How to avoid more Vodafails

Vodafone is once again bemoaning its competitive disadvantages and yet it refuses to invest in its network. Perhaps a bit of forced competition could actually help the telco.

Vodafone would have the public – and the government – believe that Telstra is taking advantage of call termination fees which is the fee a carrier pays to another carrier when a customer calls someone on the other carrier’s network.

Because Vodafone has far fewer customers than Telstra and Optus, the telco faces a net outflow of cash at the end of every month. But really, the problem that Vodafone is facing – a shortage of customers – is one of its own making.

Did Telstra or Optus cause Vodafail?

Did Telstra or Optus convince the Vodafone board to only invest in a network in the larger urban areas? Who convinced the Vodafone board to reduce network spend?

The only answer is this: Vodafone must take sole responsibility for the shift of large numbers of its customers to either Telstra or Optus over the past two years.

It’s not the Australian Competition and Consumer Commission’s job to bail out Vodafone by reducing the termination fees payable between carriers without due cause. But, it is its job to improve competition in Australia. So instead of offering Vodafone a carrot, perhaps it’s time to smack it with a stick.

If Vodafone wants sympathy from the ACCC (and Australian mobile consumers) then Vodafone must look to compete with Optus and Telstra on an equal footing and this means building a much bigger and more reliable network. And if it doesn’t, perhaps the ACCC should look for ways to make it do so.

Slip-up after slip-up

Of course, Vodafone pulling itself out of the race for the 700Mhz spectrum band seems to demonstrate that it isn’t interested in achieving a level playing field with Telstra and Optus. It wants to maintain the status quo.

Spectrum in the 700 MHz frequency band was described by Communications Minister Stephen Conroy as being “waterfront property” because of the transmission advantages in buildings and in regional areas. Both Optus and Telstra appear ready to bid for this spectrum, and it seems that once again Vodafone will get left behind.

In countering such claims, Vodafone has said that it will look to bid for spectrum on the on the 2.5GHz band. However, a lot more spectrum is being offered on that band, leaving plenty of room for the other telcos to purchase some of their own 2.5GHz spectrum to ensure Vodafone doesn’t leave the auction with any advantage.

Vodafone’s other argument that it has its own 900 MHz spectrum and this is sufficient for its needs. This perspective is not forward looking, especially when Optus and Telstra also have 900 MHz spectrum yet both intend to participate in the 700 MHz auction.

While many of Vodafone’s remaining loyal customers may not be aware of its mishandling of the spectrum auction, they certainly are aware of the mishaps it’s made in re-writing its mobile plan policies.

The recent move to charge some customers for data in 1 MB blocks was a disaster and there was an inevitable customer backlash.

Vodafone is also guilty of reducing mobile plan data allowances and removing free unlimited access to certain social networks for its pre-paid customers. However, Telstra and Optus are also guilty of recently reducing plan data allowances in an effort to squeeze more revenue from customers.

But shouldn’t a company in Vodafone’s position be trying to outdo its rivals rather than equal them?

All of these slip-ups are piling up and Vodafone needs to watch out or else it won’t be able to escape its dreaded ‘Vodafail’ catch-cry.

Forced competition?

There is one point however that is not directly Vodafone’s fault. One of the failings of the original mobile licenses awarded to Telstra, Optus and Vodafone is the lack of a requirement that license holders compete throughout Australia.

In effect Telstra is the only company with a national mobile network. The Optus mobile network is smaller than the Telstra network and both are much larger than the Vodafone network.

So if the ACCC really wants to help Vodafone – and thus mobile operator competition in Australia – it should launch a broad review into the sector and recommend changes to mobile operator licenses, forcing holders to offer competing services on a national scale.

Vodafone keeps choosing not to compete, so perhaps it’s about time we look at forcing it to.

Mark Gregory is a senior lecturer in electrical and computer engineering at RMIT University.