Applications by Telstra Corporation Limited and TPG Telecom Limited (No 2)

[2023] ACompT 2

AUSTRALIAN COMPETITION TRIBUNAL

Applications by Telstra Corporation Limited and TPG Telecom Limited (No 2) [2023] ACompT 2

Review from:

Applications by Telstra Corporation Limited and TPG Telecom Limited for review of Australian Competition and Consumer Commission Merger Authorisation Determination MA1000021

File numbers:

ACT 1 of 2022

Determination of:

Justice O’Bryan (President)
Dr J Walker (Member)
Ms D Eilert (Member)

Date of determination:

21 June 2023

Catchwords:

COMPETITION – applications under s 101 of the Competition and Consumer Act2010 (Cth) (CCA) for review of merger authorisation determination made by the Australian Competition and Consumer Commission (ACCC) – network sharing arrangement entered into between Telstra Corporation Limited and TPG Telecom Limited in respect of regional areas of Australia – conduct sought to be authorised comprised one element of the network sharing arrangement, being Telstra’s use of TPG’s spectrum licences in regional areas – where authorised use of spectrum licences is deemed to be an acquisition of an asset for the purposes of s 50 of the CCA – where ACCC refused authorisation – review of the ACCC’s determination on the basis of the information, documents and evidence provided to the ACCC – whether Tribunal satisfied that Telstra’s use of TPG’s spectrum licences in regional areas would not be likely to have the effect of substantially lessening competition in the retail and wholesale markets for mobile telecommunications services – whether Tribunal satisfied that Telstra’s use of TPG’s spectrum licences in regional areas would be likely to result in benefits to the public that outweigh any detriments to the public likely to result from that use – in the alternative, whether Tribunal satisfied that the proposed network sharing arrangement as a whole would not be likely to have the effect of substantially lessening competition in the retail and wholesale markets for mobile telecommunications services – whether Tribunal satisfied that the proposed network sharing arrangement as whole would be likely to result in benefits to the public that outweigh any detriments to the public likely to result from that use - determination of the ACCC affirmed

STATUTORY INTERPRETATION – proper construction of the conditions for authorisation stated in s 90(7) of the CCA - the meaning and application of the “future with and without” test in the context of the authorisation conditions in s 90(7)

Legislation:

Competition and Consumer Act2010 (Cth), ss 4, 4G, 42, Pt IIIA, s 44CA, Pt IV, ss 45-47, 50, 50A, 87B, Pt VII, ss 88, 90, Pt IX, ss 101, 102, 109, 155, Pt XIC

Competition and Consumer Amendment (Competition Policy Review) Act 2017 (Cth)

Radiocommunications Act 1992 (Cth), ss 3, 60, 68, 68A

Radiocommunications Legislation Amendment (Reform and Modernisation) Act 2020 (Cth)

Telecommunications Act 1997 (Cth)

Cases cited:

Application by DBNGP (WA) Transmission Pty Ltd (No 3) [2012] ACompT 14

Application by Flexigroup Ltd (No 2) [2020] ACompT 2

Application by Medicines Australia Inc [2007] ACompT 4; ATPR 42-164

Application by New South Wales Minerals Council (No 3) [2021] ACompT 4; 361 FLR 24

Application by Port of Newcastle Operations Pty Limited (No 2) [2022] ACompT 1

Australian Competition and Consumer Commission v Australian Competition Tribunal (2017) 254 FCR 341

Australian Competition and Consumer Commission v BlueScope Steel Limited (No 5) [2022] FCA 1475

Australian Competition and Consumer Commission v Pacific National Pty Ltd (2020) 277 FCR 49

Australian Competition and Consumer Commission v Pacific National Pty Limited (No 2) [2019] FCA 669

Australian Competition and Consumer Commission v NSW Ports Operations Hold Co Pty Ltd [2021] FCA 720

Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd (1982) 64 FLR 238

McDonald v Director General of Social Security (1984) 1 FCR 354

Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259

Re Herald & Weekly Times Ltd (Media Council of Australia) (1978) 17 ALR 281

Re Howard Smith Industries Pty Ltd (1977) 28 FLR 385

Re Media Council of Australia (No 2) (1987) 88 FLR 1

Re Telstra Corporation Limited and TPG Telecom Limited [2023] ACompT 1

Re Qantas Airways Ltd [2004] ACompT 9; (2005) ATPR 42-065

Re Queensland Co-operative Milling Association Ltd (1976) 8 ALR 481

Re Queensland Independent Wholesalers Ltd (1995) 132 ALR 225

Re Rural Traders Cooperative (WA) Ltd (1979) 32 FLR 244

Re 7-Eleven Stores Pty Ltd[1998] ACompT 3; ATPR 41‑666

Re 7-Eleven Stores Pty Ltd [1994] ATPR 41-357

Stirling Harbour Services Pty Limited v Bunbury Port Authority [2000] FCA 38; ATPR 41-752

Stirling Harbour Services Pty Limited v Bunbury Port Authority [2000] FCA 1381; ATPR 41-783

Sun v Minister for Immigration (2016) 243 FCR 220

Universal Music Australia Pty Ltd v Australian Competition and Consumer Commission (2003) 131 FCR 529 

Number of paragraphs:

726

Date of hearing:

4, 5, 9, 10, 11 and 12 May 2023

Counsel for Telstra Corporation Limited:

R Higgins SC with P Strickland

Solicitors for Telstra Corporation Limited:

Gilbert + Tobin

Counsel for TPG Telecom Limited:

G Rich SC with R Yezerski and S Chordia

Solicitors for TPG Telecom Limited:

Corrs Chambers Westgarth

Counsel for Singtel Optus Pty Limited:

C Moore SC with B Lim and T Rogan

Solicitors for Singtel Optus Pty Limited:

Herbert Smith Freehills

Counsel for the Australian Competition and Consumer Commission:

M Hodge KC with D Roche, S Zeleznikow and M Salinger

Solicitors for the Australian Competition and Consumer Commission:

Australian Government Solicitor

IN THE AUSTRALIAN COMPETITION TRIBUNAL

File No:		ACT 1 of 2022
Re:	Applications by Telstra Corporation Limited and TPG Telecom Limited for review of Australian Competition and Consumer Commission Merger Authorisation Determination MA1000021
Applicants:	Telstra Corporation Limited and TPG Telecom Limited
Intervenor:	Singtel Optus Pty Limited

DETERMINATION

TRIBUNAL:

Justice O’Bryan (President)

Dr J Walker (Member)

Ms D Eilert (Member)

DATE:

21 June 2023

WHERE MADE:

Melbourne

THE TRIBUNAL DETERMINES AND DIRECTS THAT:

1.The determination of the Australian Competition and Consumer Commission (ACCC) dated 21 December 2022, dismissing the application for merger authorisation MA1000021, be affirmed.

2.Until further direction of the Tribunal, the reasons of the Tribunal in this proceeding dated today are not to be made available to or published to any person save for:

(a)the ACCC, its staff and any other person assisting the ACCC in relation to the proceeding including the ACCC's legal advisers; and

(b)the parties’ legal advisors who, by reason of previous directions of the Tribunal, are permitted to have access to the confidential information of each of the parties to the proceeding.

3.Within 21 days of the date hereof, the parties are to file jointly:

(a)a copy of these reasons that marks, by way of coloured shading (using a different colour for each party), those parts of the reasons that a party seeks to have redacted on the grounds of commercial confidentiality; and

(b)short submissions addressing the basis for the claim of confidentiality on behalf of each party.

REASONS FOR DETERMINATION

A.       INTRODUCTION	[1]
The application for authorisation	[1]
The commercial and economic context of the Proposed Transaction	[7]
The ACCC determination	[16]
The application for review	[19]
The Tribunal’s determination	[33]
B.       THE PROPOSED TRANSACTION, THE APPLICATION FOR AUTHORISATION AND THE PROPOSED UNDERTAKINGS	[36]
The Proposed Transaction	[36]
MOCN Service Agreement	[39]
Spectrum Authorisation Agreement	[52]
Mobile Site Transition Agreement	[61]
The application for authorisation	[66]
Proposed undertakings	[80]
The joint undertaking	[82]
The TPG undertaking	[87]
C.       STATUTORY FRAMEWORK FOR THE TRIBUNAL’S REVIEW	[89]
Introduction	[89]
Power to grant authorisation	[93]
The review of the ACCC’s determination	[106]
Statutory preconditions for authorisation	[111]
Section 90(7)(a) – the competition test	[111]
Section 90(7)(b) – the net public benefit test	[120]
Exercise of discretion	[127]
The conduct the subject of the authorisation	[130]
Overview	[130]
Submissions of the applicants and the ACCC	[135]
Submissions of Optus	[143]
Consideration	[144]
The relevant time horizon	[160]
D.       CONTENTIONS OF THE PARTIES	[163]
The applicants’ contentions	[163]
The future without the Proposed Transaction – likely counterfactuals	[166]
Competitive effects of the Proposed Transaction	[173]
Relevant markets	[173]
Increased competition in the national retail market	[175]
Increased competition in the national wholesale market	[180]
No competitive detriments	[182]
Incentives to invest in infrastructure	[187]
Coordinated effects	[191]
Effects on secondary or sub-markets	[192]
Competitive effects of the Proposed Conduct	[193]
Net public benefit	[199]
Joint undertaking and TPG undertaking	[205]
Optus’s contentions	[206]
The future without the Proposed Transaction – likely counterfactuals	[207]
Competitive effects of the Proposed Conduct/Proposed Transaction	[213]
Relevant markets	[213]
Effects in national markets for wholesale and retail supply of mobile services	[215]
Effects in other relevant markets	[227]
Net public benefit	[228]
Joint undertaking and TPG undertaking	[231]
The ACCC’s contentions	[233]
E.       FACTUAL BACKGROUND TO THE ASSESSMENT	[237]
Methodology	[237]
Industry background	[239]
Mobile networks	[240]
Mobile network operators	[245]
Telstra	[245]
TPG	[250]
Optus	[253]
Smaller regional MNOs	[257]
Mobile virtual network operators	[260]
Spectrum	[262]
Different characteristics and uses of spectrum bands	[265]
Acquisition of spectrum	[267]
Mobile network capacity	[280]
Mobile technologies	[283]
Backhaul networks	[289]
Infrastructure sharing	[294]
Mobile broadband and fixed wireless	[304]
Enterprise and government	[306]
Nature and extent of competition between the national MNOs	[307]
Relevant markets	[307]
Market shares of the MNOs and the rate of churn	[316]
Barriers to entry and expansion in mobile telecommunications markets	[335]
Capital intensity and economies of scale	[337]
Scarcity of spectrum	[344]
Brand perception	[345]
First-mover advantage in the technology cycle	[355]
The geographic coverage of the MNOs’ mobile networks	[360]
The spectrum capacity held by each MNO	[380]
Current spectrum holdings	[381]
MNOs use of spectrum	[388]
Future spectrum auctions	[394]
Network capacity of each MNO in the RCZ	[399]
Methodologies to measure network capacity	[402]
Measurement of network capacity in the RCZ	[408]
Price competition	[417]
The technology cycle – competition to provide 5G services	[424]
Commercial and regulatory impediments to expanding network coverage and capacity in the RCZ	[439]
Overview	[439]
The TSSR guidance	[445]
Optus’s history of network investment	[452]
TPG’s history of network investment	[468]
F.        COMPETITION IN THE FUTURE WITHOUT THE PROPOSED CONDUCT/PROPOSED TRANSACTION	[480]
Overview	[480]
Telstra as an independent competitor	[484]
Optus as an independent competitor	[489]
TPG as an independent competitor	[493]
Wholesale mobile services including infrastructure services	[503]
Network sharing between Telstra and TPG in another form	[510]
Network sharing between Optus and TPG	[527]
Overall assessment	[540]
G.       THE EFFECTS, BENEFITS AND DETRIMENTS OF THE PROPOSED CONDUCT/PROPOSED TRANSACTION	[542]
Overview	[542]
Telstra	[543]
Increased network utilisation	[549]
Benefits of additional spectrum	[552]
Avoiding regulation under Pt XIC of the CCA	[564]
Telstra’s pricing incentives	[566]
TPG	[572]
Increased network coverage	[575]
Access to a 5G network	[579]
Control of core network	[582]
Non-discrimination	[583]
Seamless handover	[585]
Monetise TPG’s spectrum holdings	[587]
Non-exclusivity	[589]
Exit arrangements	[591]
Optus	[594]
Optus’s modelling of the financial impact of the Proposed Transaction	[596]
Reliability of Optus’s modelling	[608]
Regulatory advocacy	[608]
Dr Padilla’s model	[612]
TPG’s submissions	[619]
The competitive pressures facing Optus if the Proposed Transaction proceeds	[627]
Singtel’s assessment of the effects of the Proposed Transaction on Optus	[634]
The Tribunal’s overall assessment of Optus’s evidence	[637]
Market impacts	[640]
Quantification of public benefits and detriments of the Proposed Transaction	[645]
H.       THE TRIBUNAL’S ASSESSMENT OF COMPETITIVE EFFECTS	[658]
The competition test for the grant of authorisation	[658]
Would the Proposed Conduct be likely to have the effect of substantially lessening competition?	[662]
Would the Proposed Transaction be likely to have the effect of substantially lessening competition?	[675]
I.         THE TRIBUNAL’S ASSESSMENT OF PUBLIC BENEFITS AND DETRIMENTS	[695]
The net public benefit test for the grant of authorisation	[695]
Would the Proposed Conduct be likely to result in a net public benefit?	[698]
Would the Proposed Transaction be likely to result in a net public benefit?	[704]
J.        THE PROPOSED UNDERTAKINGS	[709]
Interdependence of the Proposed Transaction agreements	[710]
Further authorisation in 8 years	[714]
Maintaining licences for TPG’s mobile sites	[717]
K.       DETERMINATION	[719]

THE TRIBUNAL:

A.       INTRODUCTION

The application for authorisation

1. On 23 May 2022, Telstra Corporation Limited (Telstra) and TPG Telecom Limited (TPG) lodged an application with the Australian Competition and Consumer Commission (ACCC) seeking authorisation under s 88(1) of the Competition and Consumer Act2010 (Cth) (CCA) for Telstra to operate radiocommunications devices under TPG’s spectrum licences pursuant to the terms of an agreement entered into between them dated 17 February 2022 and titled Spectrum Authorisation Agreement – MOCN Area (Spectrum Authorisation Agreement). It is implicit in the application that the authorisation that is sought is unlimited in time, save that it will apply for the duration of the Spectrum Authorisation Agreement.

2. The application for authorisation discloses that the Spectrum Authorisation Agreement is one of three agreements entered into between Telstra and TPG as part of the one commercial transaction (referred to by Telstra and TPG as the Proposed Transaction), which seeks to establish a Multi-Operator Core Network (MOCN) in certain regional and urban fringe areas which comprise around 17% of the Australian population coverage (in the 81.4%-98.8% population coverage area) (Regional Coverage Zone or RCZ). The other two agreements are the MOCN Service Agreement dated 17 February 2022 (MOCN Service Agreement) and the Mobile Site Transition Agreement dated 17 February 2022 (Mobile Site Transition Agreement). The application is clear, however, and Telstra and TPG have acknowledged in this proceeding, that the application for authorisation is confined to conduct comprising Telstra’s use of TPG’s spectrum licences pursuant to the Spectrum Authorisation Agreement (which in these reasons will be referred to as the Proposed Conduct).

3. Under the MOCN Service Agreement, Telstra agrees to use its radio access network to supply TPG with 4G and 5G services in the RCZ. This will deliver TPG an immediate uplift in mobile network coverage, increasing from 96% to 98.8% of the population. Under the Mobile Site Transition Agreement, TPG will authorise Telstra to access, use and occupy space at 169 mobile sites in the RCZ owned or licensed by TPG to enable Telstra to install mobile telecommunications equipment in place of TPG. TPG plans to decommission its remaining 580 mobile sites in the RCZ. Under the Spectrum Authorisation Agreement, TPG will authorise Telstra to operate radiocommunications devices utilising part of TPG’s 4G and 5G spectrum within the RCZ and beyond this zone for the purposes of its radio access network.

4. The overall effect of the Proposed Transaction in the RCZ is that Telstra will augment its radio access network with TPG’s spectrum rights and mobile sites, and will operate the augmented radio access network to supply its own mobile network and to supply services to TPG in the RCZ pursuant to the MOCN Service Agreement. Telstra will also augment its mobile network in the population coverage area beyond the RCZ with TPG’s spectrum rights. Each of Telstra and TPG will continue to operate their own core networks, giving them the ability to differentiate their services on features such as pricing, data and inclusions, and software enabled services.

5. Although Telstra and TPG have applied for authorisation only in respect of Telstra’s use of TPG’s spectrum under the Spectrum Authorisation Agreement, before the ACCC and on this review the applicants have based their application on the likely competitive effects of, and the public benefits and detriments likely to result from, the Proposed Transaction as a whole.

6. The application for authorisation is opposed by Singtel Optus Pty Ltd (Optus) on the basis that the Proposed Conduct, and the Proposed Transaction as a whole, would be likely to substantially lessen competition in the Australian market for mobile telecommunications services and related markets, principally by increasing Telstra’s market power and damaging Optus’s competitive position in those markets, and that any resulting public benefits would not outweigh the anti-competitive detriment.

   The commercial and economic context of the Proposed Transaction

7. The Australian market for mobile telecommunications services is presently served by three principal mobile network operators (MNOs): Telstra, Optus and TPG. The MNOs are vertically integrated. They compete at both the retail and wholesale level, with their retail brands competing for consumer and small business customers, and their wholesale arms competing in the provision of wholesale services to resellers of mobile phone services, referred to as mobile virtual network operators (MVNOs), and other telecommunications providers. Since the introduction of competition in mobile telecommunications, the relative positions of the three MNOs has been relatively stable. Historically, Telstra has had the greatest share of retail services, followed by Optus and finally TPG.

8. There are high barriers to entry and expansion in the provision of mobile services. As a result of these barriers, the prospect of new entry, other than by niche providers, is low. The barriers to entry and expansion include: large up-front sunk capital investment; significant economies of scale (including because mobile services involve high fixed costs and low variable costs); scarcity of spectrum (spectrum being an essential input into mobile telecommunications); brand perception (as customer perceptions of network quality and reliability are a key driver of consumer decisions regarding mobile services and these perceptions can be difficult to shift); and first-mover advantages associated with the technology cycle (as changes in market share due to early advantages in technology lifecycles have the potential to endure through the lifecycle of a technology).

1. The three MNOs are currently operating networks that include three generations of mobile technology: 3G, 4G, and 5G. Each subsequent technology generation has brought increased bandwidth and speeds and improved the capabilities of the network. 5G is the newest technology generation to be deployed, and all three MNOs are rolling out their 5G networks currently. 5G technology makes more efficient use of spectrum, delivers faster speeds and provides better reliability and lower latency as compared to 4G technology. MNOs are incentivised to upgrade their networks in order to make use of this more efficient technology and meet evolving consumer needs, but doing so requires large up-front investments. MNOs must also balance repurposing (“re-farming”) their spectrum holdings for newer technology while continuing to operate the older technology simultaneously.

2. The availability of 5G technology is an increasingly critical focus of competition in the supply of mobile telecommunications services. All three MNOs are competing in the supply of retail mobile services on the basis of 5G availability, coverage and speeds and the capabilities enabled by 5G. The provision of 5G is also a basis on which MNOs compete to acquire wholesale customers.

3. Australia’s geography is characterised by a very sparse population density on average, paired with a very urbanised population centred in the capital cities and surrounding major regional centres. Mobile networks therefore need only cover a very small proportion of the total landmass in order to provide mobile coverage to the homes and workplaces of a majority of the population. However, the implication of this degree of urbanisation for mobile coverage is that covering the remainder of the population becomes decreasingly economic, and increasingly uneconomic, as network coverage expands into more remote and less densely populated areas. While providing mobile services in more remote and less densely populated areas is less economic, consumers value mobile coverage in the areas in which they live, work and travel. The extent of geographic coverage is a key component in the attractiveness of mobile services to consumers and to government and enterprise customers.

4. Since the inception of mobile technology in Australia, regional and rural investment has been considered by MNOs to be a challenge, and often not commercially viable. The history of regional mobile telecommunications investment shows that two of the primary ways in which MNOs have sought to make regional investment commercially viable is by obtaining government assistance, and by entering into agreements with their competitors to share network infrastructure.

5. Infrastructure sharing in mobile networks can be broadly classified as either ‘active’ sharing or ‘passive’ sharing. Passive infrastructure sharing may involve the sharing of non-electronic infrastructure such as cell sites, towers and buildings, but does not include the sharing of electronic equipment capable of processing or converting telecommunications signals such as radio equipment, or the sharing of spectrum (which is described as active sharing). Active infrastructure sharing may take a number of forms. One model of active sharing is called ‘roaming’. Roaming involves a host MNO carrying the traffic of another MNO on its behalf. The client MNO is not required to deploy any infrastructure in the relevant area. Other models of active infrastructure sharing are MOCN and multi-operator radio access network (MORAN) arrangements. Both models involve multiple MNO parties sharing active assets in certain coverage areas of their networks. Typical MORAN deployments include the sharing of active base stations, but not spectrum. MOCN deployments typically include the sharing of active base stations, as well as spectrum shared and owned by the operators.

6. TPG’s mobile business has historically been supported by network sharing arrangements with Optus. Optus and TPG have had a joint venture agreement in place since 2004 which they refer to as the eJV. The eJV provides for [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], and Optus provides 3G roaming to TPG in the 80-96% population coverage area. [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED].

7. During 2021 and 2022, TPG engaged in negotiations with each of Optus and Telstra with respect to new network sharing arrangements in respect of the RCZ. Those negotiations culminated in the Proposed Transaction between TPG and Telstra.

   The ACCC determination

8. On 21 December 2022, the ACCC made a determination dismissing the application for authorisation from Telstra and TPG. In its determination, the ACCC concluded:

   The ACCC is not satisfied, in all the circumstances, that the Proposed Transaction would not be likely to substantially lessen competition, or would be likely to result in a benefit to the public that would outweigh the public detriment from the Proposed Transaction. Therefore, the ACCC must not make a determination granting authorisation to the Proposed Transaction under section 88(1) of the CCA.

9. It can be seen that the ACCC reached its conclusion based on the likely competitive effects of, and the public benefits and public detriments likely to result from, the Proposed Transaction as a whole rather than those resulting from the Proposed Conduct (the conduct for which authorisation was sought). The correctness of that approach to the application as a matter of law is a disputed issue in the proceeding.

10. The ACCC’s reasons for determination record that it received a large number of submissions from interested persons, including over 90 submissions in response to the ACCC’s initial consultation process and submissions from 44 interested persons in response to the ACCC's Statement of Preliminary Views.[1] The categories of interested persons who made submissions, or with whom the ACCC consulted, included TPG (Vodafone) and Optus dealers, MVNOs and neutral host providers (mobile network infrastructure operators that provide access to infrastructure on commercial terms), NBN Co, mobile customers, local governments and industry and community organisations.[2] The ACCC summarised the submissions received as follows:[3]

    Overview of submissions

    3.30. The views expressed in submissions to the ACCC were mixed. Some interested parties, including Optus, Optus dealers, MVNOs, industry bodies (such as Commpete, the Australian Communications Consumer Action Network, the Internet Association of Australia, and the NSW Farmers Association), investors in digital infrastructure, rural, regional and remote telco providers, and telecommunications consultants expressed concern over the Proposed Transaction.

    3.31. Interested parties opposing the authorisation generally submit that the Proposed Transaction will have long-term adverse consequences for competition in the Australian telecommunications markets, noting effects on prices (particularly, an expectation that TPG will increase its prices), future investment incentives, and on the ability for smaller players and neutral hosts to enter the market. Concerns were also raised about Telstra's already dominant position and the effects of spectrum concentration, reduction to wholesale competition, and MNOs being disincentivised from investing in infrastructure.

    3.32. Other interested parties such as, customers, TPG/Vodafone dealers, MVNOs, local governments, regional councils, organisations in support of regional businesses and residents, and industry bodies are generally supportive of the Proposed Transaction, believing it would be pro-competitive. These interested parties generally submit that the Proposed Transaction would increase customer choice for regional consumers, provide network improvements and ensure more efficient utilisation of infrastructure.

    3.33. Some interested parties suggested that the ACCC could impose conditions of authorisation in order to address their concerns, ranging from imposing an obligation on Telstra to provide high quality wholesale access to any party which requires it, to declaring domestic roaming access in regional Australia, to allowing third parties to use the TPG tower sites that would be decommissioned, to requiring divestment of certain parcels of low-band spectrum to offset increased concentration. 

    [1] ACCC Reasons for Determination dated 21 December 2022 at [3.6].

    [2] ACCC Reasons for Determination dated 21 December 2022 at [3.11]-[3.24].

    [3] ACCC Reasons for Determination dated 21 December 2022 at [3.30]-[3.33] (citations omitted).

    The application for review

11. On 23 December 2022, each of Telstra and TPG (collectively, the applicants) filed applications in the Tribunal pursuant to s 101 of the CCA for a review of the ACCC’s determination. On 24 January 2023, the Tribunal made directions for the two applications to be determined together. There is no reasons to distinguish between the applications and, in these reasons, the two applications will be referred to as the “application”. The Tribunal also made a direction pursuant to s 109(2) permitting Optus to intervene in this proceeding.

12. It is common ground between the parties that the application for authorisation filed by the applicants is a “merger authorisation” within the meaning of the CCA. Section 4 of the CCA gives the following definition:

    merger authorisation means an authorisation that:

    (a) is an authorisation for a person to engage in conduct to which section 50 or 50A would or might apply; but

    (b)is not an authorisation for a person to engage in conduct to which any provision of Part IV other than section 50 or 50A would or might apply.

13. Section 68(1) of the Radiocommunications Act 1992 (Cth) (Radiocommunications Act) provides that the licensee of a spectrum licence may authorise other persons to operate radiocommunications devices under the licence. Section 68A(1) provides that, for the purposes of s 50 of the CCA (and related provisions), the authorisation under s 68(1) of a person to operate radiocommunications devices under a spectrum licence is taken to be an acquisition by the person of an asset of another person and conduct engaged in by the person.

14. As a result of those provisions, Telstra’s use of TPG’s spectrum licences pursuant to the terms of the Spectrum Authorisation Agreement is taken to be an acquisition of an asset for the purposes of s 50 of the CCA. As noted above, the application for authorisation is confined to that conduct and, accordingly, both limbs of the definition of “merger authorisation” are satisfied.

15. A review by the Tribunal of authorisation determinations made by the ACCC is governed by the provisions of Pt IX of the CCA. As discussed in the Tribunal’s decision in Re Telstra Corporation Limited and TPG Telecom Limited,[4] a review of a merger authorisation under Pt IX differs from a review of other authorisations in two material ways:

    (a)first, a review of a merger authorisation is required to be completed by the Tribunal within a statutory time period (whereas a review of other authorisations is not subject to any time limit); and

    (b)second, a review of a merger authorisation is not a re-hearing of the matter (whereas a review of other authorisations is a re-hearing of the matter) and, correspondingly, restrictions are imposed on the information, documents and evidence to which the Tribunal may have regard in a review of a merger authorisation (whereas no such restrictions are imposed in a review of other authorisations).

    [4] [2023] ACompT 1

16. With respect to the statutory time period for the review, broadly stated a review of a merger authorisation is required to be completed within 90 days. However, under s 102(1AD) of the CCA, the Tribunal may determine in writing that the matter cannot be dealt with properly within the initial period, either because of its complexity or because of other special circumstances, and that an extended period applies for the review, which consists of the initial period and a further specified period of not more than 90 days. On 31 January 2023, the Tribunal made a determination in writing to that effect such that the period of the present review is 180 days (which ends on 21 June 2023).

17. With respect to the information, documents and evidence to which the Tribunal may have regard in this review, and in accordance with s 102(10) of the CCA, the Tribunal has only had regard to:

    (a)information that was referred to in the ACCC’s reasons for making its determination;

    (b)information furnished, documents produced or evidence given to the ACCC in connection with the making of its determination; and

    (c)the model used by the ACCC as referred to at [9.132] and [9.133] of its reasons for determination which the Tribunal required the ACCC to provide pursuant to s 102(6) of the CCA on 17 March 2023.

18. The information, documents and evidence given to the ACCC in connection with the making of its determination was vast in quantity. The parties placed that vast quantity of material before the Tribunal, although in their written and oral submissions the parties referred to a relatively small part of the material.

19. The evidence given to the ACCC included a number of witness statements of executives of each of Telstra, TPG and Optus, and a number of expert reports prepared on behalf of those parties. The Tribunal has found the witness statements to be very helpful in understanding the commercial context in which the Proposed Transaction arose and the options available to TPG if the Proposed Transaction does not proceed. The witnesses who gave statements are as follows:

    (a)on behalf of Telstra:

    (i)Andrew Richard Penn, who at the time of giving his statement was the CEO of Telstra, and who made a statement dated 12 August 2022;

    (ii)Bart-Jan Sweers, Principal, Economic Modelling at Telstra, who made a statement dated 12 August 2022 and a supplementary statement dated 4 November 2022;

    (iii)Christopher George Meissner, Network Engineering Executive – Customer Access at Telstra, who made a statement dated 12 August 2022;

    (iv)Michael Graeme Ackland, Group Executive, Consumer & Small Business at Telstra, who made a statement dated 15 August 2022; and

    (v)Nicolaos Katinakis, Group Executive for Networks & Information Technology at Telstra, who made a statement dated 15 August 2022 and a supplementary statement dated 9 November 2022;

    (b)on behalf of TPG:

    (i)Inaki Berroeta Aurrecoechea, the CEO and Managing Director of TPG, who made a statement dated 15 August 2022;

    (ii)Yago Lopez, General Manager of Technology Strategy and Innovation at TPG, who made a statement dated 8 November 2022;

    (iii)Giovanni Paolo Chiarelli, Chief Technology Officer at TPG, who made a statement dated 8 November 2022; and

    (iv)Kieren Paul Cooney, Group Executive, Consumer at TPG, who made a statement dated 8 November 2022;

    (c)on behalf of Optus:

    (i)Yuen Kuan Moon, the CEO of Singapore Telecommunications Limited (Singtel) – the parent company of Optus – who made a statement dated 19 October 2022;

    (ii)Paul O'Sullivan, the Chair of the Board of Directors of Optus, who made a statement dated 19 October 2022;

    (iii)Kelly Bayer Rosmarin, the CEO of Optus, who made a statement dated 19 October 2022;

    (iv)Kanagaratnam Lambotharan, Vice President of Networks at Optus, who made a statement dated 18 October 2022;

    (v)Benjamin White, Managing Director of Wholesale & Strategy and Chief Operating Officer of Enterprise & Business at Optus, who made a statement dated 19 October 2022; and

    (vi)Steve Turner, Director of Spectrum Strategy and Management at Optus, who made a statement dated 20 October 2022.

20. In the course of its assessment of the application for authorisation, the ACCC also examined a number of those witnesses and other executives of the parties pursuant to its powers under s 155 of the CCA. The persons examined were: Messrs Penn, Sweers and Katinakis of Telstra; Messrs Berroeta and Lopez and Trent Czinner (Group Executive, Legal and External Affairs) of TPG; Ms Bayer Rosmarin, Mr White, Mr Kanagaratnam and Kent Wu Zeyi (Vice President of the Access Networks Strategy, Planning and Quality) of Optus; and Mr Moon of Singtel.

21. The expert reports given to the ACCC were as follows:

    (a)on behalf of Telstra:

    (i)reports dated 20 May 2022, 25 July 2022 and 10 November 2022 prepared by Richard Feasey with respect to the likely effects on competition of the Proposed Transaction (the reports did not state Mr Feasey’s academic qualifications, but disclose that he was, amongst other things: the Director of Public Policy at Vodafone plc from 2001 to 2013; an Associate at Frontier Economics Ltd, a London based economic consulting firm, from 2013 to 2017; appointed as a Panel Member of the UK Competition and Markets Authority in 2017; and, since 2021, the Inquiry Chair of that Authority);

    (ii)reports dated 27 July 2022 and 10 November 2022 prepared by Aetha Consulting Limited (Aetha), which model the capacity of the mobile networks operated by Telstra and Optus in the RCZ;

    (iii)report dated 28 July 2022 prepared by Emma Ihaia with respect to the public benefits and public detriments likely to arise from the Proposed Transaction (the report discloses that: Ms Ihaia is an economist with expertise in regulatory and competition economics, with 25 years of experience applying economic analysis to the telecommunications sector; Ms Ihaia has worked with a number of international consultancies including Charles River Associates, where she was a Principal Economist, and Castalia, where she was a Director in the New Zealand and Pacific Practice; Ms Ihaia holds a Bachelor’s degree and a Master’s degree, both in economics, from the University of Auckland);

    (iv)statement dated 30 October 2022 by Michael Robert Strople in relation to MOCN based network sharing, including the differences between MOCN and roaming arrangements, based on Mr Strople’s experience working in Canada; and

    (v)statement dated 27 October 2022 by Bruce Rodin in relation to MOCN arrangements as they have developed and operated in Canada, based on Mr Rodin’s experience working in Canada;

    (b)on behalf of TPG, reports dated 26 July 2022, 2 November 2022 and 17 November 2022 prepared by Dr Jorge Padilla with respect to the likely effects on competition of the Proposed Transaction (the reports disclose that: Dr Padilla is the Senior Managing Director and the Head of Compass Lexecon EMEA, a global economic consultancy and which is part of FTI Consulting, Inc; Dr Padilla has more than 20 years’ experience as an economic consultant and has taught economics for approximately 30 years at CEMFI (Madrid), Boston University, the Barcelona Graduate School of Economics, King’s College (London) and the Toulouse School of Economics; Dr Padilla earned MPhil and DPhil degrees in economics from the University of Oxford);

    (c)on behalf of Optus:

    (i)a report dated 24 June 2022 prepared by Cambridge Economic Policy Associates Pty Ltd (CEPA), and authored by Chris Doyle and Dr Jonathan Mirrlees-Black, with respect to the likely effects on competition of the Proposed Transaction (the report discloses that Mr Doyle: an economist with over 25 years’ experience advising clients in the communications space; joined CEPA in March 2022 as Head of Telecoms and Senior Advisor; between 2018-2021 was an economist at  Ofcom (the communications regulator of the United Kingdom), having previously held senior positions in economic consulting and academia; and obtained a doctorate in economics from Warwick University, specialising in game theory and industrial organisation; and that Dr Jonathan Mirrlees-Black: has over 25 years’ of experience as an economist and finance professional in infrastructure, as an investment analyst and as an advisor to global infrastructure companies, regulators, international organisations, and private equity investors; is the Director of CEPA’s Sydney office; from 2010‑15 was Senior Advisor then Head of Research at RARE Infrastructure, a Sydney‑based specialist investor in global listed infrastructure; and holds a doctorate in economics from Oxford University);

    (ii)a report dated 26 September 2022 prepared by CEPA, and authored by Chris Doyle, with respect to Telstra’s use of TPG’s spectrum under the Spectrum Authorisation Agreement, including efficiency implications and the effects it may have on competition;

    (iii)reports dated 28 June 2022 and 26 October 2022 prepared by Greg Houston of HoustonKemp with respect to the likely effects on competition of the Proposed Transaction (the reports disclose that Mr Houston: is a founding partner of the firm of expert economists, HoustonKemp; over a period of more than thirty years has accumulated experience in the economic analysis of markets; holds a BSc (Hons) in economics from the University of Canterbury);

    (iv)a report dated 27 June 2022 prepared by Analysys Mason with respect to the technical and commercial characteristics of the Proposed Transaction;

    (v)a report dated 24 October 2022 prepared by Analysys Mason with respect to the mobile network cost effects of the Proposed Transaction; and

    (vi)a report dated 25 October 2022, 16 November 2022 and 4 December 2022 prepared by AlixPartners, and authored by Matthew Hunt, with respect to the likely effects on competition and efficiency of the Proposed Transaction (the report discloses that Mr Hunt: is an economist and a Managing Director in the Investigations, Disputes and Risk practice in the London office at AlixPartners; has 22 years of experience acting as an expert and economic advisor in the fields of regulation and competition policy; leads AlixPartners’ EMEA economics practice and the economics work in the telecommunications, media and technology sectors; holds a Masters of Economics from the London School of Economics and Political Science, University of London and a Masters of Physics from the University of Oxford.

1. The Tribunal notes that, on 17 March 2023, the Tribunal refused an application made by the applicants seeking directions to enable the Tribunal to receive additional evidence on the review: see Re Telstra/TPG No 1.[5]

   [5] [2023] ACompT 1.

2. In accordance with a direction of the Tribunal made on 31 January 2023, the parties have filed a joint document identifying all findings on factual matters set out in the ACCC’s reasons for determination that are not contested by the parties on this review. On 11 May 2023, the parties filed an updated version of that document (which is referred to herein as the Joint Document of Factual Findings). The Tribunal has adopted those findings for the purposes of this determination.

3. The Tribunal has also received and had regard to:

   (a)the concise statements of facts, issues and contentions (SOFIC) filed on behalf of each of the parties to this proceeding;

   (b)written submissions filed on behalf of each of the parties in advance of the hearing;

   (c)oral submissions advanced on behalf of each of the parties during the hearing, together with a number of aide memoires and further written submissions provided to the Tribunal during the hearing;

   (d)a rejoinder filed by Optus and a response to the rejoinder filed by the applicants after the conclusion of the hearing.

   The Tribunal’s determination

4. The Tribunal considers that the authorisation preconditions stated in s 90(7) of the CCA require the Tribunal to assess the likely competitive effects of, and the public benefits and detriments likely to result from, that conduct which is the subject of the application for authorisation, being the Proposed Conduct. That assessment has been undertaken in light of all relevant circumstances, which includes the MOCN Service Agreement and the Mobile Site Transition Agreement. However, the assessment does not involve weighing the likely competitive effects of, and the public benefits and detriments likely to result from, those other agreements. The Tribunal considers that the contrary approach adopted by the ACCC in its determination, and which is supported by the applicants on this review, is erroneous. Against the possibility that the Tribunal’s understanding of its statutory task is incorrect, the Tribunal has also applied the authorisation preconditions stated in s 90(7) to the Proposed Transaction as a whole. Ultimately, it has reached the same determination on both approaches.

5. Having considered the information, documents and evidence before it and the submissions of the parties, the Tribunal is not satisfied that the Proposed Conduct, being Telstra’s use of TPG’s spectrum licences pursuant to the terms of the Spectrum Authorisation Agreement, would not be likely to substantially lessen competition, or would be likely to result in a benefit to the public that would outweigh the public detriment from that use. In relation to the Tribunal’s assessment of the Proposed Transaction, the evaluation required under s 90(7) is more finely balanced. The Tribunal accepts that the Proposed Transaction has pro-competitive benefits in that it will likely improve the competitive position of TPG in comparison to the likely counterfactuals. However, the Proposed Transaction will also deliver to Telstra material competitive advantages which will have the effect of weakening the competitive position of Optus. Overall, and on balance, the Tribunal is not satisfied that the Proposed Transaction would not be likely to substantially lessen competition, or would be likely to result in a benefit to the public that would outweigh the public detriment from the Proposed Transaction.

6. The Tribunal therefore affirms the determination of the ACCC. These are the Tribunal’s reasons for making that determination.

   B.       THE PROPOSED TRANSACTION, THE APPLICATION FOR AUTHORISATION AND THE PROPOSED UNDERTAKINGS

   The Proposed Transaction

7. On 21 February 2022, Telstra and TPG entered into three related agreements: the MOCN Service Agreement, the Spectrum Authorisation Agreement, and the Mobile Site Transition Agreement[6] (referred to earlier as the Proposed Transaction). On 28 April 2022, Telstra and TPG entered into an agreement varying the terms of the Proposed Transaction agreements. Each of the agreements are subject to a condition precedent that they do not become binding on the parties unless and until the applicants have received a notice in writing from the ACCC that it does not propose to intervene or seek to prevent the implementation of the agreements or the ACCC, or the Tribunal on review, has granted authorisation in respect of the Proposed Transaction.[7]

   [6] Joint Document of Factual Findings at [1.2] and [7.2].

   [7] MOCN Service Agreement, cl 2.1; Mobile Site Transition Agreement, cl 3.1(b); Spectrum Authorisation Agreement, cl 2.1.

8. At the time of entering into the Proposed Transaction, Telstra and TPG issued a joint announcement to the Australian Securities Exchange in which they described the Proposed Transaction and the commercial benefits that Telstra and TPG believed would result from it. The joint announcement is informative and contained the following statements:

   Telstra and TPG Telecom Limited today announced a ground-breaking ten-year regional Multi-Operator Core Network (MOCN) commercial agreement, which will provide significant value to Telstra’s wholesale mobile revenues, while providing TPG Telecom group’s subscribers with 4G and 5G services within a defined coverage zone across regional and urban fringe areas.

   Under the innovative deal TPG Telecom will gain access to around 3,700 of Telstra’s mobile network assets, increasing TPG Telecom’s current 4G coverage from around 96 per cent to 98.8 per cent of the population.

   Telstra will gain access to TPG Telecom’s spectrum across 4G and 5G, which will allow it to grow its network, increase capacity and continue to provide the country’s largest and fastest network.

   Under the MOCN arrangement Telstra will share its Radio Access Network (RAN) for 4G and subsequently 5G services in the defined coverage zone, however both carriers will continue to operate their own core network where key differentiating functionality resides. Telstra will also obtain access to and deploy infrastructure on up to 169 TPG Telecom existing mobile sites, improving coverage for TPG and Telstra customers in the zone. The non-exclusive agreement includes the option for TPG Telecom to request two contract extensions of five years each.

   Telstra CEO Andrew Penn said the deal provided significant value to shareholders and customers and was a continuation of Telstra’s strategy to maximise the utilisation and monetisation of its assets.

   “This additional spectrum will mean that all Telstra customers will continue to experience Australia’s best and fastest network across the country, in combined 4G and 5G speeds. In particular, the spectrum agreement will ensure that regional and rural customers will now experience faster speeds in more locations on their mobiles.”

   TPG Telecom CEO Iñaki Berroeta said the landmark network sharing agreement would significantly expand TPG Telecom’s mobile network footprint in regional Australia and enable growth of its customer base in regional and metropolitan areas.

   “It represents a material uplift in the capability of our network and will provide significant value for TPG Telecom shareholders over the medium and long term.

   “We will be open for business in regional and rural Australia like never before, offering a 4G network that provides 98.8% population coverage and rapidly growing 5G coverage across the nation.

   “The agreement demonstrates best-practice asset utilisation and a commitment to rationalising our operations to deliver a better customer experience, while increasing capital efficiency.

   Mr Penn said, “With more people moving to regional areas as a result of COVID, congestion in some areas has increased. This additional spectrum will also ensure that Telstra customers will experience significantly reduced congestion at busy times.

   “Telstra’s network has always been and will continue to be the best network – the structure of the deal ensures that we will continue to differentiate in network leadership for our customers in coverage and services.

   “We can do that because we will maintain our one million square km competitive advantage in mobile coverage where no other operators have invested. Mobile coverage is often talked about as population coverage, however we all know that it’s the square kilometres of coverage when you travel between towns and cities that also matters. It is the fabric of our mobile network.

   “This is critical for customers living and working in those areas. It provides security and safety when travelling long distances on major roads and is only available for our customers travelling through or working or living in those areas.”

   Mr Penn said the innovative deal would realise more value from Telstra’s network infrastructure for shareholders while making a very significant contribution to Telstra’s wholesale mobile revenues.

   “The deal provides TPG Telecom with the opportunity to access some of our network assets within the defined zone. The access is similar to the way Telstra currently provides wholesale services to its MVNOs and Belong in this zone.

   “Similar to monetising our passive infrastructure, it allows Telstra to have an innovative way of monetising some of our active mobile infrastructure, in areas where the population coverage is much smaller and more challenging in terms of returns and further investment and where there are already a number of competitors.

   “Additional scale from this agreement therefore supports return on invested capital in these areas and makes ongoing investment in the network and innovation more sustainable.”

   Mr Berroeta said the agreement was a win for TPG customers who would have access to a significant part of the best regional network in Australia.

   “The deal will give TPG Telecom’s consumer, enterprise and wholesale customers seamless access to a national network. This will enable TPG Telecom’s Vodafone, TPG, iiNet, Lebara and felix brands to improve their services for regional Australians.”

   Access to this additional coverage will be automatic for all of TPG Telecom group’s customers and will appear to them as being provided by their current TPG Telecom group provider.

   TPG Telecom will continue to operate its own 3G, 4G and 5G networks in metropolitan areas reaching around 80 per cent of the population, which includes its network infrastructure sharing arrangement with Optus in those areas.

   TPG Telecom will decommission the 725 mobile sites it currently operates within the MOCN coverage area, reducing environmental impact, energy consumption, operating costs and future capex. 

9. The remainder of this section provides a description of the three agreements which comprise the Proposed Transaction.

   MOCN Service Agreement

10. Under the MOCN Service Agreement, Telstra agrees to use its radio access network to supply TPG with 4G and 5G services in the RCZ.[8] TPG will thereby obtain access to Telstra’s radio access network within the RCZ comprising approximately 3,700 Telstra mobile sites. The MOCN Service will enable TPG to provide mobile network telecommunications services to TPG services in operation (SIOs) in the RCZ. TPG will also be able to provide the following services within the RCZ by relying on services provided by Telstra under the MOCN Service Agreement:

    (a)a fixed wireless service using combined 3.6 GHz spectrum;[9]

    (b)Narrow Band Internet of Things (NBIoT) using Telstra 700 MHz spectrum band;[10] and

    (c)capability on a mobile internet service used as a back-up (Fixed NBN Fallback).[11]

    [8] MOCN Service Agreement, cl 4.1; Sch 2 cl 1; cl 5.

    [9] Joint Document of Factual Findings at [7.4]. See also MOCN Service Agreement, Annexure A to Sch 2.

    [10] Joint Document of Factual Findings at [7.4]. See also MOCN Service Agreement, Annexure B to Sch 2.

    [11] Joint Document of Factual Findings at [7.4]. See also MOCN Service Agreement, Annexure C to Sch 2.

11. A fixed wireless service is a retail consumer fixed broadband data service for use at a single premises in the RCZ.

12. NBIoT is a service that enables the use of relatively low-power machine communications for uses other than consumer voice or data.

13. Fixed NBN Fallback capability enables TPG to supply its customers who are located at premises in the RCZ and who have a primary fixed broadband service supplied by NBN with a failover mobile broadband data service which will operate during periods of outage of the fixed NBN service.

14. Both TPG and Telstra will continue to operate their own mobile core networks. TPG will remain responsible for enhancements, upgrades, interconnection arrangements, and the acquisition of any goods or services from third parties for the purpose of developing the TPG mobile core network.[12]

    [12] Joint Document of Factual Findings at [7.9]. See also MOCN Service Agreement, Sch 4, cl 3.2.

15. The fees payable by TPG to Telstra for the MOCN service will include:[13]

    (a)a fixed annual charge for access, payable in equal quarterly instalments;

    (b)charges dependant on the number of services in operation TPG is servicing;

    (c)a per GB charge for data consumed by TPG’s use of the MOCN service in the RCZ; and

    (d)charges for fixed wireless services in operation, NBIoT services in operation, and Fixed NBN Fallback services in operation.

    [13] Joint Document of Factual Findings at [7.5]. See also MOCN Service Agreement, Sch 5.

16. Further details of the relevant fees and charges payable are as follows:[14]

    (a)[REDACTED];

    (b)[REDACTED];

    (c)[REDACTED];

    (d)[REDACTED];

    (e)[REDACTED];

    (f)[REDACTED];

    (g)[REDACTED].

    [14] Joint Document of Factual Findings at [7.6]. See also MOCN Service Agreement, Sch 5. [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED].

17. The initial term of the MOCN Service Agreement is 10 years, with TPG having two further five-year options to extend the agreement.[15] A 36-month “Transition-Out Period” will come into effect on the expiry or termination of the MOCN Service Agreement. During this period, TPG will have the discretion to nominate an earlier date for ceasing use of the services.[16] Telstra will be required to continue supplying the services until the end of the Transition-Out Period.[17]

    [15] Joint Document of Factual Findings at [7.10]. See also MOCN Service Agreement, cl 15.1(b) and (c).

    [16] Joint Document of Factual Findings at [7.11]. See also MOCN Service Agreement, cl 16.1(d).

    [17] Joint Document of Factual Findings at [7.11]. See also MOCN Service Agreement, cl 16.1(d).

18. The MOCN Service Agreement contains non-discrimination provisions that require Telstra to ensure that TPG end users and Telstra “comparison customers” receive equal treatment, including in relation to network performance and quality of service.[18] The non-discrimination obligation will apply to current services and to the technical upgrade or evolution of the shared radio access network and 4G and 5G standards.[19] Telstra “comparison customers” are defined as Telstra customers who are end users on a retail consumer grade plan and who do not have any other type of plan (including in respect of any enterprise grade product or “special service”). There are exceptions to the non-discrimination provisions, including the following:

    (a)TPG will not have access to 5G-enabled sites until 6 months after Telstra has activated the sites for 5G.[20] The six-month delay will apply on a site-by-site basis, with the effect that TPG’s access to 5G in the RCZ would be “staggered”. For Telstra 5G sites activated prior to the commencement of the MOCN Service Agreement, the six-month period will commence from the date of site activation, rather than the commencement of the MOCN Service Agreement.

    (b)As noted in the preceding paragraph, the non-discrimination provisions do not apply in respect of Telstra customers who have an enterprise grade product or “special services”.[21]

    (c)Fixed wireless access will only be supplied to TPG over 3.6 GHz spectrum on a 5G standalone basis, while the fixed wireless service supplied to Telstra comparison customers may use 3.6 GHZ Spectrum on a 5G non-standalone basis and may use other spectrum bands.[22]

    (d)The provisions do not apply to NBIoT capability.[23]

    [18] Joint Document of Factual Findings at [7.12]. See also MOCN Service Agreement, cl 4.2.

    [19] Joint Document of Factual Findings at [7.12].

    [20] MOCN Service Agreement, Sch 2, cl 3.

    [21] MOCN Service Agreement, cl 1 (definition of “Telstra Comparison Customer”).

    [22] MOCN Service Agreement, Annexure A to Sch 2, cl 1(c).

    [23] MOCN Service Agreement, Annexure B to Sch 2, cl 1(d).

19. Telstra acknowledges that it is not the exclusive supplier of MOCN services or other network or access services to TPG, and TPG is not restricted from building and operating its own mobile telecommunications network within or outside the RCZ, or procuring other network, access or roaming services from third parties.[24] TPG also acknowledges that it is not Telstra's exclusive customer of MOCN services and Telstra is not restricted from selling services equivalent to the MOCN services (or any other network or access service) to any third party.[25]

    [24] Joint Document of Factual Findings at [7.14]. See also MOCN Service Agreement, cl 8.1(a) and (b).

    [25] Joint Document of Factual Findings at [7.14]. See also MOCN Service Agreement, cl 8.1(c).

20. [REDACTED].[26] [REDACTED].[27] [REDACTED].[28]

    [26] Joint Document of Factual Findings at [7.15]. See also MOCN Service Agreement, cl 12.1(b).

    [27] MOCN Service Agreement, cl 12.1(b)(i).

    [28] Joint Document of Factual Findings at [7.15]. See also MOCN Service Agreement, cl 12.1(d).

21. The MOCN Service Agreement stipulates that it does not include any mobile technology generation beyond 5G (including 6G or 7G) and that the addition [REDACTED] [REDACTED] of a technology generation is subject to the “Change Management Process” which is specified in the Agreement.[29] Under the Change Management Process, TPG may request a change, including the addition of a technology generation ([REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]).[30] Telstra will be required to act reasonably and negotiate with TPG in good faith regarding any such change.[31] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED].[32]

    [29] MOCN Service Agreement, Sch 2, cl 2.

    [30] MOCN Service Agreement, Sch 6, Pt B, cl 3; Sch 6, Pt B, cl 5.

    [31] Joint Document of Factual Findings at [7.16]. See also MOCN Service Agreement, Sch 6, Pt B, cl 5(b).

    [32] Joint Document of Factual Findings at [7.16]. [REDACTED] [[REDACTED]] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], [REDACTED] [REDACTED], [REDACTED] [REDACTED], [REDACTED] [REDACTED].

22. There is no obligation on either Telstra or TPG to acquire spectrum at an auction, use any spectrum it acquires at an auction, or automatically include any spectrum it acquires at an auction in the scope of the MOCN services.[33] [REDACTED], [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] ([REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]), [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. [34]

    [33] Joint Document of Factual Findings at [7.18]. See also MOCN Service Agreement, Sch 6, Pt B, cl 5.

    [34] Joint Document of Factual Findings at [7.18]. See also MOCN Service Agreement, Sch 6, Pt B, cl 5. [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] “[REDACTED] [REDACTED]”.

    Spectrum Authorisation Agreement

1. Under the Spectrum Authorisation Agreement, TPG will authorise Telstra to operate radiocommunications devices utilising part of TPG’s 4G and 5G spectrum (including TPG’s spectrum in 700 MHz, 850 MHz, 2.1 GHz and 3.6 GHz bands) within the RCZ for use on the MOCN. Telstra will also be authorised to use certain TPG spectrum beyond the RCZ. Telstra is not authorised to use TPG spectrum in metropolitan areas.[35]

   [35] Joint Document of Factual Findings at [7.19]. See also Spectrum Authorisation Agreement, Annexure C to Application for Merger Authorisation (MA1000021) dated 23 May 2022 (Confidential Version), cl 4.

2. Telstra will be required to pay TPG quarterly spectrum use fees, with discounts calculated to account for any restricted spectrum (being spectrum that is withdrawn, or which TPG and Telstra agree is affected by incumbency or interference issues).[36]

   [36] Joint Document of Factual Findings at [7.20]. See also Spectrum Authorisation Agreement, cl 5.1.

3. TPG’s spectrum that is the subject of the Spectrum Authorisation Agreement is summarised as follows:

   (a)in respect of the 700MHz band, 2 x 10 MHz;

   (b)in respect of the 850 MHz band, 2 x 5 MHz;

   (c)in respect of the 2100 MHz band, 2 x 5 MHz; and

   (d)in respect of the 3600 MHz band, 20-45 MHz.[37]

   [37] Spectrum Authorisation Agreement, Sch 2 and 3.

4. Telstra and TPG have agreed to cooperate to re-stack their 850 MHz spectrum holdings beyond the outer boundaries of the Regional Coverage Zone, in which Telstra is currently the only provider of services.[38]

   [38] Joint Document of Factual Findings at [7.22].

5. The specific areas of Australia in which TPG will authorise Telstra to use its spectrum varies by spectrum band. The spectrum authorisation for the 700 MHz band covers a significant portion of Australia’s landmass, while other bands subject to the spectrum authorisation, such as the 3.6 GHz band, will cover smaller proportions of the country due to the available licences.[39]

   [39] Joint Document of Factual Findings at [7.24].

6. [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], TPG will authorise Telstra to use its spectrum in the RCZ and areas beyond that zone, [REDACTED] [REDACTED]-[REDACTED] [REDACTED] [REDACTED] ([REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] ([REDACTED] [REDACTED]).[40]

   [40] Joint Document of Factual Findings at [7.25].

7. There will be no restraints on TPG bidding on any new spectrum allocation, or any obligation on TPG to offer to include any new spectrum band within the scope of the Spectrum Authorisation Agreement.[41]

   [41] Joint Document of Factual Findings at [7.26].

8. [REDACTED].[42]

   [42] Spectrum Authorisation Agreement cl 3.

9. On termination or expiry of the MOCN Service Agreement, the parties have certain rights to terminate the Spectrum Authorisation Agreement, but are not obligated to do so. Specifically:

   (a)on termination or expiry of the MOCN Service Agreement, Telstra is entitled to terminate the Spectrum Authorisation Agreement [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED];[43]

   (b)[REDACTED]. [44]

   [43] Spectrum Authorisation Agreement cl 11.1(d).

   [44] Spectrum Authorisation Agreement cl 11.1(e).

   Mobile Site Transition Agreement

10. The purpose of the Mobile Site Transition Agreement is to set out the principles on which TPG will enable Telstra to access, use and occupy TPG Space at TPG Owned Sites or at TPG Licensed Sites for the purpose of enabling Telstra to install mobile telecommunications equipment in/on the TPG Space in place of TPG.[45] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. [REDACTED] [REDACTED]- [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED].[46]

    [45] Mobile Site Transition Agreement, Annexure C to Application for Merger Authorisation (MA1000021) dated 23 May 2022 (Confidential Version) cl 2.1.

    [46] Mobile Site Transition Agreement, cl 1.1.

11. Telstra and TPG will be required to negotiate in good faith the ability for Telstra to access and deploy infrastructure on the 169 TPG Transitioning Sites which are primarily inside the RCZ.[47] In the case of TPG Licensed Sites, access may be via the novation of the existing licence with TPG or the grant of a new licence from the licensor.[48]   

    [47] Joint Document of Factual Findings at [7.28]. See also Mobile Site Transition Agreement, cl 4.1, 4.2.

    [48] Mobile Site Transition Agreement, cl 4.2(c).

12. [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED].[49] Telstra will [REDACTED] pay TPG [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] under the Mobile Site Transition Agreement, including to access and deploy infrastructure on the TPG Transitioning Sites and to assume TPG’s obligations under the transferred site licences.[50]

    [49] Mobile Site Transition Agreement, cl 4.3.

    [50] Joint Document of Factual Findings at [7.28]. See also Mobile Site Transition Agreement, cl 4.8.

13. The 169 TPG Transitioning Sites are a subset of 749 mobile sites TPG is decommissioning in in the RCZ.[51]

    [51] Joint Document of Factual Findings at [7.29].

14. If the MOCN Service Agreement expires or is terminated, TPG can request re-installation of its equipment on facilities at one or more sites.[52] Telstra will be required to use commercially reasonable endeavours to facilitate TPG’s access to TPG sites, [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED].[53]

    [52] Joint Document of Factual Findings at [7.30]. See also Mobile Site Transition Agreement, cl 4.7(a).

    [53] Joint Document of Factual Findings at [7.30]. See also Mobile Site Transition Agreement, cl 4.7(c).

    The application for authorisation

15. On 23 May 2022, Telstra and TPG lodged a joint application for authorisation with the ACCC. The scope of the application for authorisation differed from that contemplated by the conditions precedent to the Proposed Transaction agreements. The executive summary to the application stated the following (citations omitted):

    The commercial agreements

    Telstra and TPG have agreed to share active mobile network infrastructure and spectrum in certain parts of regional Australia in response to the challenges of building and maintaining mobile network infrastructure in these regional areas of low population density.

    TPG and Telstra will continue to operate their own networks in metropolitan areas where the vast majority (around 81.4%) of the population resides. Furthermore, both TPG and Telstra will continue to operate their own mobile core networks where the key service differentiation and sensitive functions occur.

    On 21 February 2022, Telstra Corporation Limited (Telstra) and TPG Telecom Limited (TPG) entered into the following related commercial agreements:

    •  MOCN Service Agreement dated 17 February 2022 (MOCN Agreement);

    •  Spectrum Authorisation Agreement – MOCN Area dated 17 February 2022 (Spectrum Authorisation); and

    •  Mobile Site Transition Agreement dated 17 February 2022 (Site Agreement),

    (together, the Agreements) (Proposed Transaction).

    The Agreements are in respect of a Multi-Operator Core Network (MOCN) commercial arrangement pursuant to which Telstra will share its Radio Access Network (RAN) with TPG and supply 4G and 5G services in certain regional and urban fringe areas which comprise around 17% of the Australian population coverage (in the 81.4% - 98.8% population coverage area) (17% Regional Coverage Zone). The Agreements are commercially and legally interdependent.

    To support the shared use of the MOCN in the 17% Regional Coverage Zone, TPG will authorise certain spectrum it currently owns and is unutilised or underutilised to Telstra in the 17% Regional Coverage Zone to be pooled with Telstra’s spectrum and made available to both Applicants. Telstra will also be authorised to use certain spectrum beyond the 17% Regional Coverage Zone, i.e. only in areas beyond the 98.8% of the Australian population. The initial term of the MOCN Agreement is 10 years and TPG has two options to extend the agreement by 5 years.

    Application for Merger Authorisation

    Pursuant to s 68A of the Radiocommunications Act 1992 (Cth) (Radiocommunications Act), TPG’s grant of authorisation to Telstra to use TPG spectrum within the meaning of s 68(1) is deemed to be an acquisition within the meaning of s 50 of the Competition and Consumer Act 2010 (Cth) (CCA) and is capable of merger authorisation under Part VII.

    Telstra and TPG (together, the Applicants) seek merger authorisation for the authorisation of use of spectrum (under the Spectrum Agreement) which is deemed to be an acquisition within the meaning of s 50, CCA (Authorisation) on the basis that:

    •  the authorisation of spectrum would not have the effect, and would not be likely to have the effect, of substantial lessening of competition (SLC) in any market; and

    •  the public benefits associated with the authorisation of spectrum would result, or be likely to result, in a benefit to the public, and the benefit would outweigh any detriment to the public that would result, or be likely to result, from the Proposed Transaction.

    To the extent the ACCC considers it needs to have regard to the Proposed Transaction as a whole, this Application has provided information that would enable this assessment.

    The Applicants request the ACCC to authorise the use of spectrum as set out in the Spectrum Agreement that is deemed to be an acquisition under s 50, CCA. The evidence contained in this Application is provided in support of the Authorisation.

    The Applicants are not seeking authorisation for co-location agreements under the Site Agreement that may, but are unlikely to, involve the transfer of leases or licenses.

16. The following matters can be noted about the above statements.

17. First, Telstra and TPG have entered into three agreements, the MOCN Service Agreement, the Spectrum Authorisation Agreement and the Mobile Site Transition Agreement as part of the one commercial transaction.

18. Second, Telstra and TPG have sought authorisation for the use of spectrum under the Spectrum Authorisation Agreement “which is deemed to be an acquisition within the meaning of s 50”, but not in respect of the entry into and implementation of the MOCN Service Agreement or the Mobile Site Transition Agreement. The applicants stated expressly that they were seeking “merger authorisation” in respect of Telstra’s use of TPG spectrum.

19. Third, Telstra and TPG have sought authorisation on the alternative bases that:

    (a)the authorisation of the use of spectrum would not have the effect, and would not be likely to have the effect, of substantial lessening of competition in any market; and

    (b)the public benefits associated with the authorisation of the use of spectrum would result, or be likely to result, in a benefit to the public, and the benefit would outweigh any detriment to the public that would result, or be likely to result, from the “Proposed Transaction”.

20. Fourth, Telstra and TPG provided information in relation to the Proposed Transaction as a whole to enable the ACCC to assess that information “to the extent the ACCC considers it needs to have regard to the Proposed Transaction as a whole”.

21. It is apparent from the foregoing that the applicants made a deliberate decision to seek authorisation only for Telstra’s use of TPG’s spectrum under the Spectrum Authorisation Agreement, and not to seek authorisation for the conduct comprising entering into and giving effect to the MOCN Service Agreement and the Mobile Site Transition Agreement. By confining the scope of the authorisation in that manner, the authorisation sought by the applicants satisfies the definition of a “merger authorisation” in s 4 of the CCA. As discussed below, one advantage of a merger authorisation in comparison to other authorisations is that a merger authorisation is subject to statutory time limits imposed on the decision-makers (the ACCC and the Tribunal on review).

22. As noted above, the ACCC refused to grant authorisation for the reason that the ACCC was “not satisfied, in all the circumstances, that the Proposed Transaction would not be likely to substantially lessen competition, or would be likely to result in a benefit to the public that would outweigh the public detriment from the Proposed Transaction”. It is apparent that, in reaching its determination, the ACCC assessed the likely effects of the Proposed Transaction as a whole rather than the likely effects of the conduct for which authorisation was sought, being Telstra’s use of TPG’s spectrum under the Spectrum Authorisation Agreement (defined earlier as the Proposed Conduct).

23. At the commencement of this proceeding, the Tribunal sought confirmation from the parties that:

    (a)the application for authorisation was only in respect of the Proposed Conduct, namely Telstra’s use of TPG’s spectrum under the Spectrum Authorisation Agreement; and

    (b)as such, the application was in respect of a “merger authorisation” as defined in s 4 of the CCA.

24. All parties gave that confirmation. The SOFICs filed on behalf of the parties also proceed on that basis. The proceeding has therefore been conducted on that basis.

25. Telstra’s SOFIC (adopted by TPG) nevertheless advanced the contention that:

    When referring to the Proposed Conduct below, it encompasses the effects, benefits and detriments of the Proposed Transaction, because the Relevant Agreements are interlinked and would not exist without the Spectrum Agreement…

26. On the basis of that contention, the applicants’ SOFICs and written submissions proceeded on the basis that, because the three agreements comprising the Proposed Transaction are interdependent, the Tribunal’s statutory task under s 90(7) is to consider the likely effects of the Proposed Transaction as a whole.

27. For the reasons explained below, the Tribunal disagrees with that characterisation of its statutory task. It can be accepted that the Proposed Transaction agreements have been entered into by the parties as part of the one transaction. However, that premise does not lead to the conclusion that the effects, benefits and detriments of the Proposed Conduct, being Telstra’s use of TPG’s spectrum, encompasses the effects, benefits and detriments of the Proposed Transaction. It was open to the applicants to seek authorisation of the conduct comprising entering into and implementing the Proposed Transaction agreements, but the applicants elected to seek authorisation only in respect of Telstra’s use of TPG’s spectrum under the Spectrum Authorisation Agreement. The Tribunal considers that s 90(7) of the CCA requires it to assess only the effects of the conduct for which authorisation has been sought. The effects of the MOCN Service Agreement and the Mobile Site Transition Agreement cannot be characterised as an effect of Telstra’s use of TPG’s spectrum under the Spectrum Authorisation Agreement for the purposes of s 90(7).

28. The Tribunal has therefore applied the tests stated in s 90(7) to the Proposed Conduct. Against the possibility that the Tribunal’s understanding of its statutory task is incorrect, the Tribunal has also applied the tests stated in s 90(7) to the Proposed Transaction as a whole.

    Proposed undertakings

29. In connection with their application for review, the applicants have offered to give the ACCC a joint undertaking pursuant to s 87B of the CCA in relation to the Proposed Transaction, and TPG has offered to give the ACCC a separate undertaking relating to its mobile site infrastructure.

30. The Tribunal is empowered by s 102(1) to accept the undertakings on this review, if it considers it appropriate to do so. Section 102(1) stipulates that, for the purposes of the review, the Tribunal may perform all of the functions and exercise all of the powers of the ACCC. It is implicit in that section that the functions and powers of the ACCC able to be exercised by the Tribunal on the review are the functions and powers able to be exercised by the ACCC in making its determination on the authorisation application. Those powers of the ACCC include accepting an undertaking given by a person under s 87B in connection with a merger authorisation. Relevantly, s 87B(1A) provides that the ACCC may accept a written undertaking given by a person for the purposes of s 87B in connection with a merger authorisation. That provision is reinforced by s 88(4) which provides that the ACCC may grant a merger authorisation on the condition that a person must give, and comply with, an undertaking to the ACCC under section 87B.

    The joint undertaking

31. The proposed joint undertaking contains two substantive promises.

32. The first substantive promise is contained in cl 4. It provides as follows:

    4.1. During any period in which the Spectrum Authorisation is in effect, the Undertaking Signatories undertake that they will:

    (a) implement and give full force and effect to the MOCN Agreement and Site Agreement, in each case in accordance with their terms;

    (b) not make any material amendment to the MOCN Agreement or Site Agreement except:

    (i) strictly to the extent any such amendment is contemplated by, and then made in accordance with, the existing terms of those agreements, including a Change made in accordance with the Change Management Process in Part B of Schedule 6 of the MOCN Agreement or a change to the Site Transition Plan agreed in accordance with clause 4.1 of the Site Agreement; or

    (ii) otherwise only if the amendment does not take effect until after the ACCC has confirmed in writing that it does not object to the amendment being made.

    4.2. If the MOCN Agreement is terminated for any reason, TPG undertakes to exercise its right to terminate the Spectrum Authorisation in accordance with clause 11.1(e) of the Spectrum Authorisation.

33. It can be seen that the effect of the undertaking in cl 4 is twofold. First, it requires the applicants to implement and to continue to give full force and effect to the MOCN Service Agreement and the Site Agreement and to not materially amend those agreements except in accordance with their terms or otherwise with the prior consent of the ACCC. Second, it requires the applicants to terminate the Spectrum Authorisation Agreement if the MOCN Service Agreement is terminated at any time.

1. The significant competition concern arises out of the substantial competitive benefits that Telstra would obtain from the Proposed Transaction as a whole, enabling it to improve its network capacity and speed in the 80%+ population coverage area, decrease coverage gaps compared to Optus and improve the economics of its regional network which would better enable Telstra to maintain its overall network advantages over Optus (and TPG). It is also significant that [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED].

2. The Tribunal is persuaded by the evidence presented by Optus that the Proposed Transaction would be likely to have a substantial detrimental effect on Optus’s competitive position in the mobile services market. The MOCN Service Agreement compounds the effect of the Spectrum Authorisation Agreement on Optus’s competitive position – the additional spectrum gives Telstra a significant cost benefit, while the MOCN service increases the risk of Optus losing market share to TPG. Those competitive effects would detrimentally affect [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. As discussed in the context of the Proposed Conduct, over time the network quality gap between Telstra’s network and Optus’s network would be likely to increase. As a consequence, the competitive constraint that Optus currently imposes on Telstra would be likely to weaken, which would enable Telstra to increase prices and margins. The reduction in competitive constraint would also reduce the pressure that Telstra faces to invest in and upgrade its network. As such, the lessening of competitive constraints would be likely to lead to a reduction in productive and dynamic efficiency to the detriment of Australian consumers.

3. As stated in the preceding section concerning the competitive effects of the Proposed Conduct, the Tribunal’s concern is the protection of competition in the mobile telecommunications markets (at the retail and wholesale levels) and not the protection of Optus as a competitor in those markets. However, the Tribunal considers that a material reduction in the competitive constraint able to be imposed by Optus would be likely to have the effect of substantially lessening competition.

4. As noted above, the assessment of the likely competitive effects of the Proposed Transaction is more complex than for the Proposed Conduct alone. The anti-competitive elements of the Proposed Transaction must be balanced against its pro-competitive elements. The Tribunal recognises the initial pro-competitive elements of the Proposed Transaction, principally being the improved competitive position of TPG. The Tribunal also acknowledges the submissions that were made to the ACCC by certain consumer, industry and governmental associations in favour of the Proposed Transaction because they perceived that TPG would be able to provide a better competing mobile service in regional areas. However, the Tribunal also considers that the Proposed Transaction would be likely to cause substantial competitive harm to Optus which in turn would be likely to cause a substantial reduction in the competitive constraint provided by Optus in the retail and wholesale mobile service markets. This is likely to lead to a reduction in economic efficiency to the detriment of Australian consumers over time.

5. On balance, the Tribunal is not satisfied that the Proposed Transaction would not have the effect, or would not be likely to have the effect, of substantially lessening competition in the mobile telecommunications market at both the retail and wholesale levels. Again, given that conclusion, it is unnecessary for the Tribunal to consider the competitive effects in any other markets.

   I.        THE TRIBUNAL’S ASSESSMENT OF PUBLIC BENEFITS AND DETRIMENTS

   The net public benefit test for the grant of authorisation

6. Section 90(7)(b) stipulates that the ACCC must not grant authorisation in relation to conduct unless it is satisfied in all the circumstances that the conduct would result, or be likely to result, in a benefit to the public and the benefit would outweigh the detriment to the public that would result, or be likely to result, from the conduct. The meaning of the test has been discussed earlier in these reasons. The Tribunal reiterates that:

   (a)a benefit to the public includes anything of value to the community generally, any contribution to the aims pursued by society including as one of its principal elements (in the context of trade practices legislation) the achievement of the economic goals of efficiency and progress;

   (b)a detriment to the public includes any impairment to the community generally, any harm or damage to the aims pursued by the society including as one of its principal elements the achievement of the goal of economic efficiency; and

   (c)a claimed benefit may in fact be judged to be a detriment when viewed in terms of its contribution to a socially useful competitive process.

7. For the same reasons and in the same manner as undertaken in respect of the competition test for authorisation, the Tribunal applies the public benefit test for authorisation to Telstra’s use of TPG’s spectrum under the Spectrum Authorisation Agreement (the Proposed Conduct). That assessment is undertaken in light of all relevant circumstances, which includes the MOCN Service Agreement and the Mobile Site Transition Agreement. But the assessment does not involve weighing the public benefits and detriments likely to result from those other agreements. Against the possibility that the Tribunal’s understanding of its statutory task is incorrect, the Tribunal has also applied the public benefit test for authorisation to the Proposed Transaction as a whole. Ultimately, it has reached the same determination on both approaches.

8. In the present application, the Tribunal’s assessment of the public benefit test for authorisation can be stated relatively briefly. The claimed public benefits are largely focussed on the competitive effects of the Proposed Conduct and the Proposed Transaction and claimed efficiency gains. For the reasons expressed in the preceding section, the Tribunal considers that the competitive effects of the Proposed Conduct and the Proposed Transaction are negative. The anti-competitive effects are likely to reduce economic efficiency, particularly over time. It is therefore necessary to assess whether the claimed efficiency gains from the Proposed Conduct and the Proposed Transaction outweigh the likely reduction in efficiency associated with the reduction in competition.

   Would the Proposed Conduct be likely to result in a net public benefit?

9. A number of the public benefits that the applicants claim would result from the Proposed Transaction relate to Telstra’s use of TPG’s spectrum under the Spectrum Authorisation Agreement. Those claimed public benefits are:

   (a)economic and consumer benefits of reduced mobile congestion and improved network quality in regional areas;

   (b)cost savings to Telstra from avoiding the costs of building new mobile sites in the RCZ, thereby generating productive efficiencies; and

   (c)bringing forward Telstra’s 5G rollout in regional areas by freeing up capital that otherwise would be directed to providing infill coverage to address congestion issues.

10. The Tribunal accepts that Telstra’s access to additional spectrum under the Spectrum Authorisation Agreement would be likely to result in productive efficiency gains as discussed by Ms Ihaia and Dr Padilla. The additional spectrum would enable Telstra to increase the capacity and speed of its mobile network in the RCZ and beyond for lower cost compared with a counterfactual in which it does not have access to that additional spectrum. That productive efficiency gain is a public benefit, even if the cost savings are retained by Telstra and not passed on to consumers in the form of lower prices.

11. The Tribunal does not accept, though, that Telstra’s access to additional spectrum under the Spectrum Authorisation Agreement would be likely to result in a material improvement in Telstra’s network capacity and speed in comparison to a counterfactual in which it does not have access to that additional spectrum. As recognised in Telstra’s internal analysis and public statements in respect of the Proposed Transaction, spectrum is a more cost-efficient capacity augmentation option. Telstra has the resources to overcome congestion issues in its network without the Spectrum Authorisation Agreement, albeit at a higher capital (and opex) cost, by investing in additional mobile sites.

12. In the Tribunal’s view, the productive efficiency gains likely to result from Telstra’s access to additional spectrum under the Spectrum Authorisation Agreement are outweighed by the public detriment associated with the lessening of competition that is likely to result from that conduct. As discussed in the preceding section of these reasons, the competitive benefits that Telstra would derive from its use of TPG’s spectrum would be likely to [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. Over time, the network quality gap between Telstra’s network and Optus’s network would be likely to increase and the competitive constraint that Optus currently imposes on Telstra would be likely to weaken. This is likely to lead to a reduction in productive, allocative and dynamic efficiency to the detriment of Australian consumers. Telstra would have an enhanced ability to increase prices and margins and the reduction in competitive constraint would also reduce the pressure that Telstra faces to invest in and upgrade its network.

13. In the assessment of the efficiency consequences of the Proposed Conduct, the Tribunal places more weight on medium term consequences in comparison to short term consequences. The Tribunal accepts that the immediate and short terms consequences of the Proposed Conduct may be to improve the quality of Telstra’s network in the RCZ and beyond, which would deliver an immediate service benefit to consumers. The negative effects are likely to be experienced over the medium term, [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. Competition would be reduced with the likely result of a reduction in economic efficiency. Over the medium term, consumers would bear the cost of that reduction, paying higher prices for their mobile services and receiving a lower quality network than would be the case in a more competitive market environment.

14. Having regard to the foregoing, the Tribunal is not satisfied that the Proposed Conduct would result, or be likely to result, in a benefit to the public which would outweigh the detriment to the public that would result, or be likely to result, from that conduct.

    Would the Proposed Transaction be likely to result in a net public benefit?

15. The applicants contend that the Proposed Transaction would give rise to a number of additional public benefits additional to those that result from the Proposed Conduct. They are as follows:

    (a)increased competition in wholesale and retail mobile markets comprising: a reduction in quality-adjusted pricing by increased pricing pressure from TPG; improvements in the service quality of Telstra and TPG in regional areas; an increase in the incentives for, and ability of, TPG to invest in its core network and its network in metropolitan areas, as well as to innovate in its service and product offerings;

    (b)the more efficient use of mobile infrastructure in rural and regional Australia through the pooling of spectrum and the sharing of Telstra’s RAN, thereby avoiding duplication in investment between Telstra and TPG and reducing capital and operating expenditure costs, which cost savings are likely to be substantially passed onto consumers;

    (c)bringing forward Telstra’s 5G rollout in regional areas by freeing up capital that otherwise would be directed to providing infill coverage to address congestion issues; and 

    (d)environmental benefits associated with the reduced need for site duplication in the RCZ.

16. As discussed earlier in these reasons, the Tribunal does not accept that Telstra’s planned T25 coverage expansions would be likely to be accelerated because the Proposed Transaction frees up capex and resources that would otherwise have been used to address network congestion. The Tribunal does not accept that Telstra’s T25 strategy is dependent upon the Proposed Transaction or any aspect of it. However, the Tribunal does accept that the Proposed Transaction would be likely to result in a number of public benefits. Those public benefits include the productive efficiency gains from Telstra’s access to additional spectrum under the Spectrum Authorisation Agreement, as discussed in the preceding section. The public benefits also include the following (which are elaborated on in Ms Ihaia’s report):

    (a)TPG’s enhanced ability to provide 5G services in the RCZ would be likely to generate dynamic efficiencies through greater innovation in 5G service offerings; and

    (b)the decommissioning of at least 550 TPG mobile sites in the RCZ would generate further productive efficiency gains and environmental benefits.

17. The relevant question for the Tribunal is whether those public benefits outweigh the public detriments that would result from the lessening of competition in the wholesale and retail mobile markets, which the Tribunal has found is likely to result from the Proposed Transaction. Although the question is more finely balanced than with respect to the Proposed Conduct, the Tribunal considers that, over the medium term, the lessening of competition would be likely to generate efficiency losses that outweigh any efficiency (and environmental) gains from the Proposed Transaction.

18. As discussed above, the Proposed Transaction would materially strengthen the competitive position in the mobile services markets of both Telstra and TPG, and correspondingly would have a substantial detrimental effect on Optus’s competitive position in the mobile services markets. This would be likely to [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. Over time the network quality gap between Telstra’s network and Optus’s network would be likely to increase, and the competitive constraint that Optus currently imposes on Telstra would be likely to weaken. The reduction in competitive constraint would enable Telstra to increase prices and margins and would also reduce the pressure that Telstra faces to invest in and upgrade its network. As such, the lessening of competitive constraints would be likely to lead to a reduction in economic efficiency to the detriment of Australian consumers.

19. Having regard to the foregoing, the Tribunal is not satisfied that the Proposed Transaction would result, or be likely to result, in a benefit to the public which would outweigh the detriment to the public that would result, or be likely to result, from that conduct.

    J.        THE PROPOSED UNDERTAKINGS

20. To address perceived deficiencies in their application for authorisation, the applicants have offered to give the ACCC a joint undertaking pursuant to s 87B of the CCA in relation to the Proposed Transaction, and TPG has offered to give the ACCC a separate undertaking relating to its mobile site infrastructure. Collectively, the undertakings contain three substantive promises. It is convenient to consider each in turn.

    Interdependence of the Proposed Transaction agreements

21. Clause 4 of the proposed joint undertaking concerns the interdependence of the Proposed Transaction agreements. The apparent object of the undertaking is to address the concern, raised by the Tribunal with the applicants, that their application for authorisation depends upon the claimed competition and efficiency benefits arising from the MOCN Service Agreement and the Mobile Site Agreement, but those agreements are not the subject of the application for authorisation and the applicants would be free to vary them in the future without affecting any grant of authorisation. Clause 4 of the proposed joint undertaking requires the applicants to implement, and to continue to give full force and effect to, the MOCN Service Agreement and the Site Agreement, and to not materially amend those agreements except in accordance with their terms or otherwise with the prior consent of the ACCC. The clause also requires the applicants to terminate the Spectrum Authorisation Agreement if the MOCN Service Agreement is terminated at any time.

22. For reasons explained earlier, the Tribunal considers that s 90(7) requires that the authorisation preconditions be applied to the Proposed Conduct (Telstra’s use of TPG’s spectrum under the Spectrum Authorisation Agreement) and not to the Proposed Transaction. The required assessment must be undertaken in light of all relevant circumstances, which includes the MOCN Service Agreement and the Mobile Site Transition Agreement, but the assessment does not involve weighing the likely competitive effects of, and public benefits and detriments likely to result from, those other agreements.

23. In the Tribunal’s view, the effect of s 90(7) is not altered by cl 4 of the proposed joint undertaking. Clause 4 does not have the effect that the conduct that is sought to be authorised includes the making and giving effect to the MOCN Service Agreement and the Mobile Site Transition Agreement. Even without the proposed undertaking, the Tribunal accepts that, if the Spectrum Authorisation Agreement is authorised and is given effect to, the applicants are also likely to give effect to the MOCN Service Agreement and the Mobile Site Transition Agreement. However, that does not lead to the conclusion that the effects of, and benefits and detriments resulting from, those latter agreements are the effects of, and benefits and detriments resulting from, the Spectrum Authorisation Agreement. In any event, the Tribunal has concluded that the Proposed Transaction assessed as a whole does not satisfy the conditions for authorisation in s 90(7).

24. For those reasons, cl 4 of the proposed joint undertaking does not alter the Tribunal’s conclusion on the application.

    Further authorisation in 8 years

25. By cl 5 of the proposed joint undertaking, the applicants would be required to cease giving effect to the Proposed Transaction agreements (save for the transition out arrangements) unless within 8 years of authorisation the applicants have received informal approval of the agreements from the ACCC or formal authorisation from the ACCC or the Tribunal. The apparent purpose and effect of the undertaking is to shorten the period of the authorisation, and to enable the Proposed Transaction to be reconsidered by the ACCC in 8 years’ time. At that time, the competitive effects of the Proposed Transaction could be assessed by the ACCC to determine whether the arrangements should receive ongoing approval.

1. The Tribunal has earlier noted that the application for authorisation that has been sought by the applicants is effectively unlimited as to time, and therefore covers the potential 20 year term of the MOCN Service Agreement. That is a lengthy period of time in which substantial and irreversible harm to competition may occur. The Tribunal acknowledges that cl 5 of the proposed joint undertaking addresses that problem to some extent, by requiring a re-assessment in 8 years’ time. However, the Tribunal does not consider that the undertaking changes its overall assessment under s 90(7) of the CCA. The Tribunal assesses that, over an 8 year period, there is a real commercial likelihood that Optus’s competitive position in the mobile services markets will suffer substantial harm. Recovery may not be possible and, even if possible, may take a very substantial period of time. For that reason, cl 5 of the proposed joint undertaking does not alter the Tribunal’s conclusion on the application.

2. The Tribunal wishes to record, however, that the duration of a commercial arrangement such as the MOCN Service Agreement is relevant to any assessment of competitive effects and public benefits and detriments. An agreement of shorter duration, or an authorisation of shorter duration, would provide a degree of protection against anti-competitive outcomes in two ways. First, it would enable an assessment of competitive effects of an arrangement to be made at an earlier point of time, and a withdrawal of authorisation if competition had been substantially harmed. Second, it may facilitate wholesale competition for the right to supply the MOCN service from network providers at regular intervals.

   Maintaining licences for TPG’s mobile sites

3. TPG’s proposed undertaking concerns some of the mobile sites in the RCZ that it proposes to decommission if the Proposed Transaction proceeds. As noted earlier, TPG plans to transition 169 of its sites to Telstra pursuant to the Mobile Site Transition Agreement and also plans to decommission the remaining 580 sites to which it has access in the RCZ. By its proposed undertaking, TPG commits to refrain from terminating any licence or lease in respect of 300 identified mobile sites, subject to a number of exceptions. The undertaking does not require TPG to renew a licence or lease that expires. The apparent purpose of the undertaking is to address a concern (stated by the ACCC) that, following the decommissioning of sites, the threat of future network expansion by TPG in the RCZ will be diminished.

4. The Tribunal has earlier stated that it regards any consideration of TPG’s competitive strategy after the initial 10 year period of the MOCN Service Agreement, including any potential for TPG to rebuild its mobile network in the RCZ at that time, as a speculative exercise. For that reason, TPG’s proposed undertaking does not alter the Tribunal’s conclusion on the application.

   K.       DETERMINATION

5. The applicants have applied for authorisation “for the contractual authorisation of Telstra (pursuant to the Spectrum Authorisation Agreement) to operate radiocommunications devices under TPG’s spectrum licences”. That conduct has been referred to in these reasons as the Proposed Conduct.

6. The Tribunal has applied the authorisation preconditions stated in s 90(7) to the Proposed Conduct and has assessed the likely competitive effects of, and public benefits and detriments likely to result from, that conduct which is the subject of the application for authorisation. That assessment has been undertaken in light of all relevant circumstances, which includes the MOCN Service Agreement and the Mobile Site Transition Agreement. But the assessment does not involve weighing the likely competitive effects of and public benefits and detriments likely to result from those other agreements.

7. For the reasons stated above, the Tribunal is not satisfied, in all the circumstances, that the Proposed Conduct, being the conduct for which authorisation was sought:

   (a)would not have the effect or be likely to have the effect of substantially lessen competition; or

   (b)would result, or be likely to result in, a benefit to the public that would outweigh the detriment to the public that would result or be likely to result from the Proposed Conduct.

8. Therefore, the Tribunal affirms the determination of the ACCC refusing to make a determination granting authorisation to the Proposed Conduct under s 88(1) of the Act.

9. Against the possibility that the Tribunal’s understanding of its statutory task is incorrect, the Tribunal has also applied the authorisation preconditions stated in s 90(7) to the Proposed Transaction as a whole. Ultimately, it has reached the same determination on both approaches.

10. The Tribunal wishes to record that its determination relates to the Proposed Conduct and the Proposed Transaction in its present form. The Tribunal’s determination should not be understood as suggesting that network sharing arrangements between the MNOs would always have the effect of substantially lessening competition, or that they would always give rise to net public detriments.

11. The MNOs in Australia have historically shared aspects of their networks. The commercial and economic benefits of mobile network infrastructure sharing are readily apparent. This is particularly so in regional areas. The ACCC found that, since the inception of mobile technology in Australia, regional and rural investment has been considered by MNOs to be a challenge, and often not commercially viable. Due to lower expected returns on network investment in regional and remote areas versus metropolitan areas, the commercial incentives to deploy network infrastructure in these areas are typically lower than in metropolitan areas. Those findings were common ground before the Tribunal. The evidence before the Tribunal indicates that each of Optus and TPG face significant impediments to expanding regional coverage. Those impediments arise from their relative scale (in comparison to Telstra) and the TSSR guidance which requires them to replace Huawei equipment in their networks.

12. The Tribunal considers that there are strong commercial and economic incentives for the MNOs to share mobile network infrastructure in regional areas, and appropriately structured arrangements are capable of delivering efficiency benefits without substantially lessening competition. This determination should not be understood as indicating a contrary conclusion.

I certify that the preceding seven hundred and twenty-six (726) numbered paragraphs are a true copy of the Reasons for Determination of the Honourable Justice O'Bryan, Dr Jill Walker and Ms Diana Eilert.

Associate:

Dated:       21 June 2023