AUSTRALIAN COMPETITION TRIBUNAL

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

IN THE AUSTRALIAN COMPETITION TRIBUNAL

DETERMINATION

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

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 Act 2010 (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).

9    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.

10    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.

11    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.

12    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.

13    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.

14    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].

15    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

16    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.

17    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.

18    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.

The application for review

19    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.

20    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.

21    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.

22    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.

23    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).

24    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).

25    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.

26    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.

27    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.

28    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.

29    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.

30    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

31    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.

32    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

33    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.

34    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.

35    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

36    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 Agreement6 (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

37    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.

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

MOCN Service Agreement

39    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

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

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

42    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.

43    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

44    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.

45    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].

46    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

47    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

48    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

49    [REDACTED].26 [REDACTED].27 [REDACTED].28

50    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

51    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

Spectrum Authorisation Agreement

52    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

53    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

54    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

55    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

56    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

57    [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

58    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

59    [REDACTED].42

60    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

Mobile Site Transition Agreement

61    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

62    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

63    [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

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

65    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

The application for authorisation

66    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.

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

68    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.

69    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.

70    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”.

71    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”.

72    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).

73    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).

74    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.

75    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.

76    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…

77    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.

78    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).

79    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

80    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.

81    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

82    The proposed joint undertaking contains two substantive promises.

83    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.

84    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.

85    The second substantive promise is contained in cl 5. It provides as follows:

The Undertaking Signatories commit to cease giving effect to the Agreements, except to the extent necessary to give effect to the Transition-Out Period, unless by 8 years from the date that the original authorisation of the Spectrum Transaction takes effect:

(a)     the Undertaking Signatories have received, either unconditionally or on terms and conditions that are acceptable to both of the Undertaking Signatories acting reasonably, a notice in writing from the ACCC stating, or stating to the effect, that the ACCC does not propose to intervene or seek to prevent the parties from continuing to give effect to the Agreements; or

(b)     the ACCC or Australian Competition Tribunal has made a final determination to grant authorisation pursuant to Part VII, Division 1 of the Act, the effect of which is to grant the Undertaking Signatories authorisation to continue giving effect to the Agreements:

(i)     on an unconditional basis; or

(ii)     subject to conditions which are, in the reasonable opinion of the Undertaking Signatories, acceptable.

86    The undertaking proffered in cl 5 was also proffered by the applicants to the ACCC, but was not accepted by the ACCC. The effect of the undertaking in cl 5 is that 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 TPG undertaking

87    The TPG undertaking contains one substantive promise contained in cl 3 as follows:

3.1     TPG commits to refrain from:

(a)    terminating any licence or lease (a Licence) pursuant to which TPG is granted access to one or more of the 300 mobile sites (Retained Site) set out in Annexure A, each of which is within the Regional Coverage Zone; or

(b)    taking any action that causes TPG to commit a breach of any Licence that would entitle the licensor or landlord of a Retained Site (Licensor) to terminate the Licence,

unless

(c)     the Licensor is in breach of the Licence and, in consequence, TPG is entitled to terminate the Licence;

(d)     the ACCC consents in writing to TPG terminating a Licence or taking any action that would entitle the Licensor to terminate the Licence; or

(e)     a period of eight years has elapsed since the original authorisation of the Proposed Transaction took effect.

3.2     For the avoidance of doubt, nothing in this Undertaking:

(a)     requires TPG to renew a Licence that expires;

(b)     prevents a Licensor from terminating a Licence; or

(c)     prevents TPG from terminating a Licence for reasons outside of its control or where required by law.

88    As noted above, TPG currently has access to 749 mobile sites in the RCZ. If the Proposed Transaction proceeds, TPG plans to transition 169 of those 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. TPG offered the undertaking, which relates to 300 of the 580 sites proposed to be decommissioned by TPG, 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.

C.    STATUTORY FRAMEWORK FOR THE TRIBUNAL’S REVIEW

Introduction

89    The statutory framework governing the grant of authorisations by the ACCC under Pt VII of the CCA, and the review by the Tribunal of ACCC authorisation determinations under Pt IX of the CCA, were amended in material ways by the Competition and Consumer Amendment (Competition Policy Review) Act 2017 (Cth) (2017 Amendment Act). Those amendments, including the relevant legislative history, were outlined in Re Telstra/TPG (No 1).54

90    As stated in the Explanatory Memorandum accompanying the Competition and Consumer Amendment (Competition Policy Review) Bill 2017 (2017 Explanatory Memorandum), the amendments largely implemented the recommendations of the Competition Policy Review chaired by Prof Ian Harper (referred to as the Harper Review). While many aspects of the pre-existing statutory framework governing authorisations were maintained, two significant changes were made to the authorisation regime in order to simplify it:

(a)    first, a single authorisation application could be made for a single business arrangement or transaction (with the application specifying the conduct that was the subject of the application for authorisation); and

(b)    second, the ACCC was empowered to grant authorisation on the basis that the conduct would not be likely to substantially lessen competition (in addition to the pre-existing basis that the likely benefits of the conduct would outweigh the likely detriments).55

91    To a large extent, there was no dispute between the parties as to the relevant statutory requirements governing the grant of authorisation by the ACCC under Pt VII of the CCA and the review by the Tribunal of ACCC authorisation determinations under Pt IX of the CCA. The following description of those requirements is, accordingly, uncontroversial. As already foreshadowed, however, there is one significant legal controversy that arises on this review. It concerns the proper application of the statutory preconditions for authorisation in s 90(7) of the CCA in respect of the conduct for which authorisation has been sought by the applicants. The ACCC determination, and the submissions of the applicants on this review, proceed on the basis that the task of the Tribunal is to assess whether the Proposed Transaction as a whole, rather than the Proposed Conduct (which comprises only part of the Proposed Transaction), satisfies the statutory preconditions for authorisation. For the reasons explained below, the Tribunal considers that such an approach is erroneous.

92    Consistently with s 42(1) of the CCA, the following discussion of the statutory framework for the Tribunal’s review has been written by the presidential member of the Tribunal.

Power to grant authorisation

93    Following its amendment by the 2017 Amendment Act, s 88 of the CCA, within Div 1 of Pt VII, relevantly provides as follows:

Granting an authorisation

(1)     Subject to this Part, the Commission may, on an application by a person, grant an authorisation to a person to engage in conduct, specified in the authorisation, to which one or more provisions of Part IV specified in the authorisation would or might apply.

Note: For an extended meaning of engaging in conduct, see subsection 4(2).

Effect of an authorisation

(2)     While the authorisation remains in force, the provisions of Part IV specified in the authorisation do not apply in relation to the conduct to the extent that it is engaged in by:

(a)     the applicant; and

(b)     any other person named or referred to in the application as a person who is engaged in, or who is proposed to be engaged in, the conduct; and

(c)     any particular persons or classes of persons, as specified in the authorisation, who become engaged in the conduct.

Conditions

(3)     The Commission may specify conditions in the authorisation. Subsection (2) does not apply if any of the conditions are not complied with.

(4)     Without limiting subsection (3), the Commission may grant a merger authorisation on the condition that a person must give, and comply with, an undertaking to the Commission under section 87B.

Single authorisation may deal with several types of conduct

(5)     The Commission may grant a single authorisation for all the conduct specified in an application for authorisation, or may grant separate authorisations for any of the conduct.

…

94    Section 90(1) stipulates that, in respect of an application for an authorisation, the ACCC shall either make a determination in writing granting such authorisation as it considers appropriate or make a determination in writing dismissing the application. Following amendments made by the 2017 Amendment Act, s 90(7) relevantly provides as follows:

The Commission must not make a determination granting an authorisation under section 88 in relation to conduct unless:

(a)     the Commission is satisfied in all the circumstances that the conduct would not have the effect, or would not be likely to have the effect, of substantially lessening competition; or

(b)     the Commission is satisfied in all the circumstances that:

(i)     the conduct would result, or be likely to result, in a benefit to the public; and

(ii)     the benefit would outweigh the detriment to the public that would result, or be likely to result, from the conduct;

…

95    The expressions “to engage in conduct” or “engaged in conduct” in s 88, and the word “conduct” in s 90, are defined by s 4(2) of the CCA as follows:

(2)     In this Act:

(a)     a reference to engaging in conduct shall be read as a reference to doing or refusing to do any act, including the making of, or the giving effect to a provision of, a contract or arrangement, the arriving at, or the giving effect to a provision of, an understanding or the engaging in of a concerted practice;

(b)     a reference to conduct, when that expression is used as a noun otherwise than as mentioned in paragraph (a), shall be read as a reference to the doing of or the refusing to do any act, including the making of, or the giving effect to a provision of, a contract or arrangement, the arriving at, or the giving effect to a provision of, an understanding or the engaging in of a concerted practice;

…

96    The 2017 Explanatory Memorandum confirms that the purpose of the amendments made by the 2017 Amendment Act was to significantly simplify the authorisation provisions by removing separate provisions applicable to specific types of authorisations, and instead including a single provision under which conduct may be authorised (s 88) and a single test for authorisation (s 90).56

97    The amended authorisation regime in Pt VII of the CCA serves two important purposes. First, it enables market participants to obtain legal certainty that their proposed business conduct will not contravene the prohibitions in Pt IV of the CCA by satisfying the ACCC that the proposed conduct would not have the effect or would not be likely to have the effect of substantially lessening competition. Second, in circumstances where proposed business conduct may contravene the prohibitions in Pt IV of the CCA, it enables market participants to gain exemption from the prohibitions by satisfying the ACCC 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. As observed by the Harper Review:

Competition is desirable not for its own sake but because, in most circumstances, it improves the welfare of Australians by increasing choice, diversity and efficiency in the supply of goods and services. In other words, competition is a means to an end. In some circumstances, arrangements that lessen competition may nonetheless produce public benefits that outweigh the detriment resulting from the lessening of competition.57

98    It can be seen that s 88(1) empowers the ACCC to grant an authorisation to a person to engage in conduct, specified in the authorisation, to which one or more provisions of Pt IV specified in the authorisation would or might apply. The conduct may involve entering into and implementing more than one contract, being contracts to which one or more provisions of Pt IV may apply (including s 50). The effect of s 88(2) is that, while the authorisation remains in force, those provisions of Pt IV do not apply to the conduct (specified in the authorisation) to the extent it is engaged in by the applicant for authorisation, any other person named or referred to in the application as a person who is engaged in or who is proposed to be engaged in the conduct, and any other particular persons or classes of persons, as specified in the authorisation, who become engaged in the conduct. The plain meaning of s 88(2) is confirmed by the 2017 Explanatory Memorandum: an authorisation provides protection for the conduct, and in respect of the statutory prohibitions in Pt IV, specified in that authorisation – but the protection does not extend to conduct not specified in the authorisation or to provisions of Pt IV that may also apply to the conduct but which have not been specified in the authorisation.58

99    The statutory preconditions for the grant of authorisation specified in s 90(7) are directed to the conduct that is the subject of the application for authorisation under s 88. Section 90(7) prohibits the grant of authorisation unless the ACCC is satisfied that the conduct would not have the effect, or would not be likely to have the effect, of substantially lessening competition or that the conduct would result, or be likely to result, in a net benefit to the public. The word “satisfied” in the context of an administrative decision is not amenable to the application of an evidentiary burden of proof, such as balance of probabilities.59 The absence of an evidentiary burden of proof, however, does not mean that there is an absence of a legal standard of satisfaction. In respect of s 90(7), satisfaction requires that the ACCC reach an affirmative belief that the conduct would not have the effect, or would not be likely to have the effect, of substantially lessening competition or that the conduct would result, or be likely to result, in a net benefit to the public. The meaning of the competition test for the grant of authorisation stated in s 90(7)(a), and the net public benefit test for the grant of authorisation stated in s 90(7)(b), are discussed further below.

100    As discussed in Re Telstra/TPG (No 1),60 significant changes were also made to the authorisation regime governing merger transactions. The 2017 Amendment Act repealed the formal merger clearance and authorisation provisions contained in Div 3 of Pt VII. Merger transactions are now subject to the general authorisation process in s 88, with the decision-maker at first instance being the ACCC, and are subject to the same statutory preconditions for authorisation stated in s 90(7). However, the 2017 Amendment Act enacted a limited number of specific requirements for “merger authorisations” which differ from other authorisations, including that:

(a)    if the ACCC does not determine an application for a merger authorisation within a 90 day period (which may be extended under s 90(12)), the ACCC is taken to have refused the application (s 90(10B));

(b)    a review by the Tribunal of an ACCC determination in relation to a merger authorisation must be completed within 90 days (s 102(1AC), which may be extended in certain circumstances; and

(c)    a review by the Tribunal of an ACCC determination in relation to a merger authorisation is not a re-hearing (s 101(2)) and restrictions are imposed on the information, documents and evidence to which the Tribunal may have regard (s 102(8) to (10)).

101    As explained in the 2017 Explanatory Memorandum, shorter timeframes are set for determining merger authorisations compared with non-merger authorisations because of the commercial sensitivity of merger authorisations.61 The same rationale applies in respect of a review by the Tribunal of a merger authorisation. The 2017 Explanatory Memorandum included the following explanation:

The limitations on the information that may be considered by the Tribunal appropriately balance the interests of all parties to a review of a merger authorisation matter. In particular, they are intended to ensure that applicants for merger authorisation provide the Commission with all relevant material at the time of the application, and do not delay production of that material until later in the process or until Tribunal review. The limitations also facilitate the Tribunal conducting its review expeditiously, given the time sensitive nature of merger transactions.62

102    As set out earlier in these reasons, the expression “merger authorisation” is defined in s 4 of the CCA as follows:

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.

103    It can be seen that the expression “merger authorisation” is defined as a specific category of authorisation by reference to the conduct that is the subject of the application. It is confined to an application for authorisation in respect of conduct to which ss 50 or 50A would or might apply but not any other conduct to which any other provision of Pt IV would or might apply. Thus, if a person applies for authorisation of a business transaction that involves conduct to which s 50 would or might apply (being an acquisition of shares or assets) and that also involves conduct to which other provisions of Pt IV would or might apply (such as an accompanying service agreement or joint venture agreement), the authorisation is not a “merger authorisation” within the meaning of the CCA.

104    Significantly, though, whether a particular transaction is or is not a “merger authorisation”, the application for authorisation is made under s 88(1), the effect of authorisation is as stated in s 88(2), and the preconditions for the grant of authorisation are as stated in s 90(7).

105    In the present matter, the applicants sought authorisation only for Telstra’s use of TPG’s spectrum under the Spectrum Authorisation Agreement, and did not 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 satisfied the definition of a “merger authorisation” in s 4 of the CCA. This has the effect that the application for authorisation is subject to, amongst other things, statutory time limits.

The review of the ACCC’s determination

106    Section 101 of the CCA, within Div 1 of Pt IX, provides that a person dissatisfied with a determination by the ACCC under Div 1 of Pt VII may apply to the Tribunal for a review of the determination. On a review of a determination of the ACCC in relation to an application for an authorisation, the Tribunal may make a determination affirming, setting aside or varying the determination and, for the purposes of the review, may perform all the functions and exercise all the powers of the ACCC: s 102(1). A determination by the Tribunal affirming, setting aside or varying a determination of the ACCC is taken to be a determination of the ACCC: s 102(2).

107    For the reasons explained in Re Telstra/TPG (No 1),63 in conducting a review of a merger authorisation determination by the ACCC, the Tribunal is not conducting a re-hearing (see s 101(2)). Rather, the Tribunal must conduct a review of the ACCC’s determination, making its own decision with respect to the application of the applicable statutory criteria in s 90(7) having regard to only that material that is enumerated in s 102(10).

108    Although the Tribunal’s review is not a re-hearing in the sense of conducting a de novo review, the nature of the task being performed by the Tribunal on the review of a merger authorisation determination are largely the same as on a review of non-merger authorisations. The Tribunal must “make its own findings of fact and reach its own decision as to whether authorisation should be granted or not and, if so, any conditions to which it is to be subject”.64 That function is not performed by considering “whether the ACCC was right or wrong in the conclusion it reached or whether it could have better formulated its determination”.65 Further, the role of the Tribunal in conducting the review is not confined by the issues raised by the parties to the review and the Tribunal must determine itself whether the statutory test for authorisation is satisfied. However, as observed by the Tribunal (Deane J, Mr J Shipton and Mr J Walker) in Re Herald & Weekly Times Ltd (Media Council of Australia),66 “[t]he published reasons for determination of the Commission may, in an appropriate case, prove a convenient reference point for defining the matters which are truly in dispute between all or any of the Commission, the applicants, and other parties represented, or interested, in the proceedings”. Further, where the parties agree with factual findings made by the ACCC in its determination, ordinarily the Tribunal need not itself examine the facts in detail. As explained by the Tribunal (von Doussa J, Dr B Aldrich, Prof D Round) in Re 7-Eleven Stores Pty Ltd:67

In curial proceedings based on the adversarial system, the role of a court is to determine issues identified by the parties, usually in pleadings. Proceedings before the Tribunal are not adversarial in nature, and the role of the Tribunal is not merely to resolve issues in dispute between the parties. It is an administrative tribunal with a much wider role. It is required to determine whether anti-competitive conduct or anti-competitive provisions in a contract, arrangement or understanding that would otherwise be unlawful, should, in the public interest, be authorised because the public benefit outweighs the detriment constituted by any lessening of competition. Determinations of the Tribunal are likely to impact on the commercial interests of many people who are not participants in the proceedings before the Tribunal.

Notwithstanding the positions taken by the parties in this case, the Tribunal in the exercise of its statutory functions, must consider each of the issues arising under [the applicable statutory provisions] which precede a consideration of the terms and duration of the further authorisation granted by the determinations under review. On these essential steps, the Tribunal must reach its own conclusions. It must make its own assessment of both benefit and detriment.

However, where the applicants and other parties participating in proceedings before the Tribunal agree with findings on factual matters set out in the Commission's published reasons for determination, the Tribunal would ordinarily be justified in treating those findings as common ground which significantly limits the areas of primary fact which the Tribunal is itself required to examine in detail; see Re Herald & Weekly Times Ltd (Media Council of Australia (No 1)) (1978) ATPR ¶40-058 at 17,601; (1978) 17 ALR 281 at 296 where the Tribunal (Deane J, President, Shipton and Walker, Members) observed that fairness and common sense combine to require that the Tribunal determine an application for review within the context of matters which can properly be seen to be in issue between the parties or which the Tribunal itself raises or indicates that it regards as being at large.

109    In the present proceeding, the Tribunal directed the parties to confer and file a joint statement 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. The parties filed a joint statement on 11 March 2023. At the hearing of the review, the Tribunal informed the parties that, based on the SOFIC and submissions filed by the parties, there appeared to be many more factual matters set out in the ACCC’s reasons for determination that were not only not being contested by the parties but were supported by the parties. In response to the Tribunal’s request, on 11 May 2023 the parties filed an amended joint statement.

110    The Tribunal records its appreciation of the efforts made by the parties to agree a large body of background factual matters that are recorded in the ACCC’s reasons for determination. That enabled the Tribunal to focus its attention on the issues that are truly in dispute between the parties and the application of the statutory conditions for authorisation to the relevant facts. It has also greatly confined the material that the Tribunal has needed to consider in order to reach its decision. The cooperative approach of the parties is particularly important in the context of a review of a merger authorisation in which the Tribunal is required to make a decision within a confined time period.

Statutory preconditions for authorisation

Section 90(7)(a) – the competition test

111    The precondition for the grant of authorisation stated in s 90(7)(a) is that the ACCC is satisfied in all the circumstances that the conduct (the subject of the application for authorisation) would not have the effect, or would not be likely to have the effect, of substantially lessening competition. As noted in the 2017 Explanatory Memorandum, the competition test is a new basis for granting authorisation, following the recommendation of the Harper Review.68 The competition test for the grant of authorisation adopts the language of the competition based prohibitions in s 45, 46, 47 and 50 of the CCA, save that it is expressed in the negative and is focussed only on the effect of the conduct (and not its purpose). It follows that the established legal principles concerning the meaning of the words “likely effect of substantially lessening competition” are directly applicable to the competition test for authorisation. The summary of those principles that follows largely draws upon the discussion of the Full Federal Court in Australian Competition and Consumer Commission v Pacific National Pty Ltd.69

112    The meaning of the word “competition” in the CCA is well established, if somewhat difficult to state in a short form. The meaning given to the word has not altered in any material way since the first decision of the (then named) Trade Practices Tribunal in Re Queensland Co-operative Milling Association Ltd.70 As the Tribunal (Woodward J, Mr Shipton and Dr Brunt) there observed, competition (in a business or economic sense) is a rich concept containing a number of ideas.71 It remains helpful to repeat the oft-cited statements of the Tribunal in QCMA:72

Competition may be valued for many reasons as serving economic, social and political goals. But in identifying the existence of competition in particular industries or markets, we must focus upon its economic role as a device for controlling the disposition of society’s resources. Thus we think of competition as a mechanism for discovery of market information and for enforcement of business decisions in the light of this information. It is a mechanism, first, for firms discovering the kinds of goods and services the community wants and the manner in which these may be supplied in the cheapest possible way. Prices and profits are the signals which register the play of these forces of demand and supply. At the same time, competition is a mechanism of enforcement: firms disregard these signals at their peril, being fully aware that there are other firms, either currently in existence or as yet unborn, which would be only too willing to encroach upon their market share and ultimately supplant them.

This does not mean that we view competition as a series of passive, mechanical responses to “impersonal market forces”. There is, of course, a creative role for firms in devising the new product, the new technology, the more effective service or improved cost efficiency. And there are opportunities and rewards as well as punishments. Competition is a dynamic process; but that process is generated by market pressure from alternative sources of supply and the desire to keep ahead.

…

Competition expresses itself as rivalrous market behaviour. In the course of these proceedings, two rather different emphases were placed upon the most useful form such rivalry can take. On the one hand it was put to us that price competition is the most valuable and desirable form of competition. On the other hand it was said that if there is rivalry in other dimensions of business conduct — in service, in technology, in quality and consistency of product — an absence of price competition need not be of great concern.

In our view effective competition requires both that prices should be flexible, reflecting the forces of demand and supply, and that there should be independent rivalry in all dimensions of the price-product-service packages offered to consumers and customers.

Competition is a process rather than a situation. Nevertheless, whether firms compete is very much a matter of the structure of the markets in which they operate. The elements of market structure which we would stress as needing to be scanned in any case are these:—

(1)     the number and size distribution of independent sellers, especially the degree of market concentration;

(2)     the height of barriers to entry, that is the ease with which new firms may enter and secure a viable market;

(3)     the extent to which the products of the industry are characterized by extreme product differentiation and sales promotion;

(4)     the character of “vertical relationships” with customers and with suppliers and the extent of vertical integration; and

(5)     the nature of any formal, stable and fundamental arrangements between firms which restrict their ability to function as independent entities.

Of all these elements of market structure, no doubt the most important is (2), the condition of entry. For it is the ease with which firms may enter which establishes the possibilities of market concentration over time; and it is the threat of the entry of a new firm or a new plant into a market which operates as the ultimate regulator of competitive conduct.

113    As also explained in QCMA, it follows that the identification of markets must be the essential first step in an assessment of present competition and likely competitive effects. The Tribunal explained:73

A market is the area of close competition between firms or, putting it a little differently, the field of rivalry between them (if there is no close competition there is of course a monopolistic market). Within the bounds of a market there is substitution — substitution between one product and another, and between one source of supply and another, in response to changing prices. So a market is the field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution, at least in the long run, if given a sufficient price incentive. Let us suppose that the price of one supplier goes up. Then on the demand side buyers may switch their patronage from this firm’s product to another, or from this geographic source of supply to another. As well, on the supply side, sellers can adjust their production plans, substituting one product for another in their output mix, or substituting one geographic source of supply for another. Whether such substitution is feasible or likely depends ultimately on customer attitudes, technology, distance, and cost and price incentives.

114    In Australian Competition and Consumer Commission v BlueScope Steel Limited (No 5)74, I observed that competition is best described by reference to its aim, mechanism and effect:

(a)    The basic aim of business competition is to win sales – competitors strive to replace each other in the supply of products (whether goods or services) sought by customers.

(b)    The key mechanism of competition is through substitution – to supply products to customers in place of another competitor’s supply. Substitution occurs on the demand side, whereby customers substitute one product or source of supply for another, and on the supply side, whereby suppliers adjust their production mix to substitute one product for another or one area of supply for another. Competitors strive to bring about substitution in a number of ways: through lowering their costs of production to enable them to profitably lower their prices; through improving the quality of their product and thereby increasing the value of the product to customers; and through inventing new products to meet the needs and wants of customers in new or better ways.

(c)    As to effect, competition enhances the welfare of Australians by creating incentives and pressure for suppliers to reduce their costs of production and their prices (which, in the language of economics, is referred to as an improvement in productive efficiency), to commit resources to the production of goods and services most wanted by customers and to improve the quality of those products (which, in the language of economics, is referred to as an improvement in allocative efficiency) and to invest in innovation with the object of inventing new products to meet the needs and wants of customers (which, in the language of economics, is referred to as an improvement in dynamic efficiency).

115    The competition test for the grant of authorisation is concerned with the potential for the proposed conduct to substantially lessen competition. The concept of lessening competition is expanded by s 4G as follows:

For the purposes of this Act, references to the lessening of competition shall be read as including references to preventing or hindering competition.

116    As observed in Pacific National,75 the word “substantially” is imprecise; however, the courts have consistently said that, in each of sections 45, 47 and 50, the word does not connote a large or weighty lessening of competition, but one that is “real or of substance” and thereby meaningful and relevant to the competitive process.

117    The competition test for the grant of authorisation, like the competition based prohibitions in ss 45, 46, 47 and 50, uses the conditional (or hypothetical) future tense: the test requires an assessment of whether the proposed conduct (the subject of the application for authorisation) would have the effect or would be likely to have the effect of substantially lessening competition. The ACCC (and the Tribunal on review) must not grant authorisation unless it is satisfied that the proposed conduct would not have, or would not be likely to have, that effect. It is well settled that the test requires a comparison between the nature and extent of competition in any market potentially affected by the proposed conduct in the future with the proposed conduct being undertaken and in the future without the proposed conduct being undertaken.76 As also explained in Pacific National,77 the word “likely” does not mean more probable than not, but requires an assessment of what could reasonably be expected to be the consequences of the proposed conduct; it encompasses real commercial likelihoods, but not mere possibilities.

118    It follows that the competition test for the grant of authorisation requires the Tribunal to assess the likely effects of the proposed conduct on competition in all relevant markets. The conduct under consideration may have a range of potential effects on competition, both positive and negative, with such effects having different degrees of likelihood (from mere possibilities to near certainties). The Tribunal must not grant authorisation under the competition test in s 90(7)(a), however, unless it is satisfied that the likely effect of the proposed conduct, considered in totality, is not to substantially lessen competition in any market.

119    In Universal Music Australia Pty Ltd v Australian Competition and Consumer Commission78, the Full Federal Court reiterated four matters concerning the statutory test of substantially lessening competition which are relevant to the present application: first, competition is a process and the effect upon competition is not to be equated with the effect upon individual competitors, although the latter may be relevant to the former; second, competition is a means to the end of protecting the interests of consumers rather than competitors in the market; third, short term effects readily corrected by market processes are unlikely to be substantial; and fourth, the lessening of competition must be adjudged to be of such seriousness as to adversely affect competition in the market place, particularly with consumers in mind.79

Section 90(7)(b) – the net public benefit test

120    The precondition for the grant of authorisation stated in s 90(7)(b) is that the ACCC is satisfied in all the circumstances that the conduct (the subject of the application for authorisation) 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. As observed by the Tribunal in Application by Port of Newcastle Operations Pty Limited (No 2),80 the terminology used and underlying concepts in that precondition are based on the law prior to its amendment by the 2017 Amendment Act. In particular, and as observed by the 2017 Explanatory Memorandum, the precondition for the grant of authorisation stated in s 90(7)(b) is consistent with the tests previously contained in s 90.81 That test required consideration of the benefits and detriments likely to result from the conduct, and involved a comparison of the future with, and without, the conduct for which authorisation is sought.82 As the statutory precondition in s 90(7)(b) requires the ACCC (or the Tribunal on review) to be satisfied that the public benefits likely to result from the conduct outweigh the public detriments likely to result from the conduct, it is convenient to refer to the test by the shorthand “net public benefit”.

121    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”.83 The relevant “public” is the Australian public.84 Similarly, 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”.85

122    In Qantas Airways,86 the Tribunal concluded that in assessing whether an increase in economic efficiency constitutes a public benefit for the purposes of the CCA, it was appropriate to apply a total welfare or surplus standard of economic efficiency. Accordingly, cost savings (productive efficiency gains) will constitute a public benefit even if the efficiency gain is captured in the first instance by the (private) parties to the proposed conduct. The Tribunal explained:87

187    We consider that the phrase “benefit to the public” is to be given a broad definition which, in addition to group interests, takes into account (with appropriate weighting) individual interests to the extent that such interests are considered by society to be worthy of inclusion and measurement. This broad approach to public benefit promotes the achievement of both static and dynamic efficiencies.

188     Given the above reasoning, we have formed the view that the “public versus private” dichotomy used by the parties in relation to cost savings is of fairly limited assistance when examining the benefits relied upon for the purposes of s 90. Rather, the enquiry should be directed towards the extent to which the benefit has an impact on members of the community, that is society. Does it fall into the category of “anything of value to the community generally”? If it does, what weight should be given to that benefit, having regard to its nature, characterisation and the identity of the beneficiaries of it?

189    It follows that cost savings achieved by a firm in the course of providing goods or services to members of the public are a public benefit which can and should be taken into account for the purposes of s 90 of the Act, where they result in pass through which reduces prices to final consumers, or in other benefits, for example, by way of dividends to a range of shareholders or being returned to the firm for future investment. However, the weight that should be accorded to such cost savings may vary depending upon who takes advantage of them and the time period over which the benefits are received.

123    In relation to public detriments, the Tribunal stated in Medicines Australia that:88

Although “detriment” covers a wider field than anti-competitive effects in many cases the important detriments will have that character. The relevant detriment will flow from the anti-competitive effect of the conduct to which authorisation is sought. This does not exclude consideration of other detriments which may be incidental to and therefore detract from a claimed public benefit. To that extent such detriment will be relevant in weighing the public benefit.

124    As the Tribunal explained in QCMA,89 in assessing public benefits (and detriments) it is necessary to go beyond labels or catchphrases. The Tribunal observed that its appraisal of claimed benefits must depend upon its appreciation of the competitive functioning of the industry and predictions about market behaviour and performance.90 The validity of claimed benefits will rarely be self-evident and “[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”.91

125    The necessity for authorisation applicants to quantify public benefits claimed to arise from proposed conduct was discussed by the Tribunal in Qantas Airways.92 Citing Howard Smith,93 the Tribunal said that the CCA does not require an applicant to quantify, in precise terms, the benefits claimed to arise if authorisation is granted but there must be a factual basis for concluding that the public benefits are likely to result.94 The Tribunal gave the following additional guidance with respect to the quantification of public benefits:

(a)    an accurate, objective quantification of public benefits is difficult, in part because benefits have to be estimated for some period in the future and so their magnitude becomes a matter not only of empirical estimation based on assumptions but also one of statistical likelihood;

(b)    the nature of public benefits should be defined with some precision, a degree of precision which lies somewhere between quantification in numerical terms at one end of the spectrum and general statements about possible or likely benefits at the other end of the spectrum;

(c)    any estimates involved in benefit analysis should be robust and commercially realistic, in the sense of being both significant and tangible;

(d)    appropriate weighting will be given to future benefits not achievable in any other less anti‑competitive way, and so the options for achieving the claimed benefits should be explored and presented;

(e)    the Tribunal is not assisted by fanciful and speculative modelling of benefits where the underlying assumptions are not clearly spelled out, where the estimates have not been subject to rigorous sensitivity analysis, and where the estimating process is not wholly transparent;

(f)    while detailed quantification of benefits is the best option, quantification is not required by the CCA and benefits should be quantified only to the extent that the exercise enlightens the Tribunal more than the alternative of qualitative explanation; and

(g)    where benefits cannot be quantified in monetary terms, they can still be claimed in qualitative terms.95

126    A public benefit must, though, rise above the ephemeral and the trivial.96 As observed by the Full Federal Court in Australian Competition and Consumer Commission v Australian Competition Tribunal,97 the need for a benefit to be non-ephemeral can be deduced from the word “benefit” itself and Parliament is unlikely to have intended the Tribunal to concern itself with trifles.98

Exercise of discretion

127    The satisfaction of the statutory precondition to the grant of authorisation does not oblige the ACCC, or the Tribunal on review, to grant authorisation.99 Nevertheless, as the Tribunal (O’Bryan J, Dr J Walker and Ms D Eilert) observed in Flexigroup (No 2), if the ACCC or the Tribunal on review were to be satisfied that the conduct is likely to result in a net public benefit, ordinarily authorisation would be granted.100

128    In Medicines Australia, the Tribunal considered whether authorisation should be granted in circumstances where the public benefits were assessed as insubstantial. The Tribunal said:101

Similarly, where the anti-competitive detriment is low to non-existent the ACCC may be entitled to say, as a matter of discretion, that it would only authorise the conduct if the public benefit to be derived from it, beyond that necessary to outweigh the anti-competitive detriment, or satisfy the per se conduct test is substantial. That is to say that the ACCC can require, in the proper exercise of its discretion, that the conduct yields some substantial measure of public benefit if it is to attract the ACCC’s official sanction. The Tribunal is in a similar position.

129    It is important to observe that the above statements in Medicines Australia concern the exercise of the discretion to grant authorisation once the statutory precondition is satisfied; the statements do not concern the content of the statutory precondition (which, as noted above, does not require the benefits to be substantial).

The conduct the subject of the authorisation

Overview

130    As noted above, there is one significant legal controversy that arises on this review. It concerns the proper application of the statutory preconditions for authorisation in s 90(7) of the CCA in respect of the conduct for which authorisation has been sought by the applicants. Section 90(7) requires the ACCC (and the Tribunal on review) to assess whether the conduct the subject of the application for authorisation would not be likely to have the effect of substantially lessening competition or would be likely to result in a net public benefit.

131    Each of the Proposed Transaction agreements is subject to a condition precedent that the agreements be authorised or otherwise approved by the ACCC. Despite that condition, it is common ground that the applicants did not seek authorisation to enter into and give effect to the MOCN Service Agreement or the Mobile Site Transition Agreement. The applicants only sought authorisation in respect of Telstra’s use of TPG’s spectrum licences pursuant to the Spectrum Authorisation Agreement (the Proposed Conduct).

132    In their application for authorisation, the applicants adopted a somewhat inconsistent approach to the application of s 90(7). As set out earlier in these reasons, the applicants propounded their application for authorisation on the following basis (emphasis added):

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.

133    It can be seen that the applicants sought authorisation for the Proposed Conduct (Telstra’s use of TPG’s spectrum licences), and stated the competition test by reference to the effect of the Proposed Conduct, but then inconsistently stated the net public benefit test by reference partly to the Proposed Conduct and partly to the effect of the Proposed Transaction. The submissions advanced in the application principally consider the issues by reference to the Proposed Transaction.

134    In its determination and its accompanying reasons, the ACCC identified the conduct the subject of the authorisation application as the contractual authorisation of Telstra to operate radiocommunications devices under TPG’s spectrum licences pursuant to the Spectrum Authorisation Agreement (the Proposed Conduct). However, in undertaking the statutory assessment required by s 90(7), the ACCC did not limit its analysis to the Proposed Conduct. Rather, it applied the preconditions in s 90(7) to the Proposed Transaction as a whole. The ACCC therefore examined the competitive effects, benefits and detriments that would likely arise in the future from all three agreements, both separately and together, which agreements the ACCC described as “interrelated” components that together implement a single commercial arrangement. The ACCC compared the likely effects, benefits and detriments of the Proposed Transaction as a whole with a future in which none of the three agreements comprising the Proposed Transaction were implemented. Although not stated expressly in the ACCC’s reasons for determination, it is implicit that the ACCC considered that the Spectrum Authorisation Agreement would, if authorised, only be implemented together with the MOCN Service Agreement and the Mobile Site Transition Agreement in the form in which they were put before the ACCC and, as a consequence, the ACCC was required to consider the effects of the Proposed Transaction as a whole notwithstanding that authorisation was sought for only one element of that Proposed Transaction. The legal basis of that approach was not explained in the ACCC’s reasons for determination.

Submissions of the applicants and the ACCC

135    Early in this proceeding (and prior to Optus’s intervention), the Tribunal raised with the applicants and the ACCC the question whether the determination of the ACCC, the subject of the application for review, was a merger authorisation within the meaning of s 4 of the CCA. The applicants and the ACCC submitted that the application was in respect of a merger authorisation. They noted that, while the applicants had entered into three interrelated agreement comprising the Proposed Transaction, authorisation had been sought for only one aspect of the Proposed Transaction being the authorisation given by TPG to Telstra under s 68(1) of the Radiocommunications Act pursuant to the Spectrum Authorisation Agreement. They confirmed that authorisation had not been sought more generally in respect of the Proposed Transaction. They further submitted that:

(a)    pursuant to s 68A of the Radiocommunications Act, TPG’s grant of authorisation to Telstra to use TPG spectrum is deemed to be an acquisition within the meaning of s 50 of the CCA and therefore falls within the first limb of the definition of “merger authorisation” in s 4 of the CCA; and

(b)    the second limb of the definition of “merger authorisation” is satisfied as the applicants did not seek authorisation for them to engage in conduct to which any provision of Pt IV of the CCA other than ss 50 or 50A would or might apply.

136    The applicants and the ACCC added that:

Under the Spectrum Authorisation Agreement, Telstra’s use of TPG spectrum in the 17% Regional Coverage Zone is limited to Telstra operating radiocommunications devices utilising that spectrum for use in the MOCN (in accordance with the terms of the MOCN Service Agreement). The ACCC therefore considered the Proposed Transaction as a whole in the context of the other Relevant Agreements, as the benefits flowing from the spectrum authorisation are transaction-specific, in that they relate to the use of the spectrum only as part of the implementation of the MOCN.

137    Following that response from the applicants and the ACCC, the Tribunal invited the parties (including Optus) to file submissions addressing the proper application of the statutory test for authorisation in s 90(7) on the basis that the application for authorisation is confined to conduct comprising the use by Telstra of TPG spectrum, and is thereby an application for a merger authorisation. In particular, the Tribunal invited submissions as to whether the statutory test is to be applied only to the conduct in respect of which authorisation is sought (the use by Telstra of TPG spectrum), or whether and on what basis the whole of the Proposed Transaction is relevant to the statutory test.

138    The applicants and the ACCC submitted that, in the circumstances of the present matter, s 90(7) requires the Tribunal to consider the effects arising from the MOCN Service Agreement and the Mobile Site Transition Agreement, as well as from the Spectrum Authorisation Agreement. That is because, having regard to the legally and commercially interdependent nature of the Proposed Transaction, if the Spectrum Authorisation Agreement is implemented, so too will the MOCN Service Agreement and the Mobile Site Transition Agreement. Conversely, if the Spectrum Authorisation Agreement does not proceed, nor will the MOCN Service Agreement or the Mobile Site Transition Agreement. In support of that submission, the applicants and the ACCC pointed to various features of the Proposed Transaction, including the following:

(a)    The agreements were negotiated together by Telstra and TPG and entered into simultaneously. In Telstra’s submission, the evidence before the Tribunal reveals that the agreements were always regarded by Telstra and TPG as part of a single transaction. – that is, a “package of benefits”. The commercial rationale of the agreements was assessed, and they were entered into, on that express basis.

(b)    The intended benefits to each of Telstra and TPG arising from the agreements operate only if the Proposed Transaction proceeds as a whole. TPG gains the benefit of access to Telstra’s network in the RCZ, and so is able to immediately deliver improved regional coverage to its customers, while Telstra acquires the use of TPG’s spectrum and certain TPG mobile sites, which supports in part the provision of services by Telstra to TPG. On a standalone basis, however, the agreements are of limited benefit to Telstra and TPG. For example, Telstra submits that without the authorised pooling of spectrum, the implementation of the MOCN (which results in TPG customers sharing use of the same RAN) would worsen Telstra’ existing congestion concerns in regional areas associated with its limited spectrum holdings.

(c)    Each of the three agreements is subject to the same condition precedent, which requires one of several events to occur, including the grant of regulatory authorisation for the Proposed Transaction in one of the stated forms. Once the condition precedent is satisfied, the operative parts of each agreement will commence. This is said to reflect the interdependent, “all or nothing” nature of the Proposed Transaction.

(d)    Once operative, the continued existence of one agreement depends on the existence of the others. In the event that the MOCN Service Agreement expires or is terminated, the Mobile Site Transition Agreement automatically expires and each of the applicants has the right to terminate the Spectrum Authorisation Agreement.

(e)    Each of the agreements can have no sensible, practical operation without implementation of the others. For example, Telstra submits that the authority granted under the Spectrum Authorisation Agreement provides that, for the spectrum within the “Coverage Area”, which is defined as the geographic area to which the MOCN Service Agreement applies, Telstra must use that spectrum for the MOCN in accordance with the MOCN Service Agreement (unless it is agreed that it is not technically capable of such use). Accordingly, the Spectrum Authorisation Agreement cannot sensibly operate without the implementation of the MOCN Service Agreement.

139    The applicants and the ACCC submitted that, in the circumstances, the orthodox application of the “future with” and “future without” test pursuant to s 90(7) requires the Tribunal to assess the effects of the Proposed Transaction as a whole. They argued that this approach is supported by the statutory language of s 90(7), which calls for competition effects and the resulting benefits and detriments to be considered “in all the circumstances”.

140    The applicants further submitted that, to the extent the Tribunal had any concern that the applicants could in the future terminate the MOCN Service Agreement and/or Mobile Site Transition Agreement while maintaining the Spectrum Authorisation Agreement, it would be open to the Tribunal to condition authorisation on the applicants giving an undertaking pursuant to s 87B of the CCA requiring the parties to implement and to continue to give full force and effect to the MOCN Service Agreement and/or Mobile Site Transition Agreement, and to not materially amend those agreements except in accordance with the terms or with the prior consent of the ACCC. Such an undertaking could require the parties to undertake to terminate the Spectrum Agreement if the MOCN Service Agreement is terminated at any time. As noted above, the applicants subsequently proffered an undertaking to that effect (see cl 4 of the joint undertaking set out earlier in these reasons). The ACCC submitted that a condition of the kind embodied in cl 4 of the proposed joint undertaking would provide further assurance that the applicants would proceed with the whole of the Proposed Transaction. However, the ACCC contended that the condition proposed need not be secured by way of a s 87B undertaking. Rather, it could be imposed by the Tribunal as a condition if the Tribunal decided to set aside the ACCC’s determination and grant authorisation.

141    At the conclusion of the hearing, Telstra provided the Tribunal with a further written submission addressing the proper construction of s 90(7) and its application in the present case. In that submission, Telstra submitted that the analysis required by s 90(7) is not a strict “but for” test of causation. In that regard, Telstra placed reliance on the reasoning of Jagot J in Australian Competition and Consumer Commission v NSW Ports Operations Hold Co Pty Ltd102 in which her Honour observed, in the context of the competition-based prohibitions in Pt IV of the CCA, that:

(a)    the effect of a contractual provision is one of objective fact;103 and

(b)    the likely effect of conduct or a provision should not be equated with the “but for” test of causation – an event may not have occurred but for conduct or a provision but may not be the effect of the conduct or provision.104

142    Telstra’s submission continued:

… the counterfactual analysis in s 90(7) does involve a form of but for analysis, but one which asks whether, as a matter of objective fact, the specified conduct makes the relevant effects, benefits and detriments likely. That analysis must accord with the statutory purpose, in that a causal relationship which will not further that purpose ought to be excluded. However, where, as a matter of fact, effects and benefits are likely to occur in a future with the conduct but are unlikely to occur in a future without the conduct, and were those effects and benefits are pertinent to the state of competition in those alternate futures, those are effects and benefits which the Tribunal ought to take into account under s 90(7).

Submissions of Optus

143    Optus’s submissions have altered during the course of the proceeding. Optus’s written submissions early in the proceeding, filed at the invitation of the Tribunal, were largely consistent with those of the applicants and the ACCC. However, Optus’s principal submissions filed in advance of the hearing introduced a caveat to the above analysis. It pointed to a distinction between assessing the effects of the Proposed Conduct in light of the Proposed Transaction (which comprise the relevant circumstances in which the Proposed Conduct will be undertaken if authorised), and assessing the effects of the Proposed Transaction. In oral submissions at the hearing, Optus advanced the submission that s 90(7) requires the Tribunal to assess the competitive effects, and the benefits and detriments resulting from, the Proposed Conduct, being the conduct that is the subject of the application for authorisation, and not the effects and results of the other Proposed Transaction agreements. Optus drew an analogy with the approach adopted by Beach J at first instance in respect of the application of s 45 of the CCA to the provisions of a commercial agreement (the Terminal Services Subcontract, or TSS) in Australian Competition and Consumer Commission v Pacific National Pty Limited (No 2).105 In that case, the ACCC argued that, in the future without the TSS, other commercial arrangements would not have occurred or would have otherwise changed with different competitive effects to those which in fact occurred. Justice Beach rejected that approach to the application of s 45, concluding that the section required consideration of the competitive effects of the provisions of the TSS, not the potential competitive effects of other commercial arrangements that the parties may have entered into if the TSS had not been entered into.106

Consideration

144    The Tribunal largely accepts the applicants’ factual submissions concerning the interrelationship between the Proposed Transaction agreements. Specifically, the Tribunal accepts that the Proposed Transaction agreements were entered into at the same time as part of a single commercial transaction, and also accepts that each of the agreements is conditional on all of the agreements being authorised (or otherwise approved by the ACCC). The Tribunal also accepts that s 90(7) requires it to assess the likely competitive effects of, and the public benefits and detriments likely to result from, the Proposed Conduct in light of all relevant circumstances which includes the Proposed Transaction as a whole. However, the Tribunal does not agree that this assessment includes the likely competitive effects of, and the public benefits and detriments likely to result from, the MOCN Service Agreement or the Mobile Site Transition Agreement for which no authorisation has been sought. That conclusion is compelled by the plain language of the statutory preconditions for authorisation stated in s 90(7) when considered in its statutory context and having regard to the statutory purpose. The Tribunal rejects the submissions of the applicants and the ACCC to the contrary.

145    It is clear that the statutory preconditions for authorisation in s 90(7) are directed to the conduct that is the subject of the application for authorisation. The statutory preconditions require the ACCC, and the Tribunal on review, to assess the likely competitive effects of, and the public benefits and detriments likely to result from, that conduct. Both the competition test in s 90(7)(a) and the net public benefit test in s 90(7)(b) require a comparison of the future with, and without, the conduct for which authorisation is sought in order to assess the likely competitive effects of, and the public benefits and detriments likely to result from, that conduct. Nevertheless, the statutory test is directed to the effects of the conduct for which authorisation is sought, not the effects of other conduct that is coincident with, but not causally related to, the conduct for which authorisation is sought.

146    That conclusion is not only supported by the plain language of s 90(7), but also by the statutory context and purpose of the authorisation regime. The authorisation regime enables a person to obtain a statutory exemption from the prohibitions against anti-competitive conduct in Pt IV of the CCA. The applicant must specify the conduct for which authorisation is sought in the authorisation application and the ACCC (and the Tribunal on review) is empowered to grant authorisation in respect of that conduct: s 88(1). The authorisation, if granted, exempts that conduct, and not any other conduct, from the prohibitions in Pt IV of the CCA: s 88(2). Consistently with that focus on the conduct that is the subject of the application for authorisation, s 90(7) states the preconditions for authorisation by reference to the likely competitive effects of, and the public benefits and detriments likely to result from, that conduct.

147    It would be inconsistent with that statutory regime for the ACCC (and the Tribunal on review) to take into account, for the purposes of applying s 90(7), the competitive effects and public benefits and detriments resulting from other coincident conduct that is not the subject of the application. The problem with taking into account such other conduct under s 90(7) is readily demonstrated. The competitive effects and public benefits and detriments resulting from other coincident conduct might produce a conclusion that the authorisation preconditions are satisfied (for example, because the other coincident conduct is likely to result in significant public benefits). The result would be that the conduct the subject of the application would be authorised, but the authorisation would not extend to the other coincident conduct that had been taken into account in assessing the net public benefit. The effect of the authorisation would be to exempt the conduct, the subject of the application, from the prohibitions in Pt IV. The exemption would apply regardless of whether the applicants engaged in the other coincident conduct or at some future point in time ceased to engage in that other coincident conduct or varied that other coincident conduct. In other words, an inconsistent position could be reached that such other coincident conduct is assessed for the purposes of s 90(7) to provide a basis for the authorisation exemption, but the conduct would not be part of the authorised conduct. As a result, the applicant would be free to engage or not engage in that conduct without effecting the scope of the authorisation.

148    In support of their contrary contention, the applicants and the ACCC submitted that the orthodox application of the “future with” and “future without” test pursuant to s 90(7) requires the Tribunal to assess the effects of the Proposed Transaction as a whole. That submission involves a misunderstanding, or misapplication, of the “future with” and “future without” test and distorts the causal connection between the specified conduct and its effects which is required by s 90(7).

149    The reference to the “future with” and “future without” test is a reference to the well-established principle, applicable to the competition-based prohibitions in Pt IV of the CCA and the preconditions for authorisation in Pt VII of the CCA, that the relevant statutory provisions are to be applied on a forward-looking basis. In respect of those provisions of Pt IV which prohibit conduct that would have the effect, or would be likely to have the effect of substantially lessen competition, the necessary enquiry has been described as comparing the nature and extent of competition that would be likely to exist in the market in the future with the conduct occurring and without the conduct occurring. That description of the statutory test conveniently explains that the test is not a “before and after” analysis but a forward-looking exercise.107

150    But the “future with” and “future without” phraseology is not a substitute for the statutory language and cannot be applied in a manner that overlooks the need for a causal connection between the impugned conduct and its competitive effects. As is clear from the statutory text, and is apparent from the earliest cases, the enquiry must remain focused on the effects of the impugned conduct. In Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd,108 Smithers J explained:109

To apply the concept of substantially lessening competition in a market, it is necessary to assess the nature and extent of the market, the probable nature and extent of competition which would exist therein but for the conduct in question, the way the market operates and the nature and extent of the contemplated lessening. To my mind one must look at the relevant significant portion of the market, ask oneself how and to what extent there would have been competition therein but for the conduct, assess what is left and determine whether what has been lost in relation to what would have been, is seen to be a substantial lessening of competition.

151    This was also the point being made by Beach J at first instance in Pacific National Pty Limited (No 2).110 His Honour observed:111

Section 45(2)(a) is not just about a “but for” factual inquiry. It also involves a normative competition causation inquiry focusing on the impugned provisions and their likely effect.

152    It was also the point being made by Jagot J in NSW Port Operations when her Honour observed that the likely effect of conduct or a provision should not be equated with the “but for” test of causation and that an event may not have occurred but for conduct or a provision but may not be the effect of the conduct or provision.112 In other words, the fact that certain conduct is likely to be coincident with the impugned conduct (in the sense that if the latter occurs the former is also likely to occur) is not a sufficient basis on which to conclude that the coincident conduct is an effect of the impugned conduct.

153    In respect of the test for authorisation in Pt VII of the CCA, the Tribunal has long adopted the same description of the forward-looking enquiry.113 The relevant enquiry is not a “before and after” test, but a “future with” and “future without” test.114 The Tribunal has always emphasised, though, that the statutory test requires a causal relationship between the conduct for which authorisation is sought and the resulting public benefits or detriments. In QCMA, the Tribunal emphasised that “that there must be established a causal relationship between the acquisition and the claimed benefit”.115 In Qantas Airways, the Tribunal explained that the statutory assessment requires that the benefit or detriment be “such that it will, in a tangible and commercially practical way, be a consequence of the relevant agreements if carried into effect”.116 In Re Medicines, the Tribunal observed: 117

The range of public benefits which may be considered is limited, in the context of authorisation, by the requirement that the benefit be the result or the likely result of the conduct which is the subject of authorisation: Re QCMA (1976) 8 ALR 481; 25 FLR 169. Thus the public benefit which may be considered under s 90 is confined to the extent that it must be related to classes of conduct amenable to authorisation and causally related to the conduct authorised.

154    In no sense of the statutory language in s 90(7) can entering into and implementing the MOCN Service Agreement and the Mobile Site Transition Agreement be characterised as an effect of, or a result of, Telstra’s use of TPG’s spectrum under the Spectrum Authorisation Agreement (or, stated more broadly, entering into and implementing the Spectrum Authorisation Agreement). The three agreements were entered into as part of the one commercial transaction. One agreement is not the effect or result of the other; rather, they are coincident agreements. Far less can the commercial and economic effects of the MOCN Service Agreement and the Mobile Site Transition Agreement be characterised as commercial and economic effects of Telstra’s use of TPG’s spectrum under the Spectrum Authorisation Agreement. The submission of the applicants and the ACCC to the contrary is founded solely on the submission that, in a future in which the Spectrum Authorisation Agreement is implemented, the applicants will also implement the MOCN Service Agreement and the Mobile Site Transition Agreement. While that may be accepted as a matter of likelihood, the submission ignores the causal nexus between the conduct for which authorisation is sought and relevant commercial and economic effects that is required by s 90(7).

155    No clear explanation was given by the applicants for their decision to limit the scope of the application for authorisation to Telstra’s use of spectrum under the Spectrum Authorisation Agreement, as opposed to the entirety of the Proposed Transaction. In the course of submissions, the applicants argued that if the Spectrum Authorisation Agreement was considered on its own, that would necessarily lead to a grant of authorisation because that agreement has no anti-competitive effects or other detriments. That submission begs the question why the application was then confined to that agreement. There is at least a hint in some of the material before the Tribunal that the applicants limited the scope of the application for authorisation to Telstra’s use of spectrum under the Spectrum Authorisation Agreement because they wished to benefit from the statutory time limits that are applicable to merger authorisation applications under Pts VII and IX of the CCA. As discussed earlier, by limiting the application for authorisation in that manner, the application satisfied the definition of merger authorisation in s 4 of the CCA. However, the Tribunal was also taken to some material that suggests that the applicants doubted whether a single application for authorisation could be made in respect of a business transaction in respect of which s 50 might apply to one or more elements and s 45 might apply to other elements. For the reasons expressed earlier, the Tribunal considers that s 88(1) permits a single application for authorisation in those circumstances.

156    The Tribunal considers that it was open to the applicants to apply for authorisation to enter into and give effect to the Proposed Transaction agreements. The application would not have satisfied the definition of a merger authorisation in s 4 of the CCA, but that is because the Proposed Transaction is not confined to a merger transaction within s 50 of the CCA. Other elements comprise a limited form of joint or collaborative venture between the parties which would ordinarily fall to be considered under s 45 of the CCA. If such an application had been made, the ACCC (and the Tribunal on review) would have been required to apply the statutory preconditions for authorisation in s 90(7) to the entirety of the Proposed Transaction. If authorisation were then granted, the applicants would have gained a statutory exemption to engage in that conduct. It would also follow that the applicants could not vary any part of the Proposed Transaction, or proceed with only part of the Proposed Transaction, without the risk of losing the statutory exemption.

157    Instead, the applicants confined the application to Telstra’s use of TPG’s spectrum under the Spectrum Authorisation Agreement, but then advanced submissions in favour of authorisation based on propounded effects of the Proposed Transaction as a whole, which included propounded effect of the MOCN Service Agreement and the Mobile Site Transition Agreement. The applicants ask the Tribunal to apply the authorisation preconditions to the effects of the Proposed Transaction as a whole in circumstances where that conduct is not the subject of the application for authorisation. If authorisation were to be granted on the basis sought by the applicants, exemption would be afforded to the Spectrum Authorisation Agreement but not the other two agreements. The applicants would be free to vary – and to terminate – those other agreements without affecting the authorisation granted, demonstrating the flaw in the applicants’ approach. While the applicants have, on this review, sought to address that problem by offering an undertaking under s 87B to maintain and not vary the other agreement while the Spectrum Authorisation Agreement is in force, the need for the undertaking only serves to confirm that the application for authorisation was made on a flawed basis and the applicants’ submissions concerning the construction of s 90(7) cannot be accepted.

158    There is a further incongruity between the manner in which the applicants have framed their application for authorisation and the authorisation regime. By limiting their application to Telstra’s use of TPG’s spectrum under the Spectrum Authorisation Agreement, and thereby bringing their application within the definition of “merger authorisation”, the application became subject to statutory time limits before the ACCC and now before the Tribunal on review. Further, the review before the Tribunal is not a re-hearing and restrictions are imposed on the information, documents and evidence to which the Tribunal may have regard. As noted earlier, these statutory time limits and procedural restrictions are imposed in respect of merger authorisations because merger transactions are time-sensitive. Determinations of merger authorisations are intended to be made expeditiously and this requires procedural restrictions on the conduct of the Tribunal’s review. Despite the confined manner in which the applicants framed their application for authorisation, the applicants have sought authorisation on the basis of the competitive effects of, and the public benefits and detriments resulting from, the Proposed Transaction as a whole. But the Proposed Transaction as a whole is not merely a merger (an acquisition of shares or assets for the purposes of s 50); it involves a long term joint or collaborative arrangement between Telstra and TPG pursuant to the MOCN Service Agreement and Mobile Sites Agreement. As such, the Proposed Transaction is not time-sensitive in the same manner as a merger transaction. If authorisation had been sought for the Proposed Transaction as a whole, the authorisation would not have been a merger authorisation under the CCA and the procedural limitations applicable to merger authorisations, including statutory time limits, would not have applied. On the review, the Tribunal would have been required to conduct a re-hearing which would have afforded a far greater opportunity to consider in detail the evidence adduced by the parties in respect of this long term transaction. Instead, by reason of the manner in which the application was framed by the applicants, the Tribunal’s review has been limited to an assessment of the material before the ACCC and the review has been conducted under considerable time constraints.

159    For those reasons, 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. 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.

The relevant time horizon

160    The parties addressed submissions to the time horizon over which an assessment of the likely competitive effects of, and the benefits and detriments resulting from, the relevant conduct is to be assessed under s 90(7). The parties largely adopted a common position, submitting that the timeframe for analysis must relate to the effects being assessed. In the present case, the effects arise from, alternatively, the Spectrum Authorisation Agreement or the Proposed Transaction agreements collectively, which have a relatively long duration, being a minimum of 10 years and with options that may extend the duration to 20 years.

161    In Application by New South Wales Minerals Council (No 3),118 the Tribunal considered the appropriate time horizon in which to assess paragraph (a) of the declaration criteria in s 44CA of the CCA, namely whether access (or increased access) to the service, on reasonable terms and conditions, as a result of a declaration of the service would promote a material increase in competition in at least one market (whether or not in Australia), other than the market for the service. The Tribunal observed that any evaluation of markets, competition and the expected behaviour of economic actors depends upon the time horizon specified for the evaluation.119 In the context of an application for declaration of a service under Pt IIIA of the CCA, the Tribunal concluded that the relevant time horizon was across the medium term, meaning that that the effects of declaration should be assessed having regard to the present market conditions, opportunities and environment, and forecasting how those conditions, opportunities and environment may evolve and change into the medium term with and without declaration.120 The Tribunal further observed:121

151     … The object of Part IIIA is economic: to promote the economically efficient operation of, use of and investment in the infrastructure by which services are provided, thereby promoting effective competition in dependent markets. The infrastructure liable to declaration under Part IIIA is typically long-lived. Most significantly, changes in the terms of access to the infrastructure may not have immediate effects on competition in dependent markets and may only have effects in the medium term. This is because firms in dependent markets may have sunk costs. Provided the terms of access do not result in dependent market firms’ marginal costs exceeding their marginal revenues, the terms may have no immediate effect on existing firms’ consumption or production decisions. However, over the medium term, the terms of access may decrease the existing firms’ incentives to undertake further investment or otherwise increase consumption and production in the dependent market and may deter entry by new firms.

152    What constitutes the medium term in a given case may vary depending on the characteristics of the industries that are the subject of consideration. However, we consider that the assessment of the medium term should be guided by one practical consideration: over what time period is it feasible to make reasonable predictions about the conditions, opportunities or environment for competition in relevant dependent markets with and without declaration? …

162    The Tribunal considers that analogous considerations are relevant to the assessment of the authorisation preconditions in s 90(7). In assessing the likely competitive effects of, and the benefits and detriments resulting from, alternatively, the Spectrum Authorisation Agreement or the Proposed Transaction agreements collectively, the Tribunal is concerned with the medium term and not with the short term. In the context of commercial arrangements that have an expected duration of 10 to 20 years, the Tribunal is concerned with the impact of the arrangements on the supply of services in the relevant markets immediately and over the ensuing 5 to 10 years. While longer term considerations are also relevant, predictions about the development of markets and competition beyond 10 years, particularly markets which experience high levels of technological innovation and accompanying investment, become increasingly speculative. For that reason, the Tribunal places little weight on submissions and evidence that purport to predict the expected behaviour of market participants beyond a 10 year timeframe. Specifically, the Tribunal regards any predictions about TPG’s market strategy at the expiry of the Proposed Transaction agreements to be wholly speculative.

D.    CONTENTIONS OF THE PARTIES

The applicants’ contentions

163    While each of the applicants filed separate SOFICs and submissions, in substance they advanced their case collectively. Each addressed different aspects of the application and adopted the submissions made by the other. For that reason, the Tribunal considers it appropriate to address the submissions made by each of Telstra and TPG collectively as the applicants’ submissions.

164    On the application for review, the applicants largely advanced their submissions on the basis that the relevant enquiry is whether the Proposed Transaction as a whole, rather than the Proposed Conduct (which comprises only part of the Proposed Transaction), satisfies the statutory preconditions for authorisation in s 90(7) of the CCA. In doing so, the applicants did not distinguish between the likely effects of, and the likely benefits and detriments resulting from, the Spectrum Authorisation Agreement and those resulting from the MOCN Service Agreement and/or the Mobile Site Transition Agreement. At the conclusion of the hearing, Telstra provided the Tribunal with a short written submission regarding the application of s 90(7) to the Proposed Conduct only.

165    The Tribunal summarises below the key contentions advanced by the applicants in respect of the effects of, and benefits and detriments resulting from firstly, the Proposed Transaction (being the principal basis on which the applicants advanced their case), and secondly, the Proposed Conduct.

The future without the Proposed Transaction – likely counterfactuals

166    In assessing the future without the conduct sought to be authorised (the Spectrum Authorisation Agreement), the applicants assumed that no part of the Proposed Transaction would be entered into.

167    The applicants contend that there is only one commercially realistic counterfactual if the Proposed Transaction were not entered into. Telstra would continue to proceed with its current strategy to achieve 95% 5G coverage across Australia by FY25 and TPG would undertake a targeted, incremental expansion of its mobile network in the 80%+ population coverage zone with the effect that TPG would hold a similar network and market position to that which it presently occupies.

168    It would remain commercially irrational for TPG to expand its own network across a material portion of the RCZ, without the market share or existing sites to justify that expansion, and it would not be able to offer 5G services in regional and rural Australia for the foreseeable future. [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].

169    Optus would continue to focus its network investment in metropolitan areas, maintaining a targeted investment strategy in regional Australia directed to disrupting consumer perceptions regarding Telstra’s coverage and supporting existing customers. If Optus rolls out its 5G network beyond metropolitan areas, this would remain subject to the risk of future capital restrictions and would not be completed until [REDACTED] [REDACTED] [REDACTED] [REDACTED] (being the time by which Optus originally planned to complete its 5G rollout, with [REDACTED] population coverage).

170    Over several years, Optus and TPG will continue to lose market share to Telstra. There would be no meaningful 5G alternative to Telstra for customers who seek coverage in the RCZ until [REDACTED] [REDACTED] [REDACTED] [REDACTED]. With diminishing market share and dwindling capital reserves available for future investment and innovation, Optus and TPG would be less able to compete with Telstra in wholesale and retail markets over time.

171    The applicants contend that there is no commercially realistic prospect of a comparable active network sharing arrangement between TPG and Optus if the Proposed Transaction does not proceed. This is for several reasons.

(a)    [REDACTED].

(b)    Active network sharing between TPG and Optus in regional areas is not feasible for at least 3 to 5 years (with a MOCN not feasible for at least 5 years), because of limited spectrum and equipment synergies between TPG and Optus. To the extent that these limitations could be overcome, they would necessitate prohibitively expensive equipment replacements and upgrades. There are, therefore, real impediments to reaching any active sharing arrangement.

(c)    [REDACTED].

(d)    The commercial relationship between TPG and Optus has deteriorated since the Proposed Transaction was announced and there is no real commercial chance that TPG and Optus will agree upon a roaming or network sharing agreement in parts of the 80%+ coverage area.

(e)    If the Proposed Transaction did not proceed because authorisation of the Proposed Conduct was declined, TPG’s only alternative partner in an active sharing arrangement would be Optus. Neither Telstra nor TPG would be likely to enter into any alternative arrangement with each other: both would anticipate a similar, unfavourable regulatory response if they sought to pursue an arrangement on similar terms, and a substantially different arrangement would not be commercially viable. Optus’s bargaining position in subsequent negotiations for such an arrangement would be strengthened in the knowledge that it is the only potential partner to TPG. [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]).

172    Even if an agreement is reached between Optus and TPG, the applicants contend that the terms of any such agreement are uncertain. As a result, the competitive effects of any such agreement cannot be meaningfully assessed and cannot materially bear on the Tribunal’s assessment of the likely effect of the Proposed Transaction. On any view, however, such an agreement would be less competitive than the Proposed Transaction, as it would (among other things) have smaller coverage and would be limited to 4G for the foreseeable future.

Competitive effects of the Proposed Transaction

Relevant markets

173    The applicants contend that the relevant markets within which to assess the likely competitive effects of the Proposed Transaction (and the Proposed Conduct) comprise:

(a)    a national market for the supply of retail mobile services to consumers; and

(b)    a national market for the supply of wholesale mobile services (being any form of service that an MNO supplies to another party, including other MNOs and MVNOs, to access its mobile network).

174    The applicants submit that it is unnecessary to consider effects in other secondary markets.

Increased competition in the national retail market

175    The applicants contend that TPG has significantly fewer subscribers and less regional coverage than Telstra and Optus and that it cannot overcome its poor infrastructure position in the RCZ unilaterally. TPG’s poor coverage has adversely affected retail mobile services competition. The applicants say that, under the Proposed Transaction, TPG would immediately and substantially increase the quality and extent of its 4G coverage by gaining access to Telstra’s RAN in the RCZ (pursuant to the MOCN Service Agreement). TPG would move from a current population coverage of 96% (which is limited to coverage provided by TPG’s 725 sites in the RCZ, and augmented to [REDACTED] by roaming on Optus’s 3G network) to future population coverage of 98.8% (provided by approximately 3,700 of Telstra’s sites in the RCZ). TPG would also receive immediate access to existing 5G at Telstra sites in the RCZ, and access to new 5G sites six months after the site is activated for Telstra customers. Moreover, relative to a roaming arrangement, the MOCN Service Agreement would provide a superior quality of service in the RCZ due to technical differences in the operation of a MOCN arrangement as distinct from a roaming arrangement.

176    The applicants contend that the immediate and substantial increase in TPG’s coverage and service quality in the RCZ would enable it to attract new customers, to better retain existing customers and therefore to grow its market share. The improvement in TPG’s competitive position will occur in circumstances where TPG’s consistently inferior coverage position in regional Australia (relative to Telstra and Optus) has acted as a barrier to acquiring and retaining retail and enterprise mobile customers, and has resulted in a low or declining market share. Further, if the Proposed Transaction were to proceed, TPG’s pricing would decrease on a quality-adjusted basis, where TPG would improve its service offering [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] (supported by increasing market share).

177    The applicants also emphasise that, under the MOCN Service Agreement, TPG would retain control of its mobile core network, which would allow it to continue to develop and improve its products and services, and to acquire other network or access services from other third parties. TPG would also be able to provide its customers with fixed wireless, NBIoT and Fixed NBN Fallback services in the RCZ for the first time.

178    The applicants contend that the improvements to TPG’s competitive position by reason of the Proposed Transaction will disrupt the competitive status quo and constitute a competitive threat to both Telstra and Optus.

179    The applicants also contend that another competitive benefit of the Proposed Transaction is improved service quality for Telstra, because the pooled spectrum will assist in addressing congestion in regional areas where around [REDACTED] of Telstra’s sites are congested.

Increased competition in the national wholesale market

180    In respect of the national wholesale market, the applicants contend that the Proposed Transaction is itself the outcome of a competitive process between Telstra and Optus. They argue that if the Proposed Transaction does not proceed, competition in the wholesale market would be lessened. The competitive process which resulted in the Proposed Transaction evidences a new competitive dynamic between the MNOs that had not previously existed, and which would not exist in a future without the Proposed Transaction. The applicants further submit that if the Proposed Transaction does not proceed, there is no real chance that Telstra would offer TPG any similar alternative wholesale deal. Telstra would have no ability or incentive to do so both because of the finely balanced economics of the current MOCN arrangement, and for fear of being again opposed by the ACCC. Moreover, the Proposed Transaction preserves future competition for the supply of wholesale infrastructure services to TPG either by Optus or new network suppliers, or through new technologies. TPG remains free to contract with Optus or others for roaming or access services in any part of Australia during the term of the relevant agreements, as well as to reopen competition for its entire network sharing arrangements at each of the 10, 15 and 20 year exit points under the agreements.

181    The applicants further submit that the Proposed Transaction would strengthen TPG’s ability to supply wholesale mobile services to MVNOs by reason of its improved national coverage and service quality. TPG has been unable to provide such services previously due to its inferior coverage position. This would provide current or future MVNOs with a further meaningful choice of MNO with the ability to offer regional 5G coverage, thus reducing barriers to entry and expansion. In turn, this would likely increase the number of MVNOs and, consequently, customer choice, putting downward pressure on pricing throughout the relevant markets.

No competitive detriments

182    The applicants contend that the benefits that Telstra obtains from the Proposed Transaction do not cause competitive detriment, including by cementing any position of market power in any market.

183    First, the applicants contend that Telstra does not have market power in either of the retail or the wholesale mobile markets. The applicants argue that the markets are competitive and fragmented and that Telstra’s competitive position in those markets is due to the significant investments it has made in its mobile network.

184    Second, the applicants contend that the wholesale revenue that Telstra will earn under the MOCN Service Agreement will not lessen competition. The applicants argue that the payments reflect fair compensation to Telstra for a service that Telstra will provide to TPG at considerable cost. Further, any scale benefits to Telstra from carrying TPG’s traffic on its network and earning associated additional wholesale revenue is not competitively significant. Telstra submits that the decision to proceed with the Proposed Transaction was finely balanced because the risks and rewards of the deal to Telstra were equally apparent – Telstra faces the potential risk of losing market share to TPG and a decline in ARPU. [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].

185    Third, the applicants contend that Telstra’s ability to access TPG spectrum does not lessen competition for the following reasons:

(a)    The additional spectrum is for the applicants’ joint use as part of the MOCN. While access to additional spectrum means that an MNO needs to build fewer sites (and therefore incur less capex) to deliver a given level of network capacity, in the Proposed Transaction the pooled spectrum will mitigate the cost to Telstra of carrying TPG’s traffic. Telstra submitted that the capital savings from pooling spectrum are expected to be less than the additional capex Telstra will need to incur to accommodate the TPG traffic and the technology upgrades required to utilise the TPG spectrum.

(b)    The spectrum provides only a modest service quality benefit to Telstra by potentially improving speed for the worst [REDACTED] of users in the RCZ by up to [REDACTED]. While Telstra expected TPG’s spectrum would assist to alleviate congestion, and indeed is necessary to facilitate the MOCN, the service quality improvement for a small subset of regional customers was not sufficient to form [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. The immediate benefit [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]; [REDACTED] [REDACTED] “[REDACTED] [REDACTED]” [REDACTED] [REDACTED].

(c)    While it is common ground that the MOCN would have more total spectrum in the RCZ than Optus, Optus overstates the extent. Further, any analysis of relative network capacity must go beyond aggregate spectrum holdings and factor in physical infrastructure and demand on the network as the relevant measure. Aetha’s modelling – which takes into account spectrum holdings, physical infrastructure and customer demand – shows that access to TPG’s spectrum will not give the MOCN any practical capacity advantage over Optus.

(d)    Optus’s internal papers confirm 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].

186    Fourth, the applicants contend that Telstra’s access to up to 169 of TPG’s mobile sites in the RCZ would not lessen competition. The access would underpin the continuity of coverage under the MOCN Service Agreement in areas where TPG has sites but Telstra does not, and would decrease coverage gaps between Telstra and Optus.

Incentives to invest in infrastructure

187    The applicants further contend that the Proposed Transaction would not be likely to affect the incentives of any of the three MNOs to invest in infrastructure in regional Australia in a manner, or to an extent, that would substantially lessen competition.

188    In relation to TPG, if the Proposed Transaction does not occur, it is not likely that TPG would have sufficient incentive or ability to invest materially in its own mobile infrastructure in regional Australia, beyond a modest targeted build on a small number of sites. In contrast, the Proposed Transaction preserves TPG’s opportunity and incentive to invest in its network: the MOCN is non-exclusive; TPG retains significant independence and flexibility to invest in its network outside of the MOCN area or to build out its own network incrementally within the MOCN area; and TPG’s stronger market position will provide it with an improved capital base and incentives to invest. It follows that the Proposed Transaction will not meaningfully affect competition by reducing TPG’s incentives to invest in regional infrastructure relative to any realistic counterfactual.

189    In relation to Optus, the applicants contend that the Proposed Transaction would be unlikely to reduce its incentives to invest in regional Australia in the foreseeable future. In support, the applicants rely on the following matters:

(a)    As a matter of orthodox economic principle, and consistently with its past behaviour, if Optus is threatened by increased competition in relation to the quality of services provided by TPG, it will redouble its efforts to close the quality gap.

(b)    Whether Optus is willing to invest capital in 5G infrastructure in the RCZ depends on the risk it faces as a consequence of not investing, such as loss of customers, falling revenues, and the devaluation of its existing investment. It is inherently unlikely that Optus would take this risk. Optus would also risk losing its spectrum advantage in metropolitan areas if metropolitan customers who value regional coverage consider Optus’s regional offering to be inadequate. Moreover, any failure to upgrade to 5G will also jeopardise Optus’s ability to roll out later generations of technology, including 6G.

(c)    When the Proposed Transaction was announced, Optus’s initial response was that the deal posed a greater risk to Telstra’s market share than to Optus’s market share, and Optus proposed prioritising its 5G rollout in order to increase its competitiveness. The applicants argue that subsequent statements by Optus that the Proposed Transaction would [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] are part of a legal and regulatory strategy to oppose the Proposed Transaction and should be treated with scepticism.

(d)    Similarly, the applicants contend that no weight should be given to Optus’s financial modelling prepared in July 2022 which indicated that, if the Proposed Transaction went ahead, the most favourable option available to Optus would be to [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. They argue that no weight should be given to the model because it was prepared, at least in part, to persuade the ACCC to decline approval for the Proposed Transaction. In any event, the model itself shows that [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. The modelling was founded on questionable assumptions to which it is highly sensitive and, if reasonable adjustments are made, the modelling indicates that [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. Moreover, the modelling considers only [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].

(e)    The Proposed Transaction would not disturb the factors that currently influence Optus’s investment program, which is focused on [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. The applicants argue that Optus’s commercial and competitive strategy has never been to match Telstra’s regional and rural coverage, but rather to differentiate on speed and customer experience in metropolitan areas, to pursue a targeted build where it makes commercial sense, and to maintain a coverage differential with TPG. In this regard, the Proposed Transaction, which concerns only 17% of the national markets in rural and regional areas, would not affect the core means by which Optus currently competes with Telstra and TPG and would likely continue to compete.

(f)    To the extent that Optus could [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].

(g)    More generally, any decision by Optus and Singtel to reduce future investment in its network in the RCZ in a future with the Proposed Transaction in the face of enhanced competition from TPG, and the disruption of the enduring network relativities between the three MNOs, would not constitute a relevant lessening of competition within the meaning of the CCA. Although the Proposed Transaction would harm the interests of a competitor, it would not harm the competitive process. The applicants submit that, in effect, Optus’s opposition to the Proposed Transaction is a “plea for less competition” in order to earn a better financial return.

190    In relation to Telstra, the applicants contend that neither the Proposed Transaction, nor any reduced regional 5G investment by Optus, would reduce Telstra’s regional 5G investment. In support, the applicants rely on the following matters. First, Telstra has publicly committed to its 5G strategy, which is to achieve 95% coverage by FY25. [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]. Fourth, expected increases in data consumption will require Telstra to continue investing in network capacity in regional areas, to avoid congestion. Fifth, Telstra must invest to upgrade to subsequent generations of mobile technology to match mobile handsets as older generations become obsolete.

Coordinated effects

191    The applicants contend that the risk of coordinated effects from the Proposed Transaction is low, having regard to the ability of Telstra and TPG to differentiate their product offerings under the MOCN and limitations on access by Telstra to TPG customer information. They contend that the risk of coordinated effects would be higher if Optus and TPG were to enter into a network sharing arrangement, especially if such an arrangement provides for roaming only.

Effects on secondary or sub-markets

192    The applicants contend that the only relevant markets in which the Tribunal needs consider the competitive effects of the Proposed Transaction are the national retail and wholesale mobile services markets. Even if other secondary or sub-markets are considered, the Proposed Transaction would not be likely to have the effect of substantially lessening competition in those markets.

(a)    The Proposed Transaction would not have any material effect on demand in future spectrum auctions or the secondary market for the acquisition of spectrum.

(b)    As to the supply of mobile services to “enterprise customers” (i.e. government and corporate or industrial customers) as a customer segment within the national retail mobile services market, the Proposed Transaction would enable TPG to compete more effectively with Optus and Telstra for enterprise customers who value coverage in the RCZ.

(c)    As to the supply of NBIoT services,     the improved scale and customer reach which the Proposed Transaction would provide to TPG, as well as its independent control of its core mobile network and its metropolitan infrastructure, would increase TPG’s ability and incentive to invest in new or nascent NBIoT applications or services.

(d)    As to any national market for passive mobile network infrastructure services, without the Proposed Transaction, TPG would not be a material acquirer of tower access or any other passive infrastructure in the RCZ. With the Proposed Transaction, TPG would continue to acquire those services in the 81.4% population coverage areas, and it would have the increased incentive and ability to do so, having regard to its improved competitive position and associated revenue benefits and capital savings.

(e)    As to the supply of retail fixed wireless services, the Proposed Transaction would enhance competition in the national market for retail fixed broadband services by enabling TPG to supply 5G fixed wireless services to customers in the RCZ and by providing Telstra with an improved capacity to supply such services, in both cases in competition with NBN Co Limited (NBN Co).

Competitive effects of the Proposed Conduct

193    The applicants contend that, if the s 90(7)(a) analysis is limited to the Proposed Conduct only, the Tribunal should be satisfied that the Proposed Conduct would not have the effect, or would not be likely to have the effect, of substantially lessening competition in the relevant markets.

194    In a future with the Proposed Conduct, the applicants contend that Telstra will obtain modest, temporary benefits in respect of its service quality in the RCZ. These benefits would not endure, nor would they have any real impact on Telstra’s competitive position in the national markets relative to Optus and TPG. The relevant benefits, which arise from access to additional spectrum, include: modest and temporary congestion relief for the worst-affected users in the RCZ; a modest increase in service quality (including higher speeds) for Telstra customers in the RCZ; reduced site densification costs and the ability to redeploy cost savings to improve 4G or 5G coverage; and the reduced costs of providing services to TPG under the MOCN Service Agreement.

195    The applicants contend that the above benefits for Telstra are modest, [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] ([REDACTED] [REDACTED] [REDACTED]) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. To the extent that the spectrum provides speed, capacity or capex benefits, these apply only, or principally, within the RCZ and therefore have limited application to competition within the national market. The modest nature of the benefit for Telstra means that the Spectrum Authorisation Agreement (considered alone) would not substantially affect the competitive position of Telstra in the national retail or wholesale mobile services markets, relative to Optus or TPG.

196    By contrast, in a future without the Proposed Conduct, Telstra would not receive these benefits, and would likely not be able to provide the MOCN services to TPG at all.

197    TPG, in a future with the Proposed Conduct, would be able to monetise and use its spectrum in the RCZ (including to serve its own customers). Without the Proposed Conduct, TPG’s spectrum in the RCZ would be underutilised due to TPG’s limited infrastructure in the RCZ and its limited ability to unilaterally expand that infrastructure, and TPG would not receive spectrum payments from Telstra. Even if TPG entered into an alternative arrangement with Optus, Optus is unlikely to seek access to TPG’s spectrum.

198    Optus, in a future with the Proposed Conduct, would continue to have a spectrum advantage over Telstra in terms of spectrum capacity per customer, particularly in contiguous low-band spectrum, which is most valuable in regional areas. Optus’s network would also continue to have greater capacity than the combined MOCN to accommodate usage growth at the same rate of network densification. Optus’s spectrum holdings would otherwise be unaffected, including its mid-band holdings in metropolitan areas which provide Optus with a speed advantage in those areas. In a future without the Proposed Conduct, Optus is unlikely to acquire access to any TPG spectrum that would be meaningful to it – [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]. Optus sees little value in the TPG spectrum in the RCZ. Optus may also be able to acquire future spectrum across certain bands suited to 5G deployment that are scheduled to become available in the next decade. Optus therefore would not face any competitive disadvantage based on its spectrum holdings relative to Telstra in the future with the Spectrum Authorisation Agreement relative to the future without it.

Net public benefit

199    The applicants submit that the Proposed Transaction, would be likely to result in benefits to the public that outweigh any potential detriment. Many of the benefits identified by the applicants are, in effect, alleged pro-competitive features of the Proposed Transaction that are relied on in support of the applicants’ case pursuant to s 90(7)(a) of the CCA. The benefits identified were said to comprise the following.

200    First, the applicants contend that there are a range of public benefits that will result from increased competition in wholesale and retail markets: 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.

201    Second, the applicants contend that there are economic and consumer benefits of reduced mobile congestion in regional areas. Spectrum sharing will help Telstra significantly reduce congestion in regional areas which will result in improved service quality for affected customers.

202    Third, the applicants contend that Telstra pooling spectrum with TPG and gaining access to 169 TPG sites in the RCZ will enable Telstra to avoid the costs of building new mobile sites in the RCZ, thereby generating productive efficiencies. Further, the more efficient use of mobile infrastructure in rural and regional Australia through the pooling of spectrum and the sharing the Telstra’s RAN will avoid duplication in investment between Telstra and TPG and reduce capital expenditure costs, which cost savings are likely to be substantially passed onto consumers and/or redeployed by Telstra to bring forward its 5G rollout or to extend coverage. TPG will avoid the costs of maintaining and upgrading at least 550 existing sites that it will decommission.

203    Fourth, the Proposed Transaction will bring 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.

204    Fifth, the applicants contend that there are environmental benefits associated with the reduced need for site duplication in the RCZ.

Joint undertaking and TPG undertaking

205    The applicants contend that, if the Tribunal is not able to be satisfied of one or other of the matters in s 90(7) of the CCA in the absence of conditions, imposing a condition that Telstra and TPG give the undertakings proposed would be sufficient to resolve any potential competition concerns and to prevent or reverse any harm that arises or may arise within the next eight years. The joint undertaking would require the Proposed Transaction to be authorised or approved within 8 years, which would remove any competition concerns with respect to any impact on Optus and its network investment in regional areas.

Optus’s contentions

206    As noted earlier, Optus contends that s 90(7) requires the Tribunal to assess the competitive effects, and the benefits and detriments resulting from, the Proposed Conduct, being the conduct that is the subject of the application for authorisation, and not the effects and results of the other Proposed Transaction agreements. Optus therefore advanced its case before the Tribunal on alternative bases: as its primary contention, on the basis that the relevant inquiry is whether the Proposed Conduct satisfies the statutory preconditions for authorisation in s 90(7) of the CCA; and as its secondary or alternative contention, on the basis that the relevant inquiry encompasses the effects of the Proposed Transaction as a whole. Optus contends that the test for authorisation set out in s 90(7) of the Act is not satisfied, irrespective of whether it is assessed by reference to the Proposed Conduct or the Proposed Transaction as a whole.

The future without the Proposed Transaction – likely counterfactuals

207    In assessing the future without the conduct sought to be authorised (the Spectrum Authorisation Agreement), Optus assumed that no part of the Proposed Transaction would be entered into by Telstra and TPG (in the same manner as the applicants).

208    Optus contends that, in any counterfactual, Telstra would remain the dominant provider of mobile services, with all the advantages it presently enjoys including the highest number of subscribers, sites, and significant spectrum holdings. Unlike Optus and TPG, Telstra does not face additional capital expenses associated with replacing existing Huawei equipment. It would, however, face a competitive challenge to its network leadership from Optus and would defend its network leadership by investing in infrastructure including in regional areas. Telstra would not face congestion issues in the RCZ because it is able to address congestion issues through mobile site investment. Further, Telstra’s network capacity will experience a significant uplift as it closes down 3G services and migrates to 4G and 5G, which will result in additional low-band spectrum becoming available from July 2024.

209    Optus contends that there are two counterfactuals with a real commercial likelihood in a future without the Proposed Transaction.

210    In the first counterfactual, Optus and TPG would continue to invest in 5G technology, including in the RCZ. [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. 5G technology would become progressively available to customers as the rollout progresses, with [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], the target date for completion of a 5G rollout across the [REDACTED] coverage as set out in Optus’s original business case underpinning Optus’s decision to commence investment in 5G technology in 2020 (5G Business Case) in July 2020. Contrary to the applicants’ contention, Optus submits that its investment strategy would [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]. In this counterfactual, TPG would also invest, including in 5G technology and in the RCZ, [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. Telstra would remain the dominant provider of mobile services. However, with continued investment by Optus and TPG, Telstra would continue to respond competitively.

211    In the second counterfactual, Optus and TPG would enter into a network sharing agreement in respect of 4G and 5G services, including in the RCZ. Optus contends that there is a real commercial likelihood of such an agreement being made for several reasons, which include the following.

(a)    [REDACTED].

(b)    The commercial benefits arising from a network sharing deal for both parties would be of a kind and scale such that it would be economically rational for Optus and TPG to enter into an arrangement. Those benefits, [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], would include: improving scale and unit costs; generating a higher return on investment (for Optus in particular) and enabling cost savings to be deployed to build more sites and close the coverage gap with Telstra; attaining higher network speeds and performance through spectrum pooling; allowing Optus to provide wider 5G coverage through access to TPG’s low band spectrum; allowing Optus to deploy and sell fixed wireless services through access to TPG’s mid-band spectrum; and, for TPG, extending its coverage footprint from 96% up to 98.5% and providing access to a 4G and, in time, a 5G network.

(c)    There are no insurmountable technical barriers to the implementation of active sharing between Optus and TPG.

(d)    Any potential loss of market share by Optus to TPG caused by a network sharing deal would be outweighed by the cost reductions gained, such that Optus would have a real commercial incentive to enter into an arrangement with TPG.

(e)    Any distrust or deterioration in the commercial relationship between Optus and TPG could be overcome given the economic benefits of a network sharing arrangement.

(f)    [REDACTED].

212    Optus further contends that, contrary to the applicants’ submission, the Tribunal need not be satisfied of a likelihood of a network sharing agreement on particular identified terms. Any such agreement with TPG would likely improve Optus’s competitive position vis-à-vis Telstra and would bring greater balance to the benefits of scale experienced by market participants. The fact that such an agreement would constitute a competitive threat to Telstra is borne out by Telstra’s own efforts to forestall it by entering into the Proposed Transaction with TPG.

Competitive effects of the Proposed Conduct/Proposed Transaction

Relevant markets

213    Optus contends that the relevant markets in which to assess competitive effects include the national markets for the wholesale and retail supply of mobile services. Optus submits, however, that the extent of services in the RCZ is of particular importance to people who live or work in that area, and so particular focus on the extent of competition in the provision of services to that area is required.

214    Optus also contends that there are other relevant markets. First, demand from enterprise and government customers is distinct because they have larger data requirements, require services in multiple locations, and require priority traffic and higher quality of service. Second there are regional markets for the acquisition of spectrum. Third, there are upstream markets (such as the market for the supply of services to install mobile infrastructure) and downstream markets (such as markets for the supply of a variety of services using fixed wireless and mobile technology).

Effects in national markets for wholesale and retail supply of mobile services

215    Optus contends that, in a future with the Proposed Conduct and/or the Proposed Transaction, Telstra’s dominant competitive position in the national wholesale and retail mobile markets would be strengthened and entrenched. Telstra is dominant because of its spectrum holdings, superior network coverage, scale and non-reliance on Huawei equipment. The Proposed Conduct and/or the Proposed Transaction strengthens Telstra’s position in each of these dimensions.

216    First, Telstra would obtain additional spectrum under the Spectrum Authorisation Agreement for use in the RCZ and beyond it. Although the spectrum will be pooled for use with TPG, Telstra will benefit to a greater extent where it services a much larger number of the SIOs in the RCZ compared to TPG. The additional spectrum will increase Telstra’s access to total spectrum holdings in both low-band and mid-band spectrum, as well as to contiguous spectrum blocks in key bands, delivering greater improvements in capacity and speed. This will widen Telstra’s existing advantage over Optus in terms of total spectrum. Additional spectrum will also enable Telstra to increase service quality in the RCZ and in more remote areas without incurring the substantially greater costs of site densification, which is the only way to improve capacity without spectrum. This will further strengthen Telstra’s scale and cost advantages relative to Optus, which already exist. Telstra’s acquisition of TPG’s spectrum will also remove that spectrum from the market, where TPG would otherwise likely seek to monetise it. Thus, if the Proposed Conduct is considered alone for the purpose of s 90(7), authorisation ought to be declined.

217    Second, Telstra would obtain additional revenue from the use of its network by TPG customers where, under the MOCN Service Agreement, TPG will make wholesale payments to Telstra for that use. This revenue will defray the costs of Telstra’s 5G rollout, and will strengthen its scale advantage by allowing it to amortise to a greater extent its network improvement costs and to reduce its average costs of providing services. The receipt of wholesale payments will also lessen the incentive for Telstra to compete for customers on price and quality, in circumstances where Telstra will receive revenue in respect of those customers it loses to TPG, and which TPG wins from Optus.

218    Third, Telstra would be able to access and deploy infrastructure on up to 169 existing TPG mobile sites, primarily within the RCZ, enabling Telstra to increase the quality and coverage of its services in areas that would be within range of those sites, eliminate gaps compared to TPG, and decrease gaps compared to Optus.

219    The Proposed Transaction also removes two competitive threats to Telstra: the first is a potential network sharing arrangement between Optus and TPG in the RCZ, and the second is mobile roaming or neutral host network schemes mandated by the relevant regulators.

220    By contrast, Optus contends that its ability to compete against Telstra in a future with the Proposed Conduct and/or the Proposed Transaction would be reduced. The effect of the spectrum advantage that Telstra will acquire by reason of the Proposed Conduct would confer a scale and cost advantage with which Optus would be unable to compete. That advantage is only further compounded by the Proposed Transaction as a whole. Optus’s competitive position would also be weakened where both TPG and Telstra would obtain customers at the expense of Optus as a result of the Proposed Transaction. TPG would “leapfrog” Optus in terms of both coverage and quality of services in the RCZ, and Optus will have no competitive advantage or selling point over either Telstra or TPG.

221    TPG would not, however, be a strong source of infrastructure competition in regional and rural areas if the Proposed Transaction proceeds. Optus contends that TPG would be unlikely to make infrastructure investments in the RCZ and would decommission sites that are not transferred to Telstra. TPG would also lose autonomy over aspects of its network and would have limited to no ability to differentiate itself based on geographic coverage, quality of network, the timing of technology upgrades, and its RAN investment strategy. While TPG would retain control of its core network, this would allow it to differentiate only through pricing or the packaging of data and inclusions. TPG would be dependent on Telstra’s infrastructure investments. That dependency is likely to persist at any of the exit points contemplated under the relevant agreements, which make such an exit commercially unrealistic.

222    Optus also challenges the applicants’ contention that TPG could, as a matter of commercial reality, re-establish its own network in the RCZ prior to, and on, exit from the Proposed Transaction. If it does not do so, without any existing 5G regional network, TPG would face significant difficulty in rolling out 6G. Accordingly, any short term benefits to TPG, such as certainty of network access in regional areas and increased utilisation of spectrum, will not ameliorate the long term structural deficit that entry into the Proposed Transaction would create.

223    Optus further contends that, in a future with the Proposed Transaction, it would be forced to reconsider its own 5G investment strategy, and would [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]. This was recognised in Optus’s 5G Business Case in 2020. Those disincentives will be compounded by the Proposed Transaction, which will strengthen Telstra’s competitive position and its ability to defeat Optus’s investments. Optus will also [REDACTED] [REDACTED] [REDACTED], [REDACTED] [REDACTED] [REDACTED] [REDACTED], [REDACTED] [REDACTED] [REDACTED], [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. That the Proposed Transaction affects only 17% of the national market is irrelevant where infrastructure competition in the region that services this part of the market is a nationally significant dimension of competition.

224    Optus contends that, contrary to the applicants’ submission, the anticipated harm to Optus from the Proposed Transaction is not merely harm to it as a competitor. Rather, it constitutes harm to competition. Optus has historically been a crucial source of competition to Telstra. However, if the Proposed Transaction were to proceed, Optus would be unable to compete with Telstra in the same manner as it has to date, and TPG would be unable to step into its shoes. Consequently, the competitive pressure that Optus’s investment generates and which motivates Telstra to invest in regional network infrastructure would be removed. In practical terms, this would likely lead to a reduction in the scale of Telstra’s 5G rollout, as well as to deferral or reduction of any subsequent investments in technology in those areas (including the construction of a 6G network). Telstra would be even further ahead than Optus in its 5G rollout and, necessarily, any future rollout of a new technology generation (which would leverage the rollout of the earlier generation). That relative disadvantage, and Telstra’s dominance, in regional Australia will be “baked in” for a long period of time. Even if it is accepted that the Proposed Transaction creates short term efficiencies for both Telstra and TPG, these cannot negate the long term impacts on competition in the relevant markets.

225    Overall, Telstra’s strengthened competitive position will raise strategic barriers to entry or expansion in the supply of wholesale or retail mobile services, and will lead to reduced competition on price and quality.

226    Optus also contends the Proposed Transaction heightens the risk of coordinated effects between Telstra and TPG, insofar as it will reduce product and service differentiation between them, allow for easier monitoring of and retaliation against deviations from mutually beneficial behaviour, and facilitate a degree of information sharing between them.

Effects in other relevant markets

227    Optus contends that the Proposed Conduct and/or the Proposed Transaction would have the result, or would likely have the result, of substantially lessening competition in other relevant markets.

(a)    In the market for the acquisition of spectrum, the Proposed Conduct and/or the Proposed Transaction would likely have the effect of reducing demand, and therefore competition for, spectrum. First, the Proposed Transaction would result in a concentration of control by Telstra of TPG’s substantial spectrum holdings that would otherwise be monetised by TPG. Second, [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]. Third, potential entrants to the market may be deterred by the extent of Telstra’s spectrum holdings.

(b)    In the market for enterprise and government customers, in a future with the Proposed Transaction, Telstra’s dominance would continue, particularly due to its relative scale advantages. TPG’s ability to compete for these customers would be diminished, where it would have less control over the development of its network in the RCZ and delayed access to 5G services. Similarly, Optus’s weakened position will limit its competitiveness in these markets. By contrast, in the counterfactual with an Optus/TPG network sharing agreement, Optus and TPG would be able to offer the higher quality service and prioritised network traffic typical for services in these markets. Optus and TPG would therefore be able to compete more strongly with Telstra for enterprise and government customers.

(c)    In the market for fixed wireless access and NBIoT, Telstra’s strengthened market position as a result of the Proposed Transaction would enhance its ability to offer and develop these services. Optus, however, would [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED].

(d)    In the upstream and downstream markets for the supply of services to install or maintain mobile infrastructure, and services for fixed wireless and mobile technology respectively, the suppression of dynamic competition as a result of the Proposed Transaction will negatively affect competition in these markets.

Net public benefit

228    Optus contends that none of the public benefits identified by the applicants are attributable to the Proposed Conduct alone. Therefore, the net public benefit test in s 90(7)(b) of the CCA cannot be satisfied if the analysis is properly confined to the Proposed Conduct and not the wider Proposed Transaction.

229    As to the public benefits which are said to arise from the Proposed Transaction, Optus contends that they either would not arise, would arise in an Optus/TPG deal counterfactual, would not be meaningful or would not result in cost savings that would be passed through to consumers. For example, the anticipated reduction in congestion across Telstra’s network would arise in any event, in circumstances where Telstra would take steps to address congestion even if the Proposed Transaction does not take place. Optus contends that it is also unlikely that the reduced network costs expected by the applicants under the Proposed Transaction would be passed through to consumers, in circumstances where the evidence suggests that [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], and competition on pricing and quality will diminish by reason of [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED].

230    Conversely, Optus contends that the Proposed Transaction will occasion substantial public detriments that will outweigh any public benefits, including competitive harms, reduced network diversity and resilience in regional areas, and higher spectrum concentration impacting long term industry structure. Any immediate improvements in service quality arising from the Proposed Transaction will be short-lived because of reduced competitive pressure on Telstra to invest in coverage, speed, service innovation and technology upgrades, leading to poorer consumer outcomes in the future. As a result of the de-duplication of Telstra and TPG sites in the RCZ and [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], more regional areas would only be serviced by Telstra’s network. Any outages on that network will leave relevant areas with no or limited communications, and a loss of network resilience.

Joint undertaking and TPG undertaking

231    With respect to the joint undertaking, Optus contends that it does not address the relevant competitive harms arising from the Proposed Transaction, which would occur within the period contemplated by the undertaking (being 8 years, or by 2031) and would persist long afterwards even if the Proposed Transaction were then terminated. That is because Optus and TPG need to make investment decisions about 5G technology in the near term. If the Proposed Transaction occurs, Optus’s ability and incentive to invest will rapidly diminish, with the result that [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. By the time the Proposed Transaction is terminated in 2031, [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].

232    With respect to the TPG undertaking, Optus contends that it would not prevent the weakening of TPG’s competitive position. On exit from the Proposed Transaction, TPG would have access to 60% of its current sites, comprising the 300 sites the subject of the undertaking and the 169 sites provided to Telstra under the Mobile Site Transition Agreement. The 169 sites would be subject to [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], and the 300 sites would not be functional. TPG’s network position on exit from the Proposed Transaction would, therefore, be different – and inferior – to its position on entry.

The ACCC’s contentions

233    The ACCC acknowledged in its SOFIC that the ACCC’s function in this proceeding is to assist the Tribunal. As Optus has assumed the role of contradictor in the present review, the ACCC confined its contentions to the following topics:

(a)    the statutory test and relevant matters of principle;

(b)    the issues that the Tribunal will need to consider in undertaking its review;

(c)    what is to be authorised by the Tribunal;

(d)    the ACCC’s position in respect of the joint undertaking provided by the applicants, dated 20 April 2023; and

(e)    clarification of one matter concerning the modelling referred to by the ACCC in its reasons for determination.

234    The Tribunal expresses its appreciation for the assistance provided by the ACCC in this review, and has taken into account the submission advanced by the ACCC. The ACCC’s submissions with respect to the statutory framework governing this review, and particularly the proper application of s 90(7) to the conduct for which authorisation has been sought, have been discussed earlier in these reasons. It is not otherwise necessary to reproduce the ACCC’s submissions, which have been taken into account by the Tribunal.

235    In future applications for review of this kind, the ACCC should not consider itself inhibited from providing assistance to the Tribunal merely because a competitor has intervened as a contradictor. The Tribunal has long recognised the important role played by the ACCC in these reviews, assisting the Tribunal to reach the correct decision in the public interest.122 In a similar review context, the Tribunal observed:

Where there is no natural contradictor on an issue in the application, a decision maker may need to participate in the proceedings in order to assist the Tribunal. In addition, if the statutory regime is consistent with the decision maker taking an active role in the proceedings, it is then appropriate for the decision maker to respond substantively to the review application. The role that the decision maker takes in merits review proceedings is also different to the role taken in actions for judicial review. In the case of merits review, there is a more limited application of the Hardiman principles because the decision maker, as “administrator” of the particular statutory regime, is uniquely placed to assist in that it has an in-depth knowledge of the scheme: Macedon Ranges Shire Council v Romsey Hotel Pty Ltd and Anor (2008) 19 VR 422 at [30]; Bankstown City Radio Co-operative Ltd v Australian Communications and Media Authority [2007] FCA 2053 at [6]; Geographical Indications Committee v O’Connor (2000) 64 ALD 325 at [35].123

236    Given the substantive role assumed by Optus in this proceeding as contradictor, the ACCC was correct to avoid any duplication of the submissions sought to be advanced by Optus. However, it is apparent from the ACCC’s reasons for determination, and the materials before the Tribunal, that a large number of interested persons advanced submissions to the ACCC both for and against the grant of authorisation. In future applications for review of this kind, the Tribunal would be assisted if the ACCC were to present the different views of interested persons in a convenient summary form, to ensure that the Tribunal is fully informed of all perspectives with respect to the relevant conduct and not merely the perspectives of the applicants and a primary contradictor.

E.    FACTUAL BACKGROUND TO THE ASSESSMENT

Methodology

237    At the direction of the Tribunal, the parties filed a document identifying all factual findings made by the ACCC in its determination that are not contested (referred to earlier as the Joint Document of Factual Findings). In the updated version of that document provided to the Tribunal on 11 May 2023, Telstra and TPG included notes or comments with respect to certain of the factual findings. In respect of some findings, Telstra and/or TPG noted that they had not been able to verify the data presented by the ACCC. During the hearing, Telstra and TPG confirmed that notes of that kind were not intended to convey that Telstra and TPG were contesting the data and they also confirmed that it was open to the Tribunal to place reliance on the data notwithstanding the note. In respect of other findings, the notes or comments were in the nature of submissions with respect to the content or relevance of the factual finding. The Tribunal has taken those matters into account.

238    For the purpose of its review, and in accordance with its role in the present application, the Tribunal has examined the findings of fact made by the ACCC, having regard to the evidence on which they were based, the submissions made by the parties about them, and the Joint Document of Factual Findings, applying particular scrutiny in respect of those findings that are contested. Based on that material, the Tribunal makes the following findings with respect to the factual background. Where a finding is not contested by the parties, this has been indicated below.

Industry background

239    This section sets out relevant background information on the mobile telecommunications industry in Australia, the mobile networks, and their inputs.

Mobile networks

240    A mobile network uses spectrum to deliver mobile services such as voice, SMS and mobile data to end-user devices.124 MNOs compete at both the retail and wholesale level, with their retail brands competing for consumer and enterprise customers, and their wholesale arms competing in the provision of wholesale services to MVNOs and other telecommunications providers.125 A mobile network typically has a number of primary components used to deliver these services: the radio access network, transmission networks, the core network, and spectrum.126

Figure 2: Major components of a mobile network127

241    The radio access network consists of base stations (mounted on mobile towers or located at cell sites) that use spectrum to connect end-user devices to the network via radio link. A base station provides mobile coverage to an immediate geographic area called a cell. Importantly, mobile devices will maintain connectivity with the network as the end-user's device moves between cells. This capability is known as inter-cell handover.128

242    In turn, transmission networks connect these base stations to the rest of the network, and the core network. These transmission links can be wireless (microwave, satellite), but are more commonly connected by fibre link. Transmission between base stations and the rest of the network is also known as backhaul. Backhaul is an important component of network quality. A mobile network needs sufficient backhaul capacity to carry traffic across its network.129

243    The core network manages voice, SMS, and data traffic, connects and manages different parts of the network, and handles functions like billing and user management.130 The core network is also where operators’ networks connect to other networks, including the internet. MNOs connect to other operators’ networks at points of interconnection between their respective core networks.131