Standing Committee on Communications and the Arts : 26/05/2023 : Co-investment in multi-carrier regional mobile infrastructure (2025)

BHOMER, Mr Gary, Government and Industry Liaison, Pivotel

BOLGER, Mr Peter, Chief Executive Officer, Pivotel

COADY, Mr Brendan, Partner, Maddocks Lawyers; and External Counsel, representing Commpete

LIM, Ms Michelle, Chair, Commpete Inc.

ROLLINSON, Ms Elyssa, Chief Commercial Officer, BAI Communications

CHAIR: I welcome the representatives of Commpete, an alliance for competition in digital communications. Although the committee does not require you to give evidence under oath, I should advise you that this hearing is a legal proceeding of the parliament and, therefore, has the same standing as proceedings of the respective houses. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. The evidence given today is being recorded by Hansard and attracts parliamentary privilege. Would you like to make a brief opening statement?

Ms Lim : We would; thank you. Commpete is an alliance for competition in digital communications representing non-dominant providers. Our members include specialised regional providers, mobile operators, including MVNOs, data centre, fibre owners and wholesale servicing the 500-plus small telco businesses located across metropolitan and regional Australia. Many of our members compete with each other and all want appropriate pro-competition policy and industry settings, especially in rural and regional areas, in order to be able to compete in the first place. We've asked our two members, Pivotel Group and BAI Communications, to also make a short introduction to this hearing, as we believe that their organisations have perspectives that are particularly interesting and helpful to this inquiry. The committee will also be hearing from another member of Commpete, Field Solutions Group, at its public hearing in a few weeks.

I will now provide an opening statement from our alliance. Commpete advocates open-access regimes, the ability for new entrants to both enter and thrive, and diversity in the industry of both large and small providers. We believe that a dynamic wholesale market nationwide is important to the successful delivery of competition in retail markets, particularly in infrastructure-intensive industries with high barriers to entry.

The current regulatory settings were put in place in an era which was different, and that was 25 years ago. They could not and did not anticipate the massive change in the sector over that time. There is a need for massive and substantial investment in the sector to ensure that mobile networks can support the expanding range of services and applications and the evolution of technologies; however, this totally favours larger operators who have scale and access to financial resources. More innovative and competitive smaller operators are progressively excluded, not by customer choice but by the commercial strategies of the major mobile network operators, the MNOs.

Nowhere is this more apparent than in regional markets. Regional Australia is highly underserved due to the dual effects of limited telecommunications infrastructure and the limited choice in telecommunications service providers for regional users. Incumbent MNOs have been prepared to share infrastructure and network capacity where it suits them commercially. This is shown in the tables in the Commpete and other submissions drawn from the ACCC published data. We believe that there is a need for government and regulatory intervention with access regimes which enable service-layer-based competition. In our view, it is not sufficient to rely solely on infrastructure-based competition, and this would be out of step with approaches in other areas such as energy and fixed line communications.

As we are all aware, there areas where duplication of infrastructure is not economically viable and, in many cases, where any infrastructure investment requires co-investment from government. There is a solid history where the current demand patterns in rural and remote areas create special challenges for smaller service providers and an immediate risk of being precluded in the longer term, if there is no appetite for embracing progressive changes in policy approaches.

The competitive landscape in mobile telecommunications in Australia is concentrated in few hands and there is no or very limited competition in regional areas, where Telstra has a virtual monopoly. Telstra's own data reveals that its mobile network is geographically 40 per cent larger than its nearest competitor and, across regional parts of the country, that proportion is even larger. Overwhelmingly, there is little to no commercial rationale for other MNOs to build up further new public mobile coverage and what rationale does exist sits with Telstra as virtually the only accessible network that will be proximate to any new coverage that is built. The wholesale market is very undeveloped and it is difficult or impossible for neutral hosts of independent network builders to enter the market; this is different overseas.

Overall, there has been a decline in the market share of non-network mobile service providers, the MVNOs. The market share of MVNOs has failed to grow significantly over the past 25 years and has been declining from approximately 15 per cent to now about nine per cent. The MNOs are reluctant wholesalers. They only supply thin MVNO by restricting the scope of their wholesale offerings. Telstra, in particular, also limits the geographic network coverage which it provides to MVNOs. That is, Telstra's wholesale customers, MVNOs, do not get access to the full geographic range of the Telstra network. The starkest example is that, even where network infrastructure is co-funded by government, Telstra has declined the benefit of certain increased coverage provided by this co-funded infrastructure to its own wholesale customers. Telstra does not typically support roaming or active sharing to other MNOs, other than in relation to the proposed TPG-Telstra arrangement, which involves other negative impacts on competition.

Passive sharing of existing infrastructure is useful but only to a limited extent, particularly in regional and remote areas, where it's not economically viable to duplicate active infrastructure and where Telstra has a massive incumbency benefit, which has been boosted by the co-funding process to date.

Figures from the ACCC mobile infrastructure report 2022 show that limited co-location has occurred across Australia despite the significant funding that the federal government has invested in its Mobile Black Spot Program. To resolve these issues, Commpete believes that a much more direct form of regulation is required to improve competitive outcomes while addressing the issue of regional coverage.

In relation to government co-investment, Commpete considers that it needs to be mandated that any co-funded infrastructure must provide active network sharing on an open-access basis at prescribed rates to both MNOs and MVNOs—that is, at a minimum—particularly for any new sites funded wholly or in part through government co-contributions.

Commpete has in the past urged the federal and state governments to ensure that wholesale access to all subsidised sites—for example, those funded through the Mobile Black Spot Program and through other programs—is made available on an open-access basis. This approach to regulation is not unheard of in Australia. Regulation for fixed networks has gone much further, requiring residential fixed broadband networks to be offered only on a wholesale-only, open-access basis.

Given the critical nature of mobile telecommunications in modern social and economic life, Commpete considers it to be completely unacceptable that the benefits of competition in this sector are denied to Australian consumers as a result of historic ownership of infrastructure by one market participant. A policy commitment favouring active sharing at prescribed rates would likely have led to very different outcomes, in Commpete's view.

Customers in regional Australia deserve more and better choices, especially considering that their dependence on mobile communications is arguably greater than elsewhere. Regulated open access will encourage new and stronger competition among MNOs, including allowing new, small regional MNOs to develop and compete and also attract smaller private investors. Customers in regional Australia will be better connected and have more choice in mobile services. Clearly, opportunities to change policy settings arise only infrequently; so, if not now, when? The impacts of monopolisation will be harder to control and reverse as it develops further. In Commpete's view, it is now time to make the necessary changes to shape the policy for the future.

I would like to introduce Elyssa Rollinson from BAI Communications and Peter Bolger from Pivotel, who will make a short introduction before passing to the committee for questions. On behalf of our Commpete team, we thank the committee for the opportunity to assist with this inquiry.

CHAIR : Thank you.

Ms Rollinson : I will give a brief overview of BAI and our interest in the matters being considered by the committee. BAI owns and operates a broadcast transmission network which delivers TV and radio to over 99 per cent of the population, including delivery and content for the ABC, SBS and regional broadcasters. We also operate the public safety radio network for the telco authority in New South Wales. BAI has seen very rapid growth overseas over the last decade building and operating telco networks in the US, the UK, and Canada, as a neutral host. We hope that the Australian market will follow the path of the international MNOs in seeing the significant benefit of sharing networks, both passive and active. I note that the Australian broadcast industry has taken the approach of active sharing, managed by a neutral host, for decades now. BAI believes that, where public investment is placed into regional connectivity, the funds should be used both efficiently and effectively and deliver a broad range of connectivity outcomes and solutions for communities. That should be driven by clear policy outcomes. To do this, in our view, requires a significant change in approach to the current model for public funding.

Mr Bolger: I will give a brief overview of Pivotel and then some experience, observations, and views on building new mobile infrastructure. Pivotel has been delivering services into regional, rural, and remote Australia for the last 20 years. For the majority of that time it has been involved in the delivery of mobile satellite services using LEO satellite constellations that have been in service for 20 years. In more recent times we have deployed two public mobile community networks in Western Australia and three private LTE 4G networks as well as a trial air-to-ground 4G mobile network. The additional sites that we have been deploying have included Indigenous communities with wi-fi connectivity and satellite backhaul as an alternative to 4G deployments as well. Pivotel is one of just four mobile operators in Australia that operates and delivers 4G mobile services. We are fully interconnected into the mobile fabric of the Australian society with Telstra, Optus, and Vodafone. Pivotel participated in the November 2021 low band spectrum auctions and bid in excess of $50 million in an attempt to secure 10 megahertz of spectrum across regional Australia, with the intent of deploying more regional infrastructure. Pivotel's experience in deploying those new islands of public mobile coverage built by any MNO, including us and Optus and TPG—any MNO other than Telstra—is that, if that coverage is distally remote from the MNO's own network, it delivers limited community benefit.

Virtually all new co-funded sites built in regional, rural, and remote Australia are adjacent or closest to the monopoly Telstra regional mobile network. Telstra's own figures claim to have one million square kilometres, or 60 per cent, more coverage than their nearest competitor, with much of the coverage advantage delivered through co-funded state and federal government programs. Where new co-funded sites are built by anyone other than Telstra, it is critically important for users accessing the new coverage to also have access to the adjacent Telstra coverage on reasonable commercial terms.

If access to the monopoly Telstra regional network cannot be achieved via commercial negotiation on reasonable terms, then regulated access is the only path forward to encouraging new and existing operators to build new coverage, with end users gaining access to that new coverage and the proximate Telstra network on reasonable terms. Such access will foster innovation and new competition in the provision of mobile services. Once open access to Telstra's regional monopoly network is in place, it is incumbent on future government programs to provide active sharing on all new coverage, funded wholly or in part through government co-contributions at regulated rates.

This brings us to the important topic of spectrum. Virtually all low band spectrum able to be used with the 3G, 4G, 5G networks, being the low band spectrum below 1 gigahertz, is owned nationally by the three large national MNOs. Yet in the case of Telstra, it is unused across two-thirds of the country, and in the case of TPG and Optus it is unused across four-fifths of the country. New entrants seeking to build new coverage using innovative low-cost approaches, potentially leveraging the new high speed satellite services to connect remote areas, are forced to use higher frequency bands, leading to inferior coverage and performance outcomes due to the virtual inaccessibility of the low band spectrum to anyone other than the three national MNOs. I should declare, and go on record, that we have a spectrum sharing arrangement with TPG over a limited number of sites and five megahertz. That has been used once in the last half a dozen years since that agreement was put in place. Regulatory settings which allow scarce national resources such as low band spectrum to be locked up and unused over large swathes of the country do not deliver the highest value outcome for people who live, work, and operate in rural and remote Australia.

Lastly, Australia will never have 100 per cent geographic mobile coverage from terrestrial networks. The potential opportunity offered by the convergence of satellite and terrestrial mobile services represents a significant opportunity to enable government to enable connectivity of highways and byways that are unlikely to ever have terrestrial coverage. New government initiatives to support the take-up of converged satellite and terrestrial services should be considered as that technology evolves.

Ms DANIEL: Thank you for being here. Could I start with the mandated active network sharing idea. I completely hear what all of you are articulating around Telstra's market dominance. Is there a risk of eroding service by eroding Telstra's market power, allowing smaller operators to step in, who then find that the economics don't stack up? During that process Telstra has in some way stepped away because, evidently, in many of these rural and remote communities the economics are complex and difficult.

Mr Coady: I don't think there would be any danger of Telstra stepping away. We are suggesting third-party carriers and MVNOs should be provided with access to the Telstra regional network on reasonable commercial terms so that Telstra would be effectively wholesaling that capacity to other operators but would still be operating as both a retailer and wholesaler in those regional and remote areas. It is similar to the way in which the fixed network was regulated for many years and continues to be regulated. In relation to transmission services, Telstra was required always to provide access to declared services to other carriers where competition didn't exist or where it had a network, or an infrastructure monopoly, to enable competition. Regulated access to the Telstra regional network would enable competition in the same way and would be a plus for both competition and coverage because Telstra would be forced to compete with its own wholesale customers and have more of an incentive to compete more vigorously. At the moment it doesn't face a lot of incentive because its ownership of the infrastructure enables it also to monopolise the retail market.

Mr Bhomer : We think that by ensuring that Telstra opens up its regional network will encourage further investment for other operators. Today there is a moat, or a coverage gap, between existing mobile networks and Telstra's mobile network. There is no incentive for other MNOs such as Optus, TPG or Pivotel or FSG to invest in those areas that are distally remote from their existing coverage. By levelling up the coverage, you are encouraging other MNOs to invest in their networks and extend further. You are introducing a level of competition that we just don't have today.

Ms Lim : Telstra opting out is not the bigger risk. In a monopoly, if we entrench that dominance, the bigger risk is that Telstra will opt out of providing better services for an increasingly essential service that is mobile. Things like pricing, service quality, and availability are the larger risk at hand for Australia, rather than Telstra just opting out of particular pockets of coverage areas.

Ms DANIEL: Several of you mentioned international examples. Which, if any, of those examples is best practice and which best resonates with the Australian situation? Maybe Canada does. The US is so much more highly populated than we are, especially in the inland.

Ms Rollinson : BAI has established neutral host networks in a range of environments. In the US, typically our telco networks are deployed in places such as subway systems, stadiums, defense bases, those sorts of places. In London we have signed a 20-year public-private partnership to roll out connectivity through the London Underground and aboveground small cells networks connecting the entire city. In those markets, the global MNOs are all sharing those networks. BAI acts as a neutral host, giving access to any party who wishes to utilise those networks. If this is working well in highly competitive urban environments with large global MNOs, there would appear to be an even more compelling case for sharing where you have relatively smaller MNOs with fewer capital resources and in regional areas, where the returns by definition are lower. If this model works well internationally in a range of highly competitive urban environments, it should work well in regional Australia as well.

CHAIR: BAI has gone into these very highly populated areas in the underground and the subways. Is BAI out of Shropshire or out of Yorkshire, or in the far country of west Virginia?

Ms Rollinson : Not at present. Our deployments are mostly in urban, although we do have a very exciting Smart Cities project in Sunderland. We have rolled out a 5G network for the City of Sunderland in, again a 20-year public-private partnership, a joint venture with Sunderland City Council.

CHAIR: Is it fair to say that the international experience in populated areas is terrific? Can you point to any international experiences of the regional and remote competition that you were talking about?

Ms Rollinson : We have made deployments across the US in small cells, but they are generally in urban environments. We don't have a great preference in the very remote areas within those countries.

CHAIR: Anybody else with international experience?

Mr Bhomer : Not specifically with respect to active sharing solutions or neutral host solutions. From an MVNO perspective I was responsible for the wholesale department in Vodafone Netherlands, which is a very competitive MVNO market. The difference between the Australian MVNO market and a lot of overseas MVNO markets is that there is a lot more vigorous competition, even at an infrastructure level, where MVNOs are able to bring their own core network and get access to the radio access network of the actual MNOs, which allows a lot more innovation and product development, and a lot more control over the services they can offer their end users. The Australian market is what's defined as more of a thin MVNO model, where they are effectively branded resellers, which is very tightly managed and controlled by the wholesale MNOs here.

CHAIR: What needs to change? You are perhaps suggesting that what's in the Netherlands is what you would like to see happen. What needs to change in Australia to mirror that experience?

Mr Bhomer : A deeper level of connection into the MNOs' networks—what's called a thick MVNO or a full MVNO model, whereby MVNOs can bring their own core infrastructure and have a lot more control over how they offer their service to their end users, as opposed to having their product offerings and their pricing, to a certain extent, dictated by the MNOs.

Ms DANIEL: On this conversation about available spectrum that is under-utilised, what needs to change to free up access to that spectrum? Secondly, where is the new technology going and what implications does that have for policymaking around infrastructure? For example, if we are looking ahead already to 6G, what does that mean? The third aspect is the reference to the convergence of satellite and terrestrial coverage and what the government should be considering in terms of policy settings and regulation in that area.

Ms Lim : I can start on that, but I want to refer back to the question on international experience for neutral host. Commpete would be happy to provide some programs which have been successful, and which are also evolving overseas, which reflect the type of environment that we're talking about for a neutral host. It has been adopted and looked into in various programs overseas, in New Zealand and Canada, for example. We have submitted in-depth detail about these types of programs and analysis on the neutral host environment and active sharing. We are confident that this is a type of model which should be deployed in Australia, moving forward, to generate opportunity and growth in regional areas, as well as urban areas. We would be happy to take on notice any further information on that. We have submitted a lot of that information to the ACCC.

In answer to the first question you had, on spectrum, I will provide information and then pass to Mr Bolger to cover the following two questions. To the first question, on spectrum, at a high level there are different approaches to what we would look at. What we definitely know is that spectrum is a national asset. It's highly valued and it is the gateway to being able to provide real mobile opportunity for a broad range of participants.

The focus that Commpete has had, in terms of involvement in RadComms in the past, is on the goal of making competition a higher priority in the decision-making of how spectrum is allocated. Our view is that competition does need to have a considerably high place. The role of the regulator also needs to be clearly defined, as to whether it is led through the ACCC or the ACMA and the roles of that. We have submitted information on that to parliamentary inquiries and RadComms in the past.

We know that there are various interests for government; we are not arguing against that. What we are looking at is: what is the best way, from a competition perspective, that we can distribute it economically so that there is an efficient use of spectrum nationwide? We are looking to try to increase the number of participants—new entrants and private investors—that are willing to invest in that spectrum to unleash those opportunities into the various areas within Australia.

Today, we don't believe that it's used in the most efficient way. The highest priority, in terms of the way spectrum has been allocated, is to the highest bidder. The highest bidders are going to be some obvious parties. We would argue that if there was a reallocation of unused spectrum, that could go a long way to increasing competition but also deepening the utilisation and benefit for the long-term end users.

If we were to adopt a 'use it or lose it' policy, that would be something that we would support as a principle. We would also support being able to fragment the different sections so that it's not such a high level. This would mean taking Australia not as a single national zone, to put it simplistically, but being able to disaggregate it and break it down so that there is fragmentation. That allows for new entrants and a diversity of new providers to get involved.

They are some of the core areas of how we think, at a high level, the spectrum could be ultimately used. That conflicts with the current approach, which, in simple terms, is very much auctioning off to the highest bidder. That's where we are saying that competition is a different incentive. If competition were looked at as a priority goal for spectrum, that would allow for a higher utilisation of the actual spectrum asset and also introduce new investment from smaller parties, such as members of Commpete and other potential private investors. I will pass to Mr Bolger to expand on that and to answer the following two questions that were asked.

Mr Bolger: I will try to shed a little bit of extra light on the spectrum issue. When we built out our community networks, we used what we call mid-band spectrum. It has been made available under what's called an apparatus licence. More commonly, we are moving towards an area-wide licence. Spectrum has been held back in areas. You go into an area where you wish to deploy a service and that mid-band spectrum is available. It's not the most valuable spectrum for regional Australia, due to the propagation characteristics. We want low band spectrum. The low band spectrum that is available for use on mobile networks in Australia has been sold to the three large MNOs; the most recent one being at auction in 2021. At the last auction, there was an attempt to bring some new players into regional Australia. There was some very good work done by the ACMA in trying to achieve that. They created a metro zone licence and a regional licence. We were bidding for the regional licence. The concern, though, was that the MNOs were still able to come in. Whilst they had to go through two auctions, in a sense, they were still able to buy all of that spectrum on a national basis. None of that prized low band spectrum, which is essential for the deployment of services in rural and regional Australia, was held back for new entrants. Today, two-thirds of that spectrum is unused in regional and rural Australia on Telstra's network. Eighty per cent of it is unused and it's not accessible for new entrants.

CHAIR: Two-thirds and 80 per cent?

Mr Bolger: Two-thirds. Telstra-TPG coverage is about 20 per cent of the national land mass. Over 80 per cent of the land mass, that spectrum is unutilised today. It's owned by the carriers. It's been sold to the MNOs and it's not utilised today. Moving from a national spectrum licensing approach to an area-wide licensing approach for low band spectrum would be beneficial. There has been, to some degree, under the apparatus licence and area-wide licence approaches, spectrum hoarding. Companies will go in and buy some spectrum in an area or pay the annual fee that you pay for spectrum in an area and then not use it. That's been done often for competition reasons. There should be regulation around 'use it or lose it' so that you can't just camp and prevent somebody else from moving into that area.

Spectrum is an area that quite easily could be addressed. As some of the existing bands come up for auction later this decade and, potentially, new spectrum bands are opened up, it would be very easy to create spectrum that, in a sense, is reserved for regional and rural Australia and not sold on a national basis—not sold before it is going to be used by someone deploying a network service.

CHAIR: Do you think there should be a requirement that anybody bidding for spectrum should have a plan for how they will use it before they are considered?

Mr Bolger: In a general sense. When we go into a regional area and we take an apparatus licence we obviously have a very clear plan. It would be hard on a national basis to expect someone, when they buy national licences, to have a plan for the whole nation. We're not suggesting that none of the spectrum should be available for national MNOs to be able acquire it on a national basis, but we are arguing that it shouldn't be all of it.

Ms TEMPLEMAN: I want to pick up on a couple of different things in submissions. I might start with Pivotel. You talk about the Department of Regional NSW mobile coverage project. That's been alluded to already this morning. We don't pretend to have any details. I am interested in your role and how you see that going. We will be taking evidence this afternoon from that department. As one of the people involved in that, it would be good to hear what you're seeing out of it so far.

Mr Bhomer : There were four different work streams within that program, looking at various options for active RAN sharing—active radio access network sharing. MOCN, MORAN and roaming are streams that we're involved in. I won't go into the detail of that. There was an open RAN stream as well that we didn't participate in. These are all technologies that are available today; technical solutions for enabling active radio sharing. What that effectively means is that—particularly in regional areas where you have one set of infrastructure, one set of antennas and one set of radio equipment that all network operators can use—you build one tower and one set of equipment, shared amongst all the access seekers. If Pivotel, for example, built a base station in regional Australia then that could be accessed by Telstra, Optus, TPG, FSG—anybody else—on an active RAN sharing basis. We looked at and explored all of those options.

It is technically proven. It works in New Zealand. It works in other countries. We've tested it on our network as well. The outcome of that was more of a commercial barrier. You need all parties willing to participate in that. That's where the outcomes that we would have liked didn't actually eventuate. We are still working through that. The Telstra-TPG merger was right in the middle of that, which complicated matters in terms of what the various MNOs were able to commit to.

Ms TEMPLEMAN: Is that project still underway? Are you still involved?

Mr Bhomer : Yes, we are. There has been one public announcement made whereby OneWifi, who are presenting later, are the access provider in Brewarrina and Wilcannia, in regional New South Wales. They are the neutral host, if you like. Pivotel is going to be the mobile network operator that comes onto those sites and acts as a retail service provider, providing services to the community in Brewarrina and Wilcannia.

Ms TEMPLEMAN: As the mobile service provider in that project, what does that look like in terms of different customers getting access? Obviously, there are agreements with the different telcos or mobile phone service providers. What is different to how other commercial arrangements might be reached?

Mr Bhomer : The only agreements we have are with the New South Wales government, who are co-funding it, and with OneWifi, who are providing the underlying service. Pivotel will be the retail service provider in those communities. We will be providing that through our mobile network. Using a Pivotel SIM, you will be able to access our network. We will also be providing fixed wireless services to the community, like a broadband service, as an alternative to NBN.

Ms TEMPLEMAN: If I have a Telstra SIM or an Optus SIM, I have to ditch that in order to use the network?

Mr Bhomer : To access our service? You don't have to ditch it. In fact, we would recommend that you don't. Our network will be limited to those areas. As soon as you travel outside those areas, you will still need access to your national network provider. That's exactly where the problem that we spoke about earlier lies, about the moat. For Pivotel and others to go and build isolated community networks, for that to be a viable service, for you to be able to seamlessly move from the Pivotel network to the Telstra or Optus network, you just continue to use our service. When we spoke before about full MVNOs or thick MVNOs, if we have that arrangement with one of the national MNOs, we can manage that in our core network and it's seamless to use. You buy the service from Pivotel. You have a Pivotel SIM. It works on our network, and it seamlessly works on the other MNOs' networks as well.

Ms TEMPLEMAN: Is it your expectation that people will end up with phones with dual SIM cards, will they have two phones, or will they literally change SIM cards? What's your expectation of the practical aspect?

Mr Bhomer : Since the iPhone X, all of those phones have had dual SIM capability, eSIM and physical SIM. There are lots of mobile phones out there today that have dual SIM capability. The technology is there. There are dual SIM capabilities. It's about the end user difficulty in understanding that and having to say, 'Right, which network am I on now?' Also, they would have to buy two different plans. That's a barrier to adoption. That's why the one service—one SIM, one service—nationally is the only way to provide a service that will be more widely adopted.

Ms TEMPLEMAN: I want to get a bit more clarity on something from BAI—the recommendations on page 5 around specific active sharing, and the Black Spot funding program. If anyone else wants to add to this, I am happy to hear from them. The two key points are allowing the mobile network infrastructure providers the period until signature of a grant agreement to reach a commercial commitment with one or more of the MNOs, and the clarification around the rules applying where an MNO wishes to co-locate at a funded site where the fund recipients are neutral MNIP, making it clear that if passive site sharing or an active sharing solution are being provided, it's not precluded from making a return or locked into a particular charging structure. I wanted to flesh out those two key points, please.

Ms Rollinson : BAI for some time now has made observations about the structure of the government grant programs. The historical context here is that they were designed at a point in time when those grants were historically given and offered only to MNOs. It's only in recent years that you've seen MNIPs and independent players being allowed into those grant programs. In our view, tweaking those programs is still not the optimal way to get the outcome that we're looking for. We've made incremental small tweaks, but we're still not getting the step change that we need to see in those programs for them to work effectively. We are still giving funding to a very small number of players and rolling out single-carrier solutions.

We have a number of challenges as a neutral independent player who wishes to offer open access to everyone. The first is that we need MNO commitment in order to be eligible for the funds. That is very difficult to achieve when you are in a competitive bidding process for those grant funds with the MNOs who are competitors in that process. It's practically very difficult for them to agree to commit to work with us when they are competing against us for those funds. That's the first problem.

We saw one potential solution to that being a two-step process, whereby we identify projects, and then it's opened up to all MNOs to elect to participate or not as a second step.

One of the other issues that we have is what I call the information asymmetry that exists between MNOs and other players in the ecosystem. Only the MNOs know where their coverage really goes to. The publicly published maps, in our experience, and based on our data checking, are not reliable in terms of seeing what the experience is for the consumer on the ground with that phone. Relying on those maps doesn't really help us to figure out where the black spots are and where the problem is. There has been no central place for that information within government to say, 'Here is where the community need is.' We are throwing darts at a dartboard, if you like, trying to figure out where to deploy our capital to shared infrastructure. The MNOs will not share with us where their needs are and we have no easy way of accessing information on what the communities actually need.

There is a transparency of data issue there that we think needs to be addressed. Government are currently undertaking a coverage audit, which we are hopeful will assist in addressing that issue.

The other quirk of some of the historic funding programs has been that the more MNOs you have on there, the greater the subsidy became. From our perspective, it should be the reverse. The more users of that infrastructure, the less the government subsidy should be. We are still in a period of tweaking these programs to address some of those historic quirks.

BAI's view is that tweaking the programs will not get us to the outcomes that we need as a nation. We would advocate for a full redesign of the way public investment is made into regional connectivity. For us, that has three parts to it. The first is to aggregate all of the sources of funding. We have hundreds of millions of dollars sitting in different buckets in state and federal programs. In our view, that should be brought together into one comprehensive program that's driven by some very clear policy outcomes. For example, how much do you want to invest in new coverage and extension of coverage versus how much do you want to invest in achieving equivalent coverage for better competitive outcomes? And what is the balance that you want to strike there in your investment program?

The second is to aggregate the demand, by which I mean bringing together all of the connectivity needs for a community. If we're going to establish a tower in a community, if we're going to establish infrastructure, we believe you should use that for multiple purposes and not just a single carrier MNO service, or even a three MNO carrier service. We believe you should be provisioning that infrastructure for public safety networks, for fixed wireless solutions, for broadband for that community, potentially for public wi-fi, potentially LoRaWAN Internet of Things networks, and potentially for broadcast services as well, if that is what government and broadcasters wish to provide.

CHAIR: We have had the emergence of these wholesale providers—Amplitel and others. What level of confidence do you have that they will do just that? They tell us that their business model now is to essentially rent space to allcomers. We've had others express doubts, because they are still majority owned by their former owners, that they won't be as forthcoming as perhaps they are saying that they will be. What level of confidence do you have that will happen?

Ms Rollinson : I have a high degree of confidence that the sharing of passive infrastructure will be enhanced through the establishment of the tower companies. But what is unclear is whether we'll see real neutral hosting, which involves the sharing of not just the passive assets but the active network assets as well, which is where you get to really open up that infrastructure for multiple services, as we were just discussing, on many different networks. A fundamental feature of neutral hosting is providing a level playing field to anyone who wants to use that infrastructure. It infers that you won't have preferential treatment for any particular party.

The tower companies could extend their service offering to provide similar outcomes to neutral hosting. But they're not perceived to be neutral because in some cases the MNOs still have a material equity interest in them. Therefore, in such cases, you have the potential to see some misaligned incentives and potentially differential treatment of those users.

CHAIR: Mr Bhomer, on your point about open access, did you say single dish? Multiple carriers, but you can build a tower with all of the associated infrastructure, and you can get multiple carriers on a single dish; is that right?

Mr Bhomer : Single antenna, single tower and single radio—everything—single backhaul; all sharing. That's what the New South Wales program was investigating.

CHAIR: That has no issues in terms of coverage or too many people on the network smashing it down?

Mr Bhomer : No. Obviously, the spectrum is a critical component of that. There are different solutions. For us to build that, obviously, we would have difficulty in providing the spectrum. You can also have a model whereby the MNOs bring their own spectrum. They still provide the infrastructure.

CHAIR: Let us use an example of where there might be a tower now that is co-located or shared, where you have Telstra and Optus both using it. They have had a bit of a barney over who gets the best spot. It's Telstra's tower, so they win. Optus gets the secondary signal. They are a bit cranky about it but they are there. You are saying that tower and infrastructure could be replaced with a tower for both of those users, and other users, with one dish, where everybody gets the same quality of coverage.

Mr Bhomer : I'd go even further than that and say that can happen today. Telstra could effectively utilise its existing network to provide access to others on an open access basis. That's what we are advocating for.

CHAIR: Why would they?

Mr Bhomer : Exactly.

Mr Bolger: Just to make it clear, that's what the Telstra-TPG deal is. When they're merging their regional infrastructure, that's what they're doing. They're basically taking the TPG equipment off the tower and they're going to use the spectrum that TPG is currently using, making that available to Telstra; so existing equipment with more spectrum to support the same number of users.

CHAIR: I can certainly understand why a telco wouldn't want to give a free ride to its competitors. In terms of publicly funded infrastructure, is it your contention that if we are doing mobile black spots and we're funding infrastructure, a condition of it should be that we make it not only open to allcomers—at the moment we do say we would prefer that they make sure that others can get on the infrastructure—but that the infrastructure should be built in such a way? That is interesting.

Mr Coady: To follow on from that point, what is encouraged at the moment is passive infrastructure sharing, which is that you allow someone else to put their equipment on the tower. When we're talking about 'open access' or 'active sharing' it's sharing the radio equipment.

CHAIR: How much more expensive is it? At the moment, with mobile black spot coverage, someone bids to build a tower. Telstra gets the job. They put in their box. They put in their dish. They say to Optus, 'If you want to do it, bring your box and your dish, and you can pay us a rental.' If the government was going to build the tower, build the box and the dish and let Telstra and others use it, how much more expensive is it for the government to provide that infrastructure? In terms of funding those projects, how much more expensive does it get for us to fund those things?

Mr Coady: At a very simple level, there would be no additional funding. You would just make it a requirement that to get the government funding you have to open your infrastructure to other operators as well—provide access on reasonable commercial terms so that other operators can also use that infrastructure. There is no particular additional cost for the equipment.

Mr Bolger: If you were building a new tower and you were going to build it for active sharing, you would be able to build a lighter structure tower at a lower cost than if you were building a tower that was supporting passive sharing with two separate pieces of infrastructure on the tower. The cost doesn't actually increase by going to active sharing; the cost decreases for active sharing over passive sharing.

CHAIR: What are the complaints or concerns of the telcos in wanting to use infrastructure, when it is there for everybody to use, rather than their own dedicated—I am not sure what they are—servers or electronic boxes which they have on those sites? Beyond normal competitive issues, what are the technical issues they might have?

Mr Bhomer : There will be concerns around the level of service quality or the kind of service that an MNO will provide their own user. It is more a control issue. If I am Telstra, for example, I don't want somebody else to have control over the network experience that my customers are going to get. So they want to retain control over that.

CHAIR: Not unreasonable.

Mr Bhomer : Not unreasonable. If you look at the costs, the economics, we are going into areas now that aren't economic. That's where we are at. In those areas you can still provide a vastly improved service that is competitive using active sharing networks. As I mentioned, that core is still controlled by Telstra; they are still using their core network. You are only sharing the radio component.

CHAIR: Let us say, for example, that it is not Telstra that wins the contract to build the tower in the future, but Amplitel. Let us say the stipulation is that it is open access—it is going to be infrastructure for everybody. That happens and then Telstra, Optus, you and everybody else come along and get to use the dish. If, for whatever reason, that tower breaks and nobody is getting a signal, who fixes it? Is it Amplitel? The government?

Mr Bhomer : Amplitel; they are still responsible for that. SLAs will be in place, and everything else.

CHAIR: If Telstra won the contract, and if Optus and everybody else is on there and it broke, then Telstra would be responsible. Then you have Optus on the phone to Telstra saying, 'Hey, fix your tower; our customers don't have signal'.

Mr Bhomer : I am sure you have heard from regional users today who are out of service for a number of days or weeks, waiting for that service to get repaired. We said there was no additional cost. There is certainly no additional cost at the tower level, but a level of integration is required upfront to integrate the core networks of the operators. In the New South Wales example, that has also been co-funded or funded to a large extent. That is an upfront cost. Once that is in place, then the economics flow beyond that.

CHAIR: One of the key things I say to this committee often is that what we are looking for is better bang for buck. We spend a lot of money providing incentives and subsidies for mobile infrastructure. We want better bang for buck. It seems to be your contention that a much better bang for buck is to make sure there is more neutral host siting.

Mr Bhomer : One hundred per cent.

Ms Rollinson : If I may draw a parallel between what occurs in the broadcast industry with what occurs in the telco industry, there are a lot of parallels in the way coverage is provided for TV and radio, and mobile services. Both typically require site and tower infrastructure—so the passive components and then they require active network assets like transmitters. The broadcast industry for decades has realised that it makes sense to share not just the passive infrastructure but also some of the active components. They recognise the lower cost of doing that and the lower community impact of not having multiple towers around. In the broadcast industry, BAI is a service provider of choice for many of the broadcasters. We own their entire network assets—both the passive components and the active components. We provide what is basically coverage as a service. That is a neutral host model. That works really well in the broadcast industry, where they pay us a service fee for providing coverage. They trust us to do that under SLAs. They trust us to own those end-to-end network assets, and to share them with broadcasters.

Ms Lim : I understand that we need to look at the return for investment, but I urge the committee to consider this at a much broader and more strategic level. Mobile services today are a very highly unregulated environment, but mobility by its very nature is a mobile service which is being used across the whole country. It is a national service at the retail and wholesale level. So making only place-based evaluations is not going to set up the most effective model for the greater use of mobile moving forward. We need to keep that in mind. Now is the right time to set up a model and a technical deployment which is feasible and possible, which would then be able to scale and improve as regional Australia develops over time.

CHAIR: Ms Rollinson raised the point about the aggregation of funding. Ms Lim, earlier in your opening statement you seemed to touch on what I would consider as potentially anticompetitive behaviour. I don't want to make that accusation without evidence. We have focused a lot on infrastructure rollouts. I got the sense from your statement that one of the telcos—I won't name it—engages in behaviour with its own customers and partners that, if that behaviour did not occur, would lead to better outcomes for consumers and for the industry. What needs to change from a regulatory and legal point of view for those behaviours not to occur?

Ms Lim : The regulatory instruments and the government intervention are required because ultimately we are moving even further towards a monopoly of the mobile network in Australia. That has various impacts. We are not saying that it is irrational—it is rational behaviour—but, at the end of the day, mobile is an increasingly essential service.

CHAIR: Do you have specific things you would like to see changed—specific parts of the act or regulations?

Ms Lim : Absolutely. No. 1 is the declaration of a wholesale access service to the national mobile network on fair and non-discriminatory terms. No. 2 is to consider it to be mandated that any co-funded infrastructure must provide active network sharing on an open access basis at prescribed rates to both MNOs and MVNOs. That is at a minimum, particularly for any new sites funded wholly or in part through government co-contributions.

Mr Coady: The ACCC has the power under part XIC of the Competition and Consumer Act, which deals with the regulation of the telecommunications industry, to conduct an inquiry and declare a service, such as a service that provides open wholesale access to the Telstra network in regional areas. That power has been routinely used in relation to regulating the fixed telecommunications network. That sort of regulation is generally required to have competition in the industry.

CHAIR: Is that power sufficient? Does it need to go further? Do you have a view on that?

Mr Coady: The commission might need some direction from government to exercise those powers.

CHAIR: Thank you. What is the single most important recommendation you want to see this committee make to the government?

Ms Lim : To ensure that competition is always kept as a priority in any design or decision that is made moving forward in relation to the deployment of mobile services as well as the national mobile network as it stands today. That is through encouraging regulated access and wholesale, as well as ensuring that there are mandates to ensure open access for any government-funded initiatives, which encourages a diversity of smaller and larger providers and allows new entrants to participate in telecommunications in Australia in the future.

CHAIR: Thank you. If the committee has any further questions, they will be put to you in writing. I note that you undertook to get some information in relation to international examples to us. We ask you to provide that to us in writing as soon as you possibly can. You will be sent a copy of the transcript of your evidence and will have an opportunity to request corrections to transcription errors. Thank you all for your attendance.
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