completed without the active co-operation of many participants in the sector, who either assisted the Commission directly or provided information to its consultant, Eurodata. We are grateful to all those who took part. The Commission welcomes further feedback on this report, consistent with its objective to improve the information base on key issues affecting Australia’s economic performance and community living standards. Gary Banks Chairman March 1999 iii TABLE OF CONTENTS Page Foreword iii Table of contents v Abbreviations ix Glossary xv Overview xxv CHAPTERS 1 Introduction 1 1.1 Rationale for benchmarking telecommunications services 1 1.2 Approach 2 1.3 Study scope 4 1.4 Data Collection 5 1.5 Consultation 6 1.6 Refereeing 6 1.7 Structure of the report 7 2 Telecommunications services in Australia 9 2.1 The significance of telecommunications services to economic activity 9 2.2 Network structure and technological trends 14 2.3 Telecommunications services demand 16 2.4 Telecommunications carriers and service providers 23 2.5 In summary 35 3 Social policy and retail price regulation 37 3.1 The Universal Service Obligation 38 3.2 Retail price regulation 46 v INTERNATIONAL BENCHMARKING OF AUSTRALIAN TELECOMMUNICATIONS SERVICES 3.3 In summary 62 4 Regulation of competition 65 4.1 Evolution of regulatory arrangements 66 4.2 Approaches to regulating access 71 4.3 Number portability and carrier pre-selection 80 4.4 Access terms and conditions 82 4.5 Accounting separation 88 4.6 Regulating anti-competitive conduct 90 4.7 In summary 90 5 Residential price comparisons 95 5.1 Methodology 96 5.2 Public Switched Telephone Network 100 5.3 Integrated Services Digital Network 114 5.4 Mobile 117 5.5 In summary 118 6 Business price comparisons 121 6.1 Methodology 121 6.2 Small businesses 124 6.3 Medium-sized businesses — dial-up services 130 6.4 Medium-sized businesses — data services 137 6.5 Large businesses 145 6.6 In summary 148 7 Quality of service 151 7.1 Methodological issues 151 7.2 QoS regulation and monitoring in Australia 155 7.3 QoS performance indicators 159 7.4 In summary 184 8 Interpretation of performance 187 8.1 Measurement errors 188 vi TABLE OF CONTENTS 8.2 External factors outside the control of industry 189 8.3 Government involvement and interventions 194 8.4 Prices, financial performance and productivity 208 8.5 Benefits of lower Australian prices 213 APPENDICES A Participants 215 B Telecommunications economics 217 C The value-added services sector 261 D Australian regulatory and institutional arrangements 271 E International regulatory and institutional environment 287 F Assumptions used for price comparisons 331 References 349 vii ABBREVIATIONS ABS Australian Bureau of Statistics ACA Australian Communications Authority ACCC Australian Competition and Consumer Commission ACD Agreed Commitment Date ACIF Australian Communications Industry Forum ADSL Asynchronous Digital Subscriber Line AMPS Advanced Mobile Phone System ANSI American National Standards Institute ANZSIC Australian and New Zealand Standard Industry Classification AOTC Australian and Overseas Telecommunications Corporation Ltd APLDS Alternate Providers of Long Distance Service APO Australian Post Office ART Autorite de Regulation des Telecommunications (France) ASR Answer Seizure Ratio ASX Australian Stock Exchange AT&T American Telephone and Telegraph ATM Asynchronous Transfer Mode AUSTEL Australian Telecommunications Authority BIE Bureau of Industry Economics BISDN Broadband Integrated Services Digital Network BNS Business Network Services bps Bits Per Second BT British Telecom BTCE Bureau of Transport and Communications Economics CAN Customer access network ix INTERNATIONAL BENCHMARKING OF AUSTRALIAN TELECOMMUNICATIONS SERVICES CATV Community Antenna Television CBR Constant Bit Rate CDMA Code Division Multiple Access CIR Committed Information Rate CPE Customer Premises Equipment CPI Consumer Price Index CRS Computer Reservation Systems CRTC Canadian Radio-Television and Telecommunications Commission CSG Customer Service Guarantee CSO Community Service Obligation DDS Digital Data Service DG Director-General DoCA Department of Communications and the Arts DoCITA Department of Communications, Information Technology and the Arts EC European Commission ECPR Efficient Components Pricing Rule EDI Electronic Data Interchange EFT Electronic Funds Transfer EFTPOS Electronic Funds Transfer at Point of Sale ETNS European Telephony Numbering Space ETSI European Telecommunications Standards Institute FCC Federal Communications Commission (US) FMO Future Mode of Operation FTC Fair Trading Commission GDP Gross Domestic Product GDP PI Gross Domestic Product Price Index GEO Geostationary Orbit x ABBREVIATIONS GFCF Gross Fixed Capital Formation GII Global Information Infrastructure GSM Group Speciale Mobile HFC Hybrid Fibre Coaxial Hz Hertz IC Industry Commission IDD International Direct Dialling ISDN Integrated Services Digital Network ISP Internet Service Provider ITU International Telecommunications Union IVR Interactive Voice Response IXC Inter-Exchange Carrier KDD Kokusai Densin Denwa Co KSO Kiwi Share Obligation LAN Local Area Network LATA Local Access Transport Area LEC Local Exchange Carrier LEO Low-Earth Orbiting Satellite LRIC Long-Run Incremental Cost MFJ Modified Final Judgement MMC Monopolies and Mergers Commission (UK) MOC Ministry of Commerce (NZ) MPT Ministry of Posts and Telecommunications (Japan) MPTS Ministry of Posts, Telecommunications and Space (France) NAS Network Access Services NASA National Aeronautics and Space Administration NRA National Regulatory Authority NTT Nippon Telegraph and Telephone Corporation xi INTERNATIONAL BENCHMARKING OF AUSTRALIAN TELECOMMUNICATIONS SERVICES NZ New Zealand NZCC New Zealand Commerce Commission OECD Organisation for Economic Cooperation and Development OFTEL Office of Telecommunications (UK) OSI Open Systems Interconnection OTC Overseas Telecommunications Commission Limited P&T Posts and Telecommunications (Finland) PABX Private Automatic Branch Exchange PBX Private Branch Exchange PCI Price Cap Index PCS Personal Communications System PPP Purchasing Power Parity PRS Premium Rate Services PSTN Public Switched Telephone Network PTS National Post and Telecom Agency (Sweden) QoS Quality of Service RBA Reserve Bank of Australia RBOCs Regional Bell Operating Companies RPI Retail Price Index SAO Standard Access Obligations SDH Synchronous Digital Hierarchy SONET Synchronous Optical Network SMP Significant Market Power STD Subscriber Trunk Dialling TA 1991 Telecommunications
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