ACA MR6003

Media Release No. 60 - 04 December 2003

Telecommunications reform add billions to Australian economy

Reforms in telecommunications added more than $12 billion to the Australian economy in 2002-03, according to the Telecommunications Performance Report 2002-03 released today by the Australian Communications Authority (ACA).

A recent study completed for the ACA, the results of which are included in the report, estimates that the Australian economy was $12.3 billion larger in 2002-03 than it would have been without the reforms to the telecommunications regulatory regime since 1997.

The primary driver of these benefits has been improvements in the productivity of the telecommunications industry which have delivered substantial ongoing benefits to consumers and small business.

ACA Acting Chairman Dr Bob Horton said that by 2002-03, the reforms had resulted in:

• around 54,000 extra jobs being created in the Australian economy;
• real consumption benefits of $5.7 billion for all Australian households which were realised across the range of goods and services consumed by all households;
• benefits to small business worth $1.8 billion; and
• the output of the telecommunications industry increasing by 97 per cent.

"These reforms have affected consumers and small business in a number of ways as a result of them using telecommunications products and services," Dr Horton said.

He said the effects of the changes varied according to the circumstances of each telecommunications user.

Some examples of these effects included:

• the reduction in the cost of using online and automated services such as banking, event bookings and travel bookings, and the accrued savings from both the time saved and the price reductions passed on by the service providers achieving cost savings from the use of these services;
• the value of increased convenience that can be achieved through the proliferation of new technologies such as broadband access services. This can be measured in terms of both the efficiencies achieved in a business environment and the increased leisure time for consumers to pursue other activities;
• increased disposable income brought about by the reduction in the cost of pre-existing telecommunications services such as long distance national calls, international calls and mobile calls; and
• increased employment in new business areas that arises as a result of the proliferation of new telecommunications solutions, such as the development of third generation mobile networks and services.

This is the second time the ACA has commissioned Allen Consulting Group to undertake a study to estimate the benefits to consumers and small business of telecommunications reforms since the introduction of the Telecommunications Act 1997 and Parts XIB and Part XIC of the Trade Practices Act 1974. The full report is available on the ACA website.

The ACA's Telecommunications Performance Report also revealed that growth in telecommunications in 2002-03 was led by mobile phone and Internet services.

The report shows that the number of mobile services in operation grew by 12.6 per cent during the year to 14.3 million-an increase of 1.6 million over 2001-02. A continuation of this growth rate in 2003-04, would see the number of mobile phone services double in the four years since June 2000.

The report also found that the mobile telecommunications market continues to be one of the areas of fastest growth in the Australian economy, with the industry estimated to now contribute more than $5 billion annually to the economy.

Dr Horton said the acceleration in growth during the year in new mobile subscribers had been driven largely by a continuing surge in pre-paid services.

"About three out of four new mobile phone services acquired in 2002-03 were through pre-paid rather than post-paid contracts," he said. "The result is that 38 per cent of all mobile phone services in Australia are now pre-paid-up from 33 per cent last year," Dr Horton said.

"Pre-paid services have been particularly popular among young people because they offer an inexpensive way to enter the market without the need for the creditworthiness checks associated with many mobile contracts."

Dr Horton said mobile penetration-the number of mobile phone services per 100 inhabitants-is now 71.9 per cent in Australia, an increase of 7.4 percentage points over June 2002.

The gap between the number of mobile phone services and the number of standard fixed telephone services had also continued to widen. At 30 June 2003, there were approximately 11.58 million standard fixed telephone services.

"The use of SMS (short message service) was a major source of mobile service industry growth in 2002-03, with the total number of SMS messages increasing by 44 per cent compared with the previous year," Dr Horton said.

"SMS messages sent during the year reached 3.95 billion-an average of 294 messages for each subscriber.

"The importance of SMS to mobile phone service operators is also increasing, with SMS now accounting for an average of nine per cent of revenue for all mobile operators.

"Interestingly, 57 per cent of households and 40 per cent of small businesses reported using SMS-up from 30 per cent in 2001.

"Consumers are also very comfortable using SMS with our 2003 consumer satisfaction survey showing 90 per cent of households and 92 per cent of small business respondents being satisfied with the technical aspects of SMS.

"And there is continuing support for new technologies that offer customers a wider range of voice, multimedia and data services."

Dr Horton said that consumers and small businesses who had responded to the ACA's Consumer Satisfaction Survey in 2003 reported satisfaction levels higher than those reported in 2002 for all aspects of mobile phone services.

"However, many aspects of mobile services in general, including overall technical quality and network coverage, rated low to very low on satisfaction indicators. These offer some pointers for improvement," he said.

Dr Horton said the ACA found mixed performance among the major carriers in installing new fixed telephone services and repairing faults during the year.

"For 2002-03, the ACA's monitoring approach focused on areas of carrier performance that could lead to consumers experiencing lengthy delays in service repair and connection. We also looked specifically at the reliability of Telstra's network," he said.

New network performance measures introduced in January 2002-03 included the Network Reliability Framework (NRF)-a three-tier compliance and reporting framework that aims to improve the reliability of Telstra's telephone services by focusing on customers experiencing continuing problems with service reliability.

"The NRF provides a more detailed view of the extent of variations in performance in Telstra's network," he said. "Over time, it will provide better consumer information on the extent of geographic and seasonal variations and of the common causes of faults."

Dr Horton said new service connection performance by the major carriers against the Customer Service Guarantee (CSG) standard time limits remained high against an overall reduction in new connections during the year.

"In terms of achieving standard time limits, Telstra's CSG performance was 92 per cent or above for new connections across urban, major and minor rural and remote areas," he said.

"On the Optus urban network, new connection performance varied by quarter, and historically ranged between 88 and 97 per cent since the September 2000 quarter.

"Among the other providers, new connection performance was high at 99 per cent for Primus and 98 per cent for TransACT."

Dr Horton said that nationally, the number of faults reported on the Telstra and Optus networks had increased during 2002-03 compared with the previous year.

Optus had reported a 10.5 per cent increase in the total number of CSG fault rectifications to 221,056 while Telstra reported a 1.2 per cent increase to 813,300.

"Compared with the previous year, Telstra's 2002-03 performance in fault rectification fell by 1 per cent across each geographic area to 86 per cent in urban areas, 93 per cent in rural areas and 94 per cent remote areas," Dr Horton said.

"The ACA was particularly concerned about the declining trend in Telstra's performance in fixing faults in urban areas in 2002-03 and asked the carrier to develop strategies aimed at achieving results of 90 per cent or better.

"At the same time, Optus' performance fell from 92 per cent in the September quarter to 87 per cent in the June quarter. We have asked Optus to advise us on the reasons for this significant decline in performance."

Dr Horton added that respondents to the ACA's Consumer Satisfaction Survey reported very high levels of satisfaction with the overall reliability of their fixed phone service.

"However, consumers who had recently reported a fault recorded very low levels of satisfaction with all aspects of the fault repair. This was despite a three percentage point improvement in overall satisfaction levels for fault repair compared with 2002," he said.

Other highlights of the report include:

• The number of Internet subscribers in Australia exceeded five million for the first time.
• The number of broadband Internet services across Australia more than doubled during the year, bringing the number of broadband Internet services to more than 500,000.
• Twenty new carriers obtained licences while seven carriers surrendered their licences during the year. At 30 June 2003, there were 94 licensed carriers.

The ACA's Telecommunications Performance Report 2002-03 was tabled in Parliament today by the Minister for Communications, Information Technology and the Arts, the Hon. Daryl Williams AM QC MP.

The Australian Communications Authority is a government regulator of telecommunications and radiocommunications

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