The state of competition in the Australian mobile resale market A study of Australian MNOs and MVNOs The state of competition in the Australian mobile resale market A study of Australian MNOs and MVNOs Alex Richardson and Greg Shailer January 2016 The state of competition in the Australian mobile resale market. Authored by Dr Alex Richardson & Associate Professor Greg Shailer (ANU) Published in 2016 The operation of the Australian Communications Consumer Action Network is made possible by funding provided by the Commonwealth of Australia under section 593 of the Telecommunications Act 1997. This funding is recovered from charges on telecommunications carriers. Australian National University Website: www.anu.edu.au Email: [email protected] Telephone: +61 2 6125 9807 Australian Communications Consumer Action Network Website: www.accan.org.au Email: [email protected] Telephone: +61 2 9288 4000 TTY: +61 2 9281 5322 ISBN: 978-1-921974-34-2 Cover image: Shutterstock image 357498089 This work is copyright, licensed under the Creative Commons Attribution 3.0 Australia Licence. You are free to cite, copy, communicate and adapt this work, so long as you attribute the authors and “the Australian National University, supported by a grant from the Australian Communications Consumer Action Network (ACCAN)”. To view a copy of this licence, visit http://creativecommons.org/licenses/by/3.0/au/ This work can be cited as: Richardson, Alex and Shailer, Greg. 2016, The state of competition in the Australian mobile resale market. Australian Communications Consumer Action Network, Sydney. Acknowledgements This study was funded by the Australian Communications Consumer Action Network (ACCAN) Grants Scheme. The study was completed by Alex Richardson and Greg Shailer from The Australian National University. Our thanks go to ACCAN for providing the inspiration and motivation for this research. The support and input from Narelle Clark, Katerina Pavlidis and Xavier O'Halloran at ACCAN were instrumental in developing this project. Particular thanks also go to (in no particular order): The kind goodwill of ~420 consumers and employees who participated in the focus groups and online surveys without being offered any form of incentive. The mobile phone service providers, amaysim and Vodafone, who graciously agreed to participate in our research. Our friends and colleagues who distributed our survey invites through their network of contacts. Our research assistant, Jueming Bing, for his tireless efforts on repetitive complex tasks. The Research School of Accounting (formerly the Research School of Accounting and Business Information Systems) and the Research Services Office of the ANU College of Business and Economics for providing resource and administrative support. Dr Rob Nicholls for his peer review and many useful suggestions. ACCAN GRANTS SCHEME i Executive Summary This project aimed to investigate: 1. The current state of competition in the Australian mobile telecommunications industry with regards to ownership structures, relationships, service offerings, retail presence, and consumer concerns. 2. The extent to which the industry includes practices which could be perceived as inappropriate, and whether further consumer safeguards are warranted. Our analysis identified the dominance of three Mobile Network Operators (MNOs) in Australia - Telstra, Optus and Vodafone (often referred to as ‘the Big 3’). In addition, three telecommunications companies with large numbers of subsidiaries and Mobile Virtual Network Operator (MVNO) brands were identified: M2 Group Ltd, iiNet (TPG) and Pivotel Satellite Pty Ltd. We also found a range of MVNOs with strong global branding bringing expertise from their worldwide operations: ACN, Lycamobile/GT Mobile, Lebara and Virgin Mobile/Optus. The research identified a continuing trend of concentration in the Australian MVNO market by Telstra, M2 Group, iiNet and TPG, with 56 telecommunications acquisitions identified between 2005 and 2015. From an examination of providers’ Critical Information Summaries (CIS) we identified a number of apparent omissions of vital information which affect a consumer’s ability to fairly compare plans. Most of these deficiencies are relatively minor and arise from failures to adequately consider the ACMA rules. The majority of providers have clearly used the ACMA provided CIS example to draft their own statement. These cases do well in addressing the required information items. We note some cases of voluntary disclosures that provide better clarification of some issues. We identified and collected data on more than 1000 plans from 64 MVNOs and MNOs that were offered over a 10 month period (between 31 August 2014 and 30 June 2015). Some highlights of our investigation regarding outlets and offered plans are: The Big 3 have the most own-brand retail stores nationwide (over 1600 combined), Allphones continues to be the largest independent mobile phone service reseller but faces stiff competition from the Big 3 retail presence. Most MVNOs use an online shopping model that offers a SIM starter kit delivered for a token price with recharges/monthly payments managed via an online account. At least seven MVNOs have agreements with major retail stores to sell their starter kits and recharge vouchers: amaysim, Boost Mobile, Globalgig, GT Mobile, Lebara, Lycamobile and TravelSIM. ACCAN GRANTS SCHEME ii The broadband-provider M2 Group is expanding its mobile services retail presence through small pop-up kiosks under the Dodo brand, with three of these kiosks offering mobile phone plan services. There were 68 kiosks at the time of writing. Nine MVNOs ceased operations during our data collection period: ONEmobile, Savvytel, Telco Green, Cybertel Telecom, Sure Telecom, Ugly BiLL, Global Gossip, Red Bull MOBILE, and TransACT. The Optus network hosts the largest number of MVNOs (34) and plans (mostly post-paid). MVNO offers on all three networks reflect a general shift from included dollar call values to included national minutes instead. This change somewhat addresses the issue of included call values being difficult to compare in dollar terms when the unit costing varies across plans and providers. The research identified four factors consistently ranked by focus group participants and survey respondents as most important in choosing their plan and service provider: Monthly cost of service Network reliability Network coverage Amount of included data As monthly cost of service and amount of included data were identified as highly important in choosing a plan and service provider, the following statements concern the value propositions of plans on offer. However, as each MVNO and MNO set their own prices for services they offer, comparisons of included value across plans is not straightforward for the consumer. Below is a summary of the observations made and the authors strongly advise readers to refer to Appendix 2 for standardised cost information for each service provider and offer. MVNO and MNO offers on the Telstra network, on average, are priced higher ($44.75), with the Vodafone network being lower priced ($38.61). The average cost of Optus offers is $43.26 MVNO and MNO offers on the Telstra network have, on average, the highest average call dollar value inclusions but the lowest amounts of data included (around 20% less than offers based on the Optus and Vodafone networks). In terms of included data and excess data costs, on average, companies utilising the Vodafone network offer more included data and lower per megabyte excess data fees. When considering only MVNOs operating on the three networks: Optus MVNOs, on average, have the most offers, consistent with having the largest number of MVNOs. ACCAN GRANTS SCHEME iii Vodafone MVNO offer, on average, are lower priced at $26.89 compared to Telstra MVNOs at $34.32 and Optus MVNOs at $42.58. Prepaid offers by Optus MVNOs, on average, have much longer expiry periods (average of 113 days) compared to Telstra and Vodafone MVNOs (around 53 days). Telstra MVNOs, on average, include almost $500 worth of call value, more than Optus and Vodafone MVNOs. However, the different cost basis on how that call value translates to call minutes makes comparisons less transparent. Optus MVNOs, on average, offer almost twice the data compared to Telstra and Vodafone MVNOs. Telstra MVNOs have the lowest cost per megabyte for included data, but Vodafone MVNOs are typically lower priced for excess data. Providers and retail employees appear to be well trained in communicating this information via websites and in-store conversations, however, customers don’t exhibit a good understanding of the actual costs of their service beyond monthly spends. Reflecting upon these findings, we make the following recommendations: Continue to offer CIS documents via provider websites. Allow language localization of CIS documents Standardise the wording and appearance of cost information within the Information About Pricing section Require a consistent CIS format Specify how to show CIS content is current Clearly define expectations of information provided for “the maximum monthly charge payable where calculable” Clearly define expectations of information provided for “the maximum charge payable for early termination of the Offer” ACCAN GRANTS SCHEME iv Report Structure This report has five major sections: 1. The introduction identifies the project aims and rationale, followed by a detailed glossary of industry specific terms that are used throughout