Telstra CEO urges regulatory level playing field for telcos, OTT services

Telstra CEO Andrew Penn

‘Over the top’ services such as WhatsApp provide many of the same services as telecommunications providers and broadcasters but are not subject to the same regulatory frameworks, Telstra chief executive Andy Penn today told the CommsDay Summit in Sydney.

The CEO of Australia’s largest telco called for “policy that provides for the same regulations for the same service regardless of the origins and industry of the provider.”

“I do not envy policy makers and regulators here,” Penn said. “Setting and changing legislation and regulations is a complex and slow process. But the problem is technology is moving fast and the reality is sometimes our regulatory environment can struggle to keep pace.”

“Many of us here hold telecommunications carrier licences or are broadcasters,” Penn told the conference. “Our licences impose significant obligations and liabilities on us. If we do not meet those obligations there are serious penalties.”

Many of the services provided by telcos are “mirrored in the OTT world”, the CEO said. However “services such as Viber or WhatsApp do not have universal services or terminating obligations.”

Penn noted the decision of Telstra (as well as Vodafone and Optus) to block access to a number of sites that hosted footage of the Christchurch terror attack.

“My layman’s view is that broadcasting is broadcasting and the rules and norms that apply around content must be consistent regardless of the platform from which the content is broadcast,” the CEO said. “There is no reason why social platforms should be in a different category so I applaud the government for recognising that.”

Last week the government rushed through parliament new legislation compelling social media platforms to remove “abhorrent violent material” from their services in an “expeditious” manner.

Telco profits

Penn used his speech to call for “pro investment” policy settings for the telco sector. Telco networks require “an incredible amount of capital investment,” but “returns in the industry on that capex are reducing,” Penn said.

“This is unsustainable, as ultimately it will hurt investment capacity within the industry and lead to a degradation in the quality of networks.”

Telstra’s profits have been battered by changes in the industry, particularly the NBN rollout. Penn in late 2017 said that Telstra estimated the NBN rollout would have a $3 billion negative impact on EBITDA. Telstra’s chairperson has estimated that the NBN will cut the telco’s net profit after tax by “close to half” when the new network is completed and described the process as effectively a renationalisation of Australia’s fixed-line infrastructure.

A key concept underpinning the Australian Competition and Consumer Commission’s oversight of the telco sector is the long-term interests of end users (LTIE).

“It is appropriate for regulators to look at the profitability of the telecommunications sector and ask whether customers are getting a good deal, but it has to be done through the lens of the amount of capital invested,” Penn said in his remarks prepared for the CommsDay event.

“Competition is already intense in our industry as evidenced by falling ARPUs [average revenue per user] in both fixed and mobile and the increasing value of data and other inclusions for customers. Competition is good for industry, but it would be incorrect to conclude that there is insufficient competition in Australia today.”

Telstra believes there should be a level playing field for all telecommunications technologies, Penn said.

“When we look at the volume of data we need to provide for in the future and the demographic and topographic challenges Australia presents for telecommunications infrastructure, there is no one technology solution,” Penn said.

The CEO noted his past criticism of NBN wholesale pricing levels.

“Everyone here has heard my comments on NBN wholesale pricing so I am not going to repeat them again here today. But this is exactly the dynamic that that problem is creating - an unnatural bias to one technology over others as well as a disincentive to invest,” he said.

Penn also used his speech to defend the Universal Service Obligation (USO) scheme, which is delivered by Telstra under contract with the government.