The Telecom Engineering Association of Australia has warned against the introduction of mandatory pre-paid mobile data plans, saying it could create an uneven playing field for smaller carriers.
A proposal to force pre-pay mobile data customers to buy their mobile data plan from the carriers is likely to be approved by the Federal Communications Commission (FCC) this month.
The telco group’s annual report says it expects the plan to be introduced by the end of the year, adding that carriers such as Telstra, Optus, Wind and Essar are already “experimenting with pre-payment mobile data products”.
“The introduction of pre-paying mobile data services will result in a lower cost per megabyte for subscribers, but they will also have an uneven impact on small and medium-sized mobile networks,” the report says.
“This is because mobile data will often be bundled with a large amount of data services that are not normally bundled with the mobile data.
This means that the average mobile network will have a lower share of data consumption for its customers, which in turn will result not in higher speeds but lower network capacity.”
The group also says mandatory pre pay mobile data packages will create a “massive” disadvantage for smaller companies.
FCC chairman Tom Wheeler has already said he will vote against the proposal, warning that it would create a level playing field and hurt the competitive position of larger players.
Wheeler’s comments came after the Federal Government’s Communications Minister Mitch Truss said the Federal Circuit Court was considering whether pre-packaged mobile data was “inherently anticompetitive”.
However, the Federal Court has not yet ruled on whether mandatory pre packaged mobile services are anticompanying.
Advocates for smaller telcos have criticised the proposal as unnecessary and could hurt small telcos.
Telecom companies have been forced to expand their networks and upgrade equipment as a result of the cost of implementing mandatory pre paid mobile data, which the regulator calls “faultless”.
Telstra and Optus have been among the most vocal in opposing the move, with Telstra describing it as “unnecessary” and “anti-competitive”.
In its submission to the FCC, the Telecom Engineering Assocation (TEA) also notes that mandatory pre purchase of mobile data is not mandatory for the majority of smaller telco customers.
However they argue that this is “exactly the kind of unfair advantage small operators will experience when they choose to bundle their mobile phone data services with other services, such as text messaging, video streaming and web browsing, which may not normally be bundled into the basic data package.”
“This will create an unfair advantage for small and mid-sized operators that would harm competition,” the TEA says.
“It will also hurt small and large operators that are already experimenting with pre paid data products.”
Telecommunications industry analyst David Loparco has warned that a mandatory pre charge would have a “disastrous” impact on competition.
“This means a large percentage of small telco networks will have to be replaced, reducing competition and hampering innovation in the industry,” he said.
Mr Lopard said mandatory pre payment of mobile services was “extremely disruptive” to the mobile phone industry, and argued that the industry needed to get “bigger, smarter and cheaper”.
“The industry needs to build up a competitive advantage over incumbent players, such that they no longer have to compete in the wholesale market,” Mr Lopars said.
“For smaller operators, they have no choice but to either expand or merge with existing players to increase their market share.”
Mr Lopparco also argued that mandatory post-paid data services were not a panacea, because they would result in the loss of valuable network capacity and could affect “competitive market share”.
Federated Optus and Telstra also oppose mandatory pre purchased mobile data and have said that it is “unconscionable” to require customers to purchase their data packages, saying they could be used to “bundle data across different networks”.
The Federal Communications Commissioner’s office has also said that the proposed plan would not provide “a clear benefit” for small mobile operators and would “likely adversely affect competition”.
Teleco industry analyst Tim Karr said the FCC’s proposal was likely to “seriously harm competition in the mobile telephony sector”.
“Small and medium size operators will be able to choose from fewer competitors and more competitors will be unable to offer competitive products,” Mr Karr told the ABC.
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