Report: Full Competition Leads to Almost 50% Drop in Average Mobile Voice Price

Full competition in the telecom industry has resulted in almost 50 per cent drop in average mobile voice price, a report released on Friday said.

However, in the fixed market, although there are significant price declines in areas where there is good competition, basic access price such as that of fixed line rental actually registered a 68 per cent increase in prices in real terms from 1998 to 2010, the report by independent telecom analyst Ovum said.

The report was released on the eve of 20 years anniversary of Optus Communications (ASX: SGT) being awarded by then Communications Minister Kim Beazley second full service telecom carrier package which opened competition in the industry.

When Optus was awarded the license for $800 million, the two government-owned telcos that dominated the domestic market, Telecom Australia, and the international market, Overseas Telecommunications Corporation, were merged into Telstra.

To mark the occasion, Optus commissioned Ovum Research to conduct a study on the impact of two decades of competition in Australia's telecom industry.

"The last 20 years can be categorised as a tale of two markets: a mobile market, where lower barriers to entry have led to a level playing field and a fixed market where the legacy of a vertically integrated incumbent has slowed the growth of competition," wrote Ovum Research Director David Kennedy.

"Lower prices were not the only benefit of a competitive telecoms market. Innovation, investment and better customer service were also the products of competition. The industry has produced sustained investment over the last twenty years while innovation in new products and pricing, such as the introduction of mobile cap plans in 1994, has delivered huge consumer benefits," Mr Kennedy said.

He added the industry has shifted from providing to becoming the platform for innovation, citing the rollout of the National Broadband Network (NBN) which would even usher in a new phase of competition that will provide new benefits to Australians.

However, for a the playing field to be truly level, Mr Kennedy said perpetual vigilance is needed, which also requires that NBN be transparent and be subject to continued regulatory oversight.

Over the past 20 years, Optus ownership structure has change after BellSouth sold its shares to Cable & Wireless in 1996. In 2000, the company was listed in the ASX although C & W retained the majority stake. In 2001, Optus became a wholly-owned subsidiary of SingTel which was successful in its takeover bid.