Telstra's Market Dominance in Australia

This assignment examines the telecommunication market in Australia, focusing on Telstra's significant market power and its implications. The report discusses Telstra's symbiotic relationship with the National Broadband Network (NBN), arguing that their combined structure creates a cartel-like situation that limits competition. It further analyzes how this dominance affects equity and efficiency, highlighting customer dissatisfaction due to quality concerns and service issues. The assignment concludes by illustrating the trade-off between affordability and quality faced by consumers in Australia's telecommunication market.

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction:....................................................................................................................................2
Telecommunication Market: Australia:...........................................................................................2
Issues in the telecommunication market of Australia:.....................................................................4
Conclusion:......................................................................................................................................6
References........................................................................................................................................7

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Introduction:
With progressing economy and innovations in technology and production, newer sectors
are gaining more and more importance in the globalized market. One of the primary developing
sectors in the current business world is the telecommunication sector. The sector deals with
transmission of vocal, verbal or word messages across the globe and with time, the sector has
seen massive dynamics with innovations in the concerned technologies (Bigliardi, Ivo Dormio
and Galati 2012). Nowadays, this sector has gained utmost importance, with businesses going
global, as most of the commercial activities are done through this medium. The report discusses
the telecommunication sector in Australia, its current dynamics, players and the issues faced by
the players as well as the clientele, as is evident from the survey conducted by the Australian
Competition and Consumer Commission (ACCC). From economic perspective, these issues are
tried to be analyzed and explained in this report (Accc.gov.au, 2017).
Telecommunication Market: Australia:
The telecommunication market in Australia is one of the most significant revenue
generating market, which has seen consistent rise in the number of consumers over the years.
The need for the development of this sector has been constantly increasing due to the economic
boom and business prospect that the country is showing. The main products of this market are
landline service, broadband internet and mobile and data services, the third product seeing
significant increase in the demand with time, the demand for the former two remaining
significantly high (Makwana, Sharma and Arora 2014).

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The market in the country has a big player along with several medium and small ones,
thereby giving a distorted semi-monopolistic structure to the concerned market. The big player
being Telstra and the other players being Optus, TPG, iiNet and others, the market, though
seeing a recent hike in the level of prices, the demand is also showing a continual upward trend.
The market shares of the different players in Australia, on the producer side can be shown as
follows:
Table 1: Market shares for fixed line broadband:
Provider Share of market (%)
Telstra 41
iiNet 15
Optus 14
TPG 12
Others 18
(Source: Communications.gov.au, 2017)

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Table 2: Market shares for mobile services:
Provider Share of market (%)
Telstra 45
Vodafone 18
Optus 27
Others 10
(Source: Communications.gov.au, 2017)
Form the above tables, it is evident that Telstra enjoys a huge market share, both in
landline services as well as mobile services and the company enjoys almost monopolistic kind of
market power, with the other service providers enjoying much lower shares in the
telecommunication market of the country. With much of the market share in the hands of a single
service providers, the market shows a semi-monopolistic structure, with the economic issues of
trade off between equity and efficiency cropping up in the market. This is discussed in details in
the following sections of the report, with the help of the study findings of the ACCC (Alizadeh
2015).
Issues in the telecommunication market of Australia:
As shown in the above discussions, the market structure of this sector in Australia is not
that of a perfectly competitive type, which in its turn leads to several distortions and unequal

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distribution of facilities and advantages, both on the producer side and the consumer side, in this
market. The issues, as can be derived from the study findings are as follows:
 The primary player in this market, Telstra, has been in the scenario for quite a long time and
has and is still enjoying significant favors and subsidies from the Australian government.
Over the years, the company has received huge subsidies in the form of the National
Broadband Network Company Agreement or the Obligation of Universal Services, which
were basically given to the company in order to ensure equitable as well as superior quality
distribution of their services at affordable prices, to people across the country and of different
income strata. However, the company has used these subsidies for fulfillment of their vested
interest and has achieved significant share of the market overtime (Crouch and Davies 2013).
 The customer complaints and submissions, as were received by the ACCC, puts forward the
efficiency issue of the NBN services. The main issue as has been put forward by them is the
issue of inequitable distribution of the services across the country, especially between the
urban and more developed regions and the rural and the remote regions. The rural sector
customers of the NBN plan, though pay the same amount for availing the service as paid by
the urban ones (Crouch and Davies 2013). However, they complain about the distinctively
slower speed they receive as compared to their urban counterparts, along with other problems
like that of outdate d materials usage, using of fiber in some places and mixed technologies in
other places. These problems have created lack of confidence among the rural customer, who,
with the progress in the economy and the change in the business modes, are willing to adapt to
the new age technologies. The customers are also not happy in terms of the quality of services
and follow-ups in case of complaints (Alizadeh 2013).

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 The organizational structure of the NBN and that of Telstra, is also expected to contribute to
the issues of market distortions as together they portray a cartel like structure. The symbiotic,
profit – maximizing mode of operations of this collusion has in one way ruled out the
potential competitions as the monopoly they enjoy due to the presence of increasing returns to
scale, cannot be challenged by other players in the market. Many of the potential competitors,
though are providing superior services, cannot compete with Telstra, in terms of prices as the
latter already has a cost advantage (Patel 2017).
The issues, as discussed above, show the trade-off between the equity and efficiency in
the market. Due to the lack of quality and customer satisfaction, Telstra is seeing a loss in
their clientele as many of the loyal customers shifting to other service providers.
Conclusion:
The report shows the conflict between equity and efficiency that arises in the
telecommunication market of Australia, due to the presence of unequal distribution of market
power among one government aided and privileged service providing giant and a few smaller
competitors. The reluctant nature of the former and the discrimination in the quality of service
provided by the company has given rise to huge dissatisfaction on part of the customers, many of
whom are shifting to other service providers, choosing quality over affordability due to the
necessary nature of the service discussed about in the report.

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References
Accc.gov.au (2017). Communications sector market study. [online] Australian Competition and
Consumer Commission. Available at:
https://www.accc.gov.au/about-us/market-studies/communications-sector-market-study
[Accessed 2 Sep. 2017].
Alizadeh, T., 2013. Towards the socio-economic patterns of the national broadband network
rollout in Australia. State of Australian Cities, Sydney. Accessed December, 31.
Alizadeh, T., 2015. The spatial justice implications of telecommunication infrastructure: The
socio-economic status of early National Broadband Network rollout in Australia. International
Journal of Critical Infrastructures, 11(3), pp.278-296.
Bigliardi, B., Ivo Dormio, A. and Galati, F., 2012. The adoption of open innovation within the
telecommunication industry. European Journal of Innovation Management, 15(1), pp.27-54.
Communications.gov.au (2017). [online] Available at:
https://www.communications.gov.au/sites/g/files/net301/f/Vodafone%20-%20Attachment
%20E.pdf [Accessed 2 Sep. 2017].
Crouch, A. and Davies, S., 2013. A coordinated satellite and terrestrial microwave backhaul for
cellular mobile in remote and regional Australia. Australian Journal of Telecommunications and
the Digital Economy, 1(1), p.2.

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Makwana, K., Sharma, N. and Arora, S., 2014. Factors influencing consumer brand switching
behavior in telecommunication industry: An empirical study. Prestige eJ. Management and
Res, 1(1), pp.1-10.
Patel, A., 2017. Equity and Efficiency. In Mental Health Economics (pp. 155-161). Springer,
Cham.