#123 CommsDay Summit: State of the telecom industry panel

Music. This is Comms Day Live. I'm Graeme Lynch and welcome to the show.

Well, this week we held the 2025 edition of our annual Comms Day Summit. Our biggest yet, over 500 attendees at the Folsom Hotel in Sydney. We had two days of speeches from industry luminaries. And on the second afternoon, we concluded with a couple of panels. The first panel was discussing no less a topic than the state of Australia's telecom industry. We brought together a number of leading lights from the sector.

Coms Alliance CEO Luke Coleman, TELSOC President Michelle Lim, New Zealand Telecommunication Carriers Forum CEO Paul Brislin, Andrew Sheridan, the former Optus Regulatory Executive, New South Wales Department of Primary Industries and Regional Development Digital Development officer, Peter Adams, and New Street research analyst, Ian Martin. So between them, we had quite a robust discussion. Let's have a listen to it. Your MC is Steve Kinane from the ABC.

And the panelists are going to introduce themselves first, but I'll just tell you what it's all about. The panel's going to explore four critical challenges facing the Australian telco sector. First, with rising capital costs and uncertain returns, how can telcos continue to justify investment in fiber and 5G standalone and what role hyperscalers will play in shaping future value. Second, we'll examine universal service. Third, we'll look at retail competition.

Finally, we'll question whether co-regulation still works. Each theme poses a fundamental question about how the industry can remain viable, competitive, and accountable into the next decade. And I'm going to get each panelist to introduce themselves, starting with you, Paul, and then moving on the panel. Fabulous. Hi, everyone. Is that on? Oh, there we go. My name's Paul Brislin. I'm the chief executive of the Telecommunications Forum.

Most of you won't know what that is because it's a New Zealand thing. So Luke at the other end is my counterpart over here. We are the industry body that brings everyone together to create the codes and the regulations that run the sector. Yeah, that's me. Well, hi, everyone. Hi, Andrew Sheridan. I'm now an advisor with Regulatory and Public Affairs Advisory.

I've had four decades in telecommunications, both in the UK and in Australia, and most recently 27 years with Optus in their Regulatory and Public Affairs unit. Thanks, Andrew. My name is Michelle Lim. So about two or five years ago, I cut my teeth at Powertail and there was a dot-com crash and anyone sort of paid anything and with some experience kind of disappeared and I was left there.

So that was fun. We created some wholesale models and product development and that's probably the hardest time in terms of career. And since And it's been pretty smooth sailing and probably best known as the ex-chair of Compete. I'm today here as a president of TELSOC, which is the Australian Society of Telecommunications. And it's the oldest continually running learned society in Australia. Michelle, I'll get you to hang on to that, Mike. And you guys all share together.

Sure. And there's another one down there. Hi, Ian Martin. I'm a financial analyst advising investors on the state of play and prospects for the telecommunications sector and occasionally government agencies as well. I've got a background actually prior to that in policy and regulation, and that's probably tended to be more of my focus as a financial analyst.

Thanks, Ian. My name's Peter Adams. I've got a background in sort of enabling a range of industries with technology from education to logistics aviation. Currently, my role for the New South Wales government includes the regional digital connectivity program. All right, I've got a lapel mic. I've got a lapel mic, so I don't need the handheld. Hi, everyone. I'm Luke Coleman. I've been the CEO of Communications Alliance for the last nine months.

I got my start in the telecommunications industry as a young journalist out of university writing for a publication called Communications Day. From 2007 until 2010, I then worked for a Chinese vendor that I will not name up until 2014, and then spent the next six years in Canberra as an advisor and then chief of staff to Paul Fletcher and then Mitch Fifield. Then spend six years at Vocus before starting at Comms Alliance. Thank you.

Great. Thanks, everyone. We're going to start with our first theme, and that's investment sustainability. With the cost of capital rising and monetization pathways still uncertain, how do telcos justify continued investment in fiber and 5G standalone? Who wants to take that on first? Michelle, you want to. Yeah. Okay. Andrew's got the mic. I've got the mic, so I'm happy to lead off.

I think the reality is, and I think we've heard from a number of speakers today, that the industry is financially challenged.

The return on investment in Australia is not where they need to be, particularly given the huge amount of investment that is required in this sector. And just to put that in perspective, our dominant provider that has over 50% market share has a return that is in single digit, mid single digits. Compare that to markets in Asia where the dominant provider has returns double digit, often high teens into 20% region.

And you need those sorts of returns to justify the huge investments that our sector needs to make. And it's very risky investments, I think, that we're making. And I think we've seen some impacts of that already. We've seen consolidation in the market. The best example of that is the Optus TPG network sharing arrangement. Telstra even thought that it was sensible to do a similar deal as well.

And that reflects the reality that the market here can only support two networks in regional Australia because of the huge cost of investment and the low returns. Now, as an industry, we've got to think about how we, I guess, address that. And I think carriers haven't done a good enough job in terms of monetizing their investments. They've given a lot of value away. And what that means going forward, the truth is, is that we're going to have to charge more for the services that

we provide. And that means the reality of higher prices. But I think we also need to look at what role government can play as well. Certain decisions have not helped the economics. If you look at the 5G rollout. Set back a number of years by the Huawei decision, which cost billions of dollars to the mobile industry. And that has definitely had an impact in terms of reducing the level of investment and slowing the pace of investment.

You look at spectrum, which is a significantly high cost in the industry today. And I think government and policymakers have tended to look at that as a revenue generation, generating opportunity rather than a nation building opportunity. And I think as Anarki said in his speech yesterday, some countries are now looking at how can we get behind our critical infrastructure to try and drive that investment. And the challenge is only going to get worse with AI and the data requirement

and capacity requirements there. We're going to need much more investment. So that's going to need a great deal of thought and collaboration about how to achieve that. And it's also critical to the Albanese government's productivity goals that we get that investment in this infrastructure. Okay, we'll go Ian then, Michelle, on this issue. Okay, I'm a little bit more positive than Andrew.

I agree with most of what he said, by the way, but certainly as things stand at the moment, they're better than they've been probably for about 10 years in this mobile sector. By the way, cost of capital is actually going down at the moment. Certainly the risk-free rate, you note, with the reserve bank rate going down, that's leading to a little bit of reduction in the cost of capital. And even the risk elements of the cost of capital probably look better now than they've looked for some years.

And actually, to put that into context, that's partly because the macroeconomic factors are a little bit weaker than they might have been. So that's probably going to affect the top-line outlook to some extent. But certainly the recent... Performance of the sector has been more positive with the net additions. Optus, in fact, would have been a lot better if they hadn't had those two big issues or three big issues that set back their net additions and their pricing for some time.

Their cash earnings would be something of the order of 100 million higher than they are now. So certainly for those two operators, Telstra, the larger two operators, Telstra and Optus, notwithstanding, Optus still has a return less and their cost of capital, it looks better. And their last results actually were very strong. I think EBIT was up about 50%.

The difficult one is TPG, but even they, with their sale of the enterprise and government business to Vocus, has brought in close to $5 billion after costs, and that gives them a lot of capability to restructure their balance sheet and their invested capital. The outlook for three years, I think, is relatively positive. And there's a pathway, I think, for both of those second and third operators to get their returns back towards their cost of capital.

For Optus, it also means improving their margins, which I think they're on track for. The real issue is beyond that three-year timeframe, how do we get into a situation where they can invest with confidence into the next generation of networks? And there's a lot to play out between now and then. Michelle? Yeah, so I'd say that if the telcos don't want to invest, then someone else will. And that's the fundamental context that we're operating in now.

And just in terms of the question, how do telcos justify continued investment in 5G and fiber as a standalone? Well, there's going to be lots of reasons. Regulation is one thing. and, you know, reducing all of those sort of hurdles. And you can help trim the sails, but it's not going to fundamentally, you know, change things unless you pick a different route or a different course. And that's, I think, where we're at at the moment.

And, you know, in terms of fiber and 5G, you know, maybe there's different ways to look at things. Maybe, you know, with a 5G network, we're going to be looking instead of fiber backhaul, we'll be looking at satellite backhaul. So what about Leosat backhaul connecting, you know, the RAN to the core? You know, could we do that? So there's all these different ways of thinking and it all goes into what sorts of solutions there might be.

And that all is going down into more like shared infrastructure, being smart about the way we more efficiently can use that infrastructure. But it also might mean more players and different ways of looking at how to deliver to that end customer. Okay. I'm going to come to our other panelists now on this issue of investment sustainability, but I'm just going to throw another question into the mix and you can answer either the first or this one.

And this is, is the growing role of hyperscalers in AI and data infrastructure an opportunity for telcos or a long-term threat to value capture? Luke, you want to take that one or you can address the first question. I think the two things are intrinsically linked that But hyperscalers and telcos, at one and the same time, the biggest customers and their biggest competitors. The services which telcos would have sought to provide to customers and are largely being eaten up by those hyperscalers.

At the same time, those hyperscalers have such voracious appetites for data. They need quadiversity. They need so much fiber going into those data centers that every telco's four largest customers for new fiber are going to be those same big four hyperscale companies? So the answer to the question is both. They are both competitors and customers.

I think it's inevitable that we will see the hyperscalers continue to increase the role that is played by cloud services, by cloud computing, by cloud storage that may have once been the domain of the telcos.

And that will require the telcos to redefine how they conduct themselves in that business environment, to find an equilibrium where they're able to make those investments and serve those customers, but also realizing there's going to be areas where they're just not able to compete at scale against major global tech firms. Peter, have you got a comment on investment sustainability? And Michelle, I'll just get you to pass the mic down to Paul as well.

So I think one of the, you know, wearing a few different hats, but if you look, go back to in Vicky Brady's first speech to Mobile World Congress a couple of years ago, she talked about needing to sort of change the way the industry works and partners. And I think certainly government has a role for that. And of course, government needs to make sure that we get the best value for money. Like it makes sense to invest taxpayers money, then the majority of taxpayers need to benefit from it.

And I think, you know, a quote was something to the effect of we spend more time protecting what we used to have than sort of looking forward. So I think that's probably in the context. And it's interesting, some of the themes that we've heard over the last couple of days, if you look at the context of what the message that's being delivered is quite different.

If you actually go to the investor days or listen to the message that's being sent out to investor days from the various telcos, it's all about, particularly for the MNOs, about how the mobile part of their business is the jewel in the crown and it is actually the most profitable. So, you know, from New South Wales government's point of view, I can't speak for my federal colleagues in the room, but I probably will before the panel's finished.

So, you know, they can come up and I can see you down the back there. Just jump up and defend yourself when I'm speaking on your behalf. We've worked very hard in New South Wales and we've worked very closely with our federal colleagues to look at more sustainable models because we've heard a lot of people talking about the rural and regional problem and it's a metro problem as well.

Metro people go up to the wineries on the weekend, they leave the cities, they might go out to regional festivals, they might visit family and friends, but they actually want their mobile to work. So we've been running a range of experiments and pilots and trying to work with the industry to do things.

But what we've actually found is there's a disconnect between what you quite often hear the boards and the CEOs talk about in terms of, you know, we need to work differently to then the middle level players who are sort of working with government to do it, who spend more time trying to protect what they've got than actually actively participating. So our message is we've got these programs. We've seen some particularly good engagement lately, I might add.

And before the end of the year, we'll be able to point to, you know, some active trials and actually say, well, here's some different models. And it is actually, it's, I think somebody had one of their slides this morning about all boats floating on a rising tide. If we can have lower cost models, then everybody wins. The industry wins, the taxpayer wins and government gets value for money. Paul?

Yeah, look, harking back to what Michelle said, if we don't build the network, somebody else is going to. And we're already seeing that in New Zealand with the impact of Starlink, especially in rural and remote parts of the country. They're up to about 20% market share in rural and remote New Zealand. And that is a significant impact on the rest of the market, given that they don't belong to the telco forum. They don't partake of any of the codes that we've developed.

We're running the risk of developing a two-tier telecommunications environment where you have national players who do all the right things. We have a dispute service. We have agreements around customer disconnection codes, all that kind of thing, vulnerable customers. And we have a new player who's coming in from outside with a substantially different offering who doesn't abide by any of those rules and is enabled by the government to do just that.

Carry on, build what you need, we're more interested in resilience than we are in a level playing field. So I think if you're not careful, you will have somebody do it to you rather than you doing it yourselves. And I think Brendan yesterday in the first speech of the day, he talked about the real issue for the industry is reputation management and how working together delivers a lot more than separately.

And I think Luke and I both have that opportunity to help bring everyone together in our own markets. That is incredibly powerful. When it works, it works really, really well. And you can respond to major issues as a sector much more readily than you can as individual companies.

Okay. I want to move on to the second theme, which is about universal service. And I'll ask you first, in a world of mobile first access and satellite availability, does the traditional USO model still make sense? And if not, what should replace it? Well, no, it doesn't make sense.

I think if you go back to the big, probably the major microeconomic reform decision of the Hawke government in 1989, they basically said if we can separately identify what the USO is and cost it, we can fund it directly. Initially, they said from budget, but ultimately it was a levy, which still goes through budget.

And if we can do that, then the rest of the industry can move out to a commercial model, which Telecom subsequently did through Telstra, through Frank Blunt's future mode of operation. That drove enormous productivity gains. We reversed that process incrementally with the NBN and with the way the cross-subsidies managed through the NBN. In fact, we're paying for that cross-subsidy twice, once through the $8.26 levy per month plus TST.

And again, as taxpayers through the enormous equity investment in NBN, it's not going to come back. So there's a double payment in effect for a subsidy that could be met more efficiently by offering that connectivity arrangement out to a wider market to be contested by a number of different operators could meet that arrangement now. There's a great deal of complication in that USO arrangement that could be simplified and met far more efficiently through a contestable arrangement.

Paul, are there any lessons from New Zealand? Yeah, we've got a very old telecommunications service obligation. We don't have a universal one. The TSO is for those customers who is a very small subset for historical reasons who were kind of left out of the fibre build and also the rural connectivity build. And unfortunately, their setting is so low that it's almost farcical.

Chorus has to seek dispensation every year from the ministry because it can't find anybody on a dial-up connection to measure their speed to make sure they're getting the 56A that they are supposed to be getting. So it's rather a challenge. I think certainly in New Zealand, I'm finding that local problems are best solved at a local level, that the wireless ISPs that operate in local communities are a much better place to solve those problems.

We have programs that work to support them around the rural connectivity build, so towers in remote locations and things of that sort. And I think coming at it from a grassroots level, certainly our rural is a lot smaller than your rural, but I think that works really well. This idea of taxing everybody to try and cover a small portion of the audience seems to be quite an expensive way of doing it, and I don't know it helps with anyone else.

It's a handbrake on the industry. Andrew, what's your view on this? Yeah, look, I think for many, many years, I think people have agreed that the USO is broken. As Ian said, it's a complete mess when you look at the different cross subsidies. Unfortunately, it's been in the graveyard of policy reform for the last 10, 15 years. So it's really pleasing that it's now being resurrected with both sides of politics prioritising this as part of their, I think, reform agenda.

I think a couple of things. We have to look at changing it. Our mobile has to be part of the solution because it is now a really important and significant technology. But I think we need to probably also have a think about what does a... You know, what is the requirement for universal service in today's environment? Is it connectivity or is it actually around inclusion and affordability?

I'm a little bit worried with the government getting ahead in terms of sort of putting out there the universal outdoor mobile obligation. That feels very similar to the 1980s concept of, you know, the key thing is making sure everyone's connected, whereas I think there is a lot of other issues in today's modern society that are probably more important.

So I think thinking through what do we want in terms of delivering that and what is the best way of achieving a sort of reformed USR, I think is critical before we go on the reform path. Okay. Michelle, what are your thoughts on this, on universal service? Yeah, so universal services is almost like the gold-plated example of incrementalism. So it's just been on for, we've been talking about it for so long.

And I think the industry and government, everyone knows what we want and what the outcome, what the ideal scenario is. But, you know, at the moment we've got an insurance plan where the premiums keep on going up and the policy just doesn't have the right inclusions anymore.

And I think what's the real, you know, and at the end of the day, what Andrew's saying, you know, it's like when we're moving into kind of this modern service, well, you know, from a Telsoc perspective, it's all what are those entitlements? What should those entitlements include and to who and how? And then the rest can be left to the commercial market to resolve those.

But I think we're in a phase where, and I probably disagree a bit with Andrew in saying that, you know, with the UMO last year, I think that there was some solid work that had happened around USO. We saw some direction, whether you agree with it or not. But I think where we're sitting now, there is a risk that if we don't have the focus to understand and move forward with the USO, we're just going to be in 10 years' time talking about the same thing.

And it will be, instead of a 20-year gold-plated incremental policy, it will be a 30-year one. Sorry, it won't be 10 years for the USO because the current contract expires in about another five or six years. Okay. Yeah, with the copper. Peter, I'll throw another question in the mix and you can take on either. But should universal service policy shift its focus from availability to affordability and digital inclusion? And if so, who should be bearing that cost?

Well, I definitely won't be speaking on behalf of my federal colleagues on policy. Remember as the as the states and territories we use blunt force trauma our only contribution is throwing money at the problem we have to work with our federal colleagues on policy but i'll probably. To the comment I made earlier about the industry needs to work with all levels of government on better delivery models in terms of getting value for money, which ultimately does translate into access.

I mean, the minister said this morning, she's got to focus on digital advantage for everybody and no one being left behind. So I think there's your policy guidance on where my federal colleagues are going and the New Zealand example is great. Somebody will correct me, but there's over 550 towers that are shared there. And the agreement with the government is sort of help us out, build into these areas, which are semi-profitable, but we need to cover these areas.

So that's the direction that I think we need to go. And Peter, a quick follow-up about that. Are you hearing more of that kind of talk like what's going on in New Zealand about local solutions? Yeah. New South Wales has been on this journey since sort of late 2021, 22, and a massive the amount, as everyone in this room would know, has changed in the telecommunications industry over the last three years. We've had the tower sales, we had the Telstra TPG proposal, we've then had the Optus TPG.

So there's been massive structural changes in the industry, which makes it a real challenge, I can tell you from a government point of view, when you're working with political cycles and trying to get funding and move things through.

But I think, yeah, we certainly, and I'd say with some of those industry changes since the end of last year, this year, we're seeing a different approach to government and we're having some, as I said, we'll see some positive outcomes that are publicly visible by the end of the year. Luke, what's your view on this? Should the model change? It should. I should start out by tipping my hat to Andrew Sheridan here because for a long time, USO has actually stood for usual submission from Optus.

Optus has been leading the charge on USO reform for the better part of two decades. And it's been Andrew that's been doing the thinking behind that. What is the policy problem we're trying to solve with the universal service obligation and the regional broadband scheme? It is to address an area of market failure. That is the point of this, where the market has failed to deliver telecommunications services to people in extremely remote areas.

Yes, it is a good social outcome for the government to step in and solve that problem. Now, historically, the way that was done was by funding Telstra via the USO to keep the copper network going out in regional and remote areas that didn't make any economic sense to connect. But in the year 2025, 99.5% of the population has coverage from at least one mobile operator. 98.5% of the population has coverage from at least two, now three, thanks to the Mocken Agreement, mobile operators.

100% of the population has NBN Sky iMuster or NBN fixed wireless or NBN fixed line, 100% of the population now has Starlink. The problem has been solved by the commercial market. Then you will say, well, what is the problem then if we have 100% coverage? Well, not everyone can afford Starlink. SkyMuster can't deliver voice services to an effective level for it to be a universal service.

So it's a different problem. And I actually think that the phrase universal service is misleading because we're not looking for a universal solution here. We're looking for a solution for 1.5% of the population that don't have competitive mobile coverage. They still have SkyMuster. They still have Starlink. Within the next couple of years, they'll probably have Amazon Kuiper. There might be other LEO satellites that conserve them.

This is not a universal problem. This is a very distinct niche problem of how we solve the question of connectivity for a sliver of the Australian population that doesn't have access to competitive services. I think we need to change the way that we approach the problem to solve the USI question. Okay, before we wrap this up, I'll just get some quick comments from Michelle and Andrew again. Michelle, did you want to make some comments or you took the mic?

Yes. I just wanted to comment on what Luke is talking about, but we can't lose track of what is a minimum entitlement and what should an end consumer, whether it be 1.5% or 2% or whatever that might be, what should that be in a modern world? And so, yeah, so that's, I'll leave it with that. Andrew, I'll just get some final comments from you, given you've been pushing for change in this area for so long. And I think that goes back, I'm agreeing with both of you.

I think it's important to understand exactly what that set of obligations now should be and who they should apply to, because I think we risk taking a legacy concept into the modern world with all the problems that we've identified with it. And it will cost a lot of money and it will just create further disappointment for customers in terms of what those outcomes for.

So I think some real caring thinking through what is a 21st century universal service requirement, I think is pretty important and fundamental to a successful reform agenda.

Okay. We're going to move on to our third theme now, and that is retail competition. Luke, I'll get you to go first on this one. Is the level of price competition in the retail broadband market, especially under the current NBN pricing framework, undermining providers' ability to reinvest and innovate. I don't see pricing as the problem at a wholesale level. It is a good thing that we have a national operator that has a requirement to offer the same service at the same price to all comers.

Where I think the problem comes in is that we have such strict regulatory structures around how operators are allowed to market those services, what flexibility is allowed in their speeds. These regulations exist to give consumers a level of certainty about the speeds they will expect when they get an NBN service. But they also restrict operators' ability to offer differentiated services.

So we all get locked into, oh, I want to launch a new broadband plan and offer a 25 megabit per second NBN wholesale service. The regulator says, you have to call it this in your marketing materials or we're going to fine you. You want to offer this speed, you have to call it that. And we have consumer groups that are arguing for even stricter regulations around how you can market your own broadband services.

I think that there is a lot greater capacity in the retail market to have more differentiation in products, to offer different services, different speed tiers to meet different consumer needs. But we need to stop micromanaging the minute of how telcos offer those services, how they market those services in a way that gives them more flexibility to address consumers' needs. Paul, you want to respond to Luke's comments then? Yeah, look, we're going down the same path.

Unfortunately, we've got a telco commissioner who is looking at how we market broadband in such a way that it's homogenizing the industry. So you're going to end up with everybody offering basically the same products. You can have the small one, you can have the fast one, you can have the enterprise level one, and that's about it. And I think that's a terrible loss. We've had 20 years of fairly intense competition in the mobile marketplace with new products and new services coming on stream.

You know, differentiated offerings would roll over data and a whole bunch of things that the incumbents said would never happen. I like to see that play out in the broadband space as well. But because of the micromanagement and this intense view that everything has to be comparable, so your product must look much like your neighbor's product so that...

Poor mums and dad customer at home can sit and compare the two brochures side by side, I think that's a terrible waste, quite a red herring, and we'd be better off getting away from all of that. All right. I'm sensing Michelle is itching to make a comment here, Michelle. Yeah. So, I don't think we should muddy the waters. So, there's consumer protections and there's those type of regulation.

But ultimately, if the question is about, is the level of price competition in the retail broadband market under the current NBN pricing framework undermining

a provider's ability to reinvest and innovate. I'd say no. I would say that the original concept of why NBN is here and the work that was done a few years ago to provide industry that certainty in the wholesale cost model up until 2040 and the fact that we have from 2010 when it was talked about that we were trying to get challenges in the retail space to sit at 30% market share, and we've well and truly got there, and that we've seen a change in the tier

two market where we've got companies like Aussie Broadband, Superloop, looking at different ways to do their service models to innovate and to provide competition. I'd say going back to the question and not muddying it with other types of regulation and consumer protections, from a price competition perspective, NBN has done its job. Ian? Yeah, no, I've got to disagree with most of that.

I mean, it certainly is an issue in the way the retail market is regulated and innovation is being, in a sense, regulated away. But a lot of that comes from the way NBN is regulated. And again, I draw the distinction here with what Telecom did or what Telstra did when it was freed up to address the commercial market. It moved from a budget setting where basically everyone had the same product, mispriced.

Not meeting the market to one where, in the way that Frank Blunt and his team managed Telstra through the 90s, started to address different market segments in different ways, generated the pricing structure for the telecom face and collapsed as they did that, as they face competition, but their fixed revenue went up 4% each year. That's because they started working out how to address each part of the market differently and price differently for those parts of the market.

We've now got NBN back to where telecom was in the 1980s with a well-manicured price structure for everyone, not meeting different market segments. And that might be what government wanted, that there's some basic product that's the same for everyone, but it's not a model that NBN is going to be able to address the differentiated needs of an AI world in 10 years' time. That SAU simply isn't up to the task that's going to be asked of NBN for the next decade or more.

All right, Andrew, you want to chip in there? Yeah, just quickly. I think I support a little bit of what Martin says. Look, the NBN is a great national asset. I argued strongly for it throughout my career, arguing for the separation of Telstra and Telstra not to be involved and for the NBN to be established. And I think it's going to play a great part in our sort of future connectivity.

But from a retailer's perspective, it is a case of be careful what you wish for, because there isn't enough margin reselling the NBN to really make the sort of heavy investments that are required for the future for the retail service providers. And those ROICs I talked about for Telstra and Optus and TPG, which are at very low international levels, that's off the mobile network. If you look at the ROICs off the NBN platform, they're minuscule and they're not supporting that level of investment.

So support the NBN, but really I don't think that is generating the sorts of returns that the industry needs to make the big investments to support the digital connectivity needs of Australia. Peter? So I'll just time shift from where I am now back 15 years. So my research background is in consumers taking up innovations and one of the things and probably the key discovery.

Contribution my research was purchase complexity for consumers is a major challenge so and particularly you know we've seen it historically in the mobile market it's you know it basically obfuscates the problem you've got the same service being priced differently based on different plans so the key thing that I found during you know my research was that consumers are just confused so the comment earlier about you know the poor old mums and dads need to be able to compare that's actually true.

That we need the consumers to be able to compare prices by pricing things differently and making it confusing for them might work to margins for your individual organization but at the end of the day it doesn't work for the consumer and it was you know it was the key thing that came out of my research was that you know this this idea of purchase complexity was a real challenge for them in terms of telecommunications and it particularly hurts the most vulnerable in

our community which is clearly where you know the minister indicated the federal minister indicated this morning that she wants to support because clearly, by definition, it's a higher cost. So, you know, I think one of the ACMA reports shows that, you know, for more vulnerable households, telecommunications is above 8% of their household expenditure. They're having to sacrifice other things, whereas obviously for a better off household, you're down in the 2%. So, it actually does matter.

Yeah, and I think where there's going to be the squeeze and the space to watch is that sub-wholesale market and the very, very long tail of small RSPs. So that's that 1,500. And it probably makes sense to see what sort of consolidation will happen there or the changes that will happen in that space of the market. And that's not necessarily a bad thing because that's really what consumers might be driving.

And these businesses can make their own decisions now that there's more certainty in terms of regulation and pricing as to what this might mean for their business or not. Okay. A further question under the heading of retail competition, are MVNOs and Flanker brands delivering real consumer value or are they simply arbitraging networks in a way that weakens long-term industry economics? Who wants to tackle that one?

One of my favorite topics. We've seen, We're now generation five in mobile, and through each life cycle, there's a clear pattern where the early gains, the early adopters, the MNOs want to capture that value themselves. Some point in the cycle that just gets too hard for them, they've got a strong economic incentive to engage MVNOs to find new markets.

And with the previous generation, 3G, 4G, those MVNOs are really selling the same, finding different ways to sell the same product, essentially voice, connectivity, data allowances, and so on. I think this time might be a little bit different, and certainly Telstra and I think the other two network operators are hoping that it will be different because there's so much promise that we've been offered in 5G which hasn't yet eventuated.

The network operators themselves haven't been able to find what that additional value is that 5G could offer. And so offering that capability now on a wholesale basis out through MVNOs and through these intermediaries, the MVNAs, MVNEs, the enablers, and so on, is potentially a way to find new sources of value that the network operators themselves just haven't had the capability to find. And it's a two-edged sword, as Vicky Brady noted with the half-year result.

Yes, there's potentially a lot more revenue, but you're potentially risking a shift in some of that service revenue from the network operator to those other platforms. So it's something I've got to manage, but I think they've engaged with it because they think there is more positive, more upside potential from offering 5G wholesale than simply keeping it as far as they can in-house. Anyone else want to pick up on that one? No? Okay. Paul?

Yeah, we've got a very immature MVNO market in New Zealand. I suspect we're lagging a long way behind. We just don't have the population to seemingly sustain multiple MVNO operators. The growth that we're seeing and the big change in the market is the power companies in particular deciding that there's fat margins in telco, so they'll come sweeping in and offer bundled services.

And that's where the growth lies over there. It's something that's attracted the interest of the commission who are going to have a look to see whether or not they're cross-subsidizing. That's going to keep them occupied for years to come. So that's delightful. Can't wait.

Okay, we'll move on to our final theme, and I'll get Michelle to tackle this one first. It's co-regulation. Has co-regulation delivered credible consumer outcomes, or is it now time for firmer, more direct regulatory intervention in areas like outages, billing, and complaints? So I look over at Luke and I feel like, I feel a glare. So maybe, Luke, why don't you have the honours of talking about co-reg?

When you look back to yesterday in my speech, I spoke about the early days of comms alliance back in 2006. The co-regulatory environment back then was so much simpler than what we see today. A lot of the industry codes were very technical in nature, regulated how you transfer a mobile number from one operator to another, all things that we did very well.

In recent years, the pressure on our industry to be regulated in a similar manner to other so-called essential services, and I do the little quote marks for essential services for a reason, because other essential services, gas, electricity, you don't get to choose your electricity transmission network provider. You don't get to choose your gas network provider.

You do get to choose the retailer. Telco is the only essential service that has competitive network providers competing to deliver you the best service and to serve you. And so I think we've seen this trend where the telecommunications industry is being regulated like other essential service sectors, but we are not. We are a sector that has a choice of underlying infrastructure and network providers.

And so the co-regulatory regime has come under pressure from new regulation when it comes to consumers facing financial hardship, for example. Now, that is not to say that that is a bad regulation. It is good that we have protections in place for consumers facing financial hardship. Similarly, with new regulations coming in with victims of domestic family and sexual violence, that is a good protection to have in place for very vulnerable consumers.

The question should be, can industry be trusted to solve these problems itself before the heavy hand of government comes in to do it for us? And I think industry needs to be given a chance, a better chance, to solve those problems. Why? It's not that industry is trying to shake off responsibility for these things. Not at all. It's that the complexity of implementing a new standard across a broad industry with absolute labyrinth of OSS systems, BSS systems, billing stacks.

Every telco has to implement those processes. It is so complicated. One word in a direct regulation can lead to millions of dollars in additional costs and months and months of work on putting technology processes in place. It is not the industry trying to shirk responsibility. But co-regulation enables our industry to solve these problems in a practical way that enables us to implement these measures in a way that works for the systems that telcos themselves know best.

So I hope that industry is able to rebuild trust with our customers, rebuild trust with regulators and government to say, we are able to look after these issues ourselves. We need to be able to prove that we can do that. And I would hope that the co-regulatory environment has delivered fantastic outcomes for consumers. If I could put one slide up there on that big screen, it would be the CPI data over the last 20 years.

Every line on that will be going up except telco, and that's because co-regulation has enabled, in part, amongst many factors, enabled prices to keep going. Quick follow-up. There was a big story in Comstate today about certain telco getting a very large fine. Can industry be trusted to run their own race? What a great question. I'm glad you asked that. Because what happened in that case? What's come out today? Yes, a telco has copped the single largest fine in Australian corporate history

for unconscionable sales conduct. And so you've had some groups come out and say, aha, we need direct regulation. Newsflash. They got caught. They got fined. We already have direct regulation in place. It's called the Australian Consumer Law. It's regulated by the ACCC. It is a regulator that has teeth and it bites and they just got bit bad. We also have, on top of that, the Telecommunications Consumer Protection Code.

Now, we've just submitted a new version of the TCP code that will directly address the issue of sales practices amongst telcos. And guess what? The ACMA will then be a second regulator that will also have powers to clamp down on telcos for unconscionable conduct when it comes to their sales processes, I should say. You have a safety net above a safety net. You have the Australian consumer law that applies to all industries, including telcos.

Above that, we have the TCP code that applies specifically to the measures in the telecommunications sector. So be wary. Whenever anybody says we need more direct regulation in the telco industry, remind them, we already do. The ACCC is there. We have a safety net above that safety net that the ACMA regulates. We have two regulators in our section. They are both protecting the interests of consumers, and we have learned that they are not afraid to use their teeth.

All right, Michelle, you get a response now. I do regret allowing Luke to ask first. So I think there's a bit of a furby that direct regulation still allows for industry expertise and stakeholder engagement in developing that. So it doesn't move away from it. And I think if we go back into the very, you know, start of co-regulation, which is back in the neoliberalism times, it was 20 years ago, the makeup of the industry was very different. There was a handful of providers.

There was a handful of really strong experts who could get in together and do that. Well, times have changed. We know that the market structure is different. We know the participants are different. We know that there's a big diversity. And I think there's the argument that in terms of the process development for codes, how long does it take? What is the process? And is that really what consumers need? And I think, you know, when you can sort of say.

And who leads it is a real question. Does industry lead codes for consumers and competition or is it a regulator who can drive and provide guidelines while the stakeholders also provide input? So, you know, from a TELSOC perspective, and we did nut this out quite a bit, from a TELSOC perspective, code development is probably best suited for technical and operational matters.

But when it really comes to a consumer and a competition-related matter, if you look at the timing of how things sort of run about, I think that's up for debate. Okay. I want Peter to hop in here. You want to make a comment? Only as a counterpoint in terms to the research, a company no less than McKinsey actually found that the ROIC, so Return on Invested Capital for Telecommunications Industries Internationally, was 10% to 15% less in deregulated markets.

So put that into your favorite search engine or AI and then go and look at that research and then make your decision. Andrew, you want to hop in here? Yeah, I mean, I think, particularly if you read the pages of Comms Day, which I do every day, and this has become quite a polarized debate and I think it's a little bit odd. My sense is that, picking up the point that Luke has said, I mean, this is a highly regulated industry.

I mean, three years ago, we did an exercise looking at how many regulations we were subject to, and we were up to 340 then, and that has been added to. So the industry is subject to several hundred direct regulations. So that's a fact. The code, I think it's unarguable that the co-regulation has led to better outcomes for consumers. Have they been perfect? No, but they have led to better outcomes and we can improve on those.

And I think my point probably is that, There's a role for direct regulation and I think there's a role for co-regulation. But I think what we need to do in thinking through which of those paths we go down for any given thing is to what is the outcome we're trying to drive and what's the public benefits associated with each of those? Because it's not a binary decision. I think there's a role for both. Paul? You know, I can't comment really on the Australian situation,

but in New Zealand, it's a slightly different model. So we have the Commerce Commission that comes out and says, here are a set of guidelines on a particular issue. We will issue these guidelines and we'll measure you against these guidelines over to you industry as to how you implement those guidelines.

And what we tend to do is codify them. We will get together most of the industry, those who want to participate, those who it applies to if it's retail or if it's a wholesale code, and we will work together to build a code. And I find that what the telcos are more likely to do with a code they've helped create is actually live up to it. When it's a code that's enforced on them from on high, that's where you get, as Luke said, you get some of those issues where interpretation comes in.

I don't know how many lawyers you all employ. It's too many, but they can all sit around and pass a different view on what this particular line means and what was implied by that. It takes forever and we've had really poor outcomes when it's a code handed down from on high. When we get to help create it, then it seems to work quite well. What then happens is the commission can review it and say, actually, you've not lived up to expectations, so we're going to do it for you.

And that's when the wailing and the gnashing of teeth takes place. But it gives you that opportunity. I think you've got to let industry have a crack at it first. Otherwise, it is a directed market rather than and a directive market. Ian, do you have faith in the current system? Well, I tend to agree with Luke and Paul that co-regs better because it's coming from the market, from the operators in the market.

And again, the difficulty with having a regulatory framework enforced from above is that you then get the operators behaving to meet the regulatory guidelines rather than to meet what works for the customers. Better to have that input from the customers, from the players in the industry help set up, help establish that code to begin with. Okay. Yeah, we've got five minutes left of the panel. I might throw to Graeme Lynch, actually.

Surely you've got a question about regulation for our panel here? For those in the audience who might not have heard the question, if ACMA does not accept the TCP code, what happens after that? Well, you break it, you bought it. The industry has put forward its view of what should be an acceptable set of consumer protections in the TCP code.

It governs everything from the beginning to the end of a sales process from the way consumers advertise a product to the way consumers are sold a product and the conduct of telcos as they sell that product every step of the way to the redress available to consumers after the sale has taken place. Every step through that process is governed in quite strict measures by the TCP code.

As you may have read in Comms Day, we have had as much negative feedback from consumer advocacy groups as we have from members of the industry itself in saying this is micromanaging the minute of the day-to-day business of doing a telco to consumer groups saying you haven't gone far enough this is the very very broad breadth of feedback we've received so to go back to your question graham what happens if it is not accepted well then Uh-huh.

It would need to be made clear what was not acceptable in the TCP code and what needs to be directly regulated, given that broad scope of the TCP code. Is it the question of responsible sales being a very topical issue right now? Is that the bit that needs to be directly regulated? Is it coverage maps, which is also covered in the TCP code? If you don't have the coverage you expected when you buy a mobile service, you can go and return it. That is what industry is putting forward.

If that's not acceptable, are you going to directly regulate that? The code itself is the product of so many ingredients that you would need to look at a lot of individual and specific measures to say, will direct regulation solve this problem more effectively than what industry has proposed itself? I would be very surprised if there was one single piece of direct regulation that could solve that problem.

Rather, it would need to target each of those individual steps throughout the sales process and come up with something better than industry has been able to come up with itself.

And when I say industry coming up with itself, with the requirement to consult with consumer groups, with regulators, other bodies, all of that feedback was taken into account during the process. This is not an industry navel-gazing exercise where we sit in a dark room by ourselves and come up with these things. It has been an iterative process. It has taken two years from beginning to end, three public drafts, including a consultation paper at first.

This has been the most consultative TCP code development process ever undertaken by industry. And so, if it is not accepted, my question will be, well, what can be done better by direct regulation that can be done by COVID? We've got a minute left. Does anyone else want to chime in on that one? Okay well let's wrap that panel thanks very much to our panelists that was a great little chat thank you.