3g pacts alert regulator

THE proposed $900 million third-generation mobile phone alliance between rivals Telstra and Hutchison is being investigated by the competition regulator amid growing concerns about the structure of the deal and its implications for competition.

The Australian Competition & Consumer Commission has also sought assurances about the level of competition between network partners for retail consumers from Telstra and Hutchison - operator of the "3" network - and from the other 3G alliance between Optus and Vodafone.
ACCC commissioner Michael Cosgrave confirmed that the regulator had yet to give approval to either alliance - under which two companies would jointly build then share 3G network infrastructure - but declined to comment further.

However, in recent weeks, the ACCC has contacted other industry players with material posing a number of questions about the alliances.

The central question is how the alliances will deal with third parties, such as rival mobile phone operators, hoping to use the new 3G networks to offer services to their own customers.

When Telstra and Hutchison announced their alliance, Telstra chief executive Ziggy Switkowski indicated the companies would not be inclined to offer any access for Optus.

Telstra later clarified its position in light of the regulator's comments that 3G would be a "declared" service - open to access from third parties - in the same way their existing 2G mobile networks have been.

But suspicions over the companies' intentions with their 3G network have remained.

It is understood that Optus and Vodafone, which are together spending $1 billion building 3G networks, will each do their own wholesale deals with third parties wanting access to the network.

For the Telstra/Hutchison alliance, however, wholesale decisions will be made in concert between the parties, with any profits flowing into a "partnership" created to run the 3G joint venture. Sources said there was also a veto provision that allowed either party to block a third party from accessing the network. "It starts to look like they are making business decisions together and sharing in the profits together," one observer said.

An Optus spokesman said: "Both Optus and Vodafone are subject to the access requirements of the Trade Practices Act and would deal with parties seeking access to the network in accordance with legal requirements."

The other major issue under consideration is the effectiveness of retail competition between the four carriers, which compete ferociously for customers on their existing networks, on only two 3G networks.

The two groups will effectively operate a network duopoly for 3G which offers the promise of high-speed data, video calling and a raft of emerging business and consumer software applications.

The ACCC is keen to avoid a repeat of the disastrous $7 billion pay-TV cable rollout - and subsequent duopoly - in the mid-1990s. Two networks were built but third-party access was effectively unavailable for many years until a series of court cases cracked the duopoly.