AMTA Mobile Industry Report 2004

Australian Mobile Telecommunications
Industry
Economic Significance
September 2004
Research commissioned by AMTA

ECONOMIC SIGNIFICANCE OF MOBILE TELECOMMUNICATIONS
The Allen Consulting Group Pty Ltd

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While The Allen Consulting Group endeavours to provide reliable analysis and believes the
material it presents is accurate, it will not be liable for any claim by any party acting on such
information.
© The Allen Consulting Group 2004
The Allen Consulting Group ii

Acknowledgments
The Allen Consulting Group would like to thank the members of the mobile
telecommunications industry who contributed to this report.
A ten member Working Group of industry representatives provided guidance and

feedback on the project. This included reviewing draft documents, providing
guidance on industry issues and helping to obtain information from public and
private sources. The Working Group was established and run by the Australian
Mobile Telecommunications Association (AMTA).
In addition, the report includes information that individual mobile

telecommunications businesses provided. Industry participation in the information
gathering process enabled the report to include a range of views on industry issues
as well as up-to-date information.
The Allen Consulting Group iii

Preface
This report was commissioned by the Australian Mobile Telecommunications

Association (AMTA) and completed by The Allen Consulting Group. This is the
second year that AMTA has commissioned a report on the Economic Significance
of the Mobile Telecommunications Industry.
AMTA is the peak industry body representing Australia's mobile

telecommunications industry. Its mission is ‘To promote an environmentally,
socially and economically responsible and successful mobile telecommunications
industry in Australia’. AMTA’s members include the mobile phone carriers,
handset manufacturers, retail outlets, network equipment suppliers and other
suppliers to the industry.
The Allen Consulting Group is a strategic consulting firm specialising in policy,

program, regulatory and stakeholder analysis. We assist governments and
organisations in designing more effective reforms, programs, regulatory
frameworks and organisational arrangements. We have experience in advising
across telecommunications, health and community services, education, employment
and training, housing, utilities, transport, finance, services and manufacturing
sectors.
The Allen Consulting Group iv

Contents
Executive summary vii

Glossary xiii
Chapter 1 1
Introduction 1
1.1 The project 1
1.2 The project approach 1
Chapter 2 2
Snapshot of Australia’s Mobile Telecommunications Industry 2
2.1 A short history 2
2.2 Australian mobile telecommunications: current industry structure 5
2.3 Mobile telecommunications industry sectors described 6
Chapter 3 19
Industry growth 19
3.1 Introduction 19
3.2 Subscriber growth and characteristics 19
3.3 Competition in Australia’s mobile telecommunications industry 26
3.4 Trends in international mobile markets 28
Chapter 4 35
Industry revenue and value added 35
4.1 Industry revenue 35
4.2 Industry Gross Product 37
Chapter 5 41
Employment 41
5.1 Trends in employment 41
5.2 Wages paid 43
Chapter 6 45
Payments to Government 45
6.1 Mobile telecommunications specific payments to government 45
6.2 Generic taxes paid by the mobile industry 49
The Allen Consulting Group v

Chapter 7 51
Industry Investment 51
7.1 Investment in network infrastructure 51
7.2 Examples of capital expenditure projects 52
7.3 Expenditure on research and development 55
Chapter 8 56
Industry initiatives and future directions 56
8.1 Introduction 56
8.2 Technological innovations 57
8.3 New and emerging applications 60
8.4 Industry led initiatives 64
Appendix A 67
Project Working Group members 67
Appendix B 68
Request for information from industry 68
Appendix C 69
Organisations involved with the mobile telecommunications industry
in Australia 69
The Allen Consulting Group vi

Executive summary
Australia’s mobile telecommunications industry has been a strong performer over

the last ten years and recent innovations provide a platform for continued strong
performance. Today, the Australian mobile telecommunications industry has an
estimated 16 million subscribers, in over 70 per cent of households, used by nearly
80 per cent of the Australian population. Mobile telecommunications have become
a part of every-day life for individuals, business and the community.
To better understand the economic significance of the mobile telecommunications

industry in Australia, the Australian Mobile Telecommunications Association
(AMTA) engaged The Allen Consulting Group to undertake research. This report
brings together detailed information on the participants in the industry and the
industry’s growth, and presents examples of how mobile phones have enhanced the
way people do business and manage their daily lives. It also presents measures of
the economic significance of mobile telecommunications to the telecommunications
industry and the economy.
The mobile telecommunications industry
The mobile telecommunications industry is made up of three major sectors.
The hardware sector is responsible for building and maintaining the network
infrastructure required for mobile telephony as well as providing end-user hardware
such as handsets. The hardware sector comprises a number of large global firms as
well as many smaller firms, particularly providing end-user equipment.
Carriage service providers (CSPs) are suppliers of telecommunication services to

the public using carrier network infrastructure. In 2001-02, there were more than a
1
dozen CSPs operating in Australia. This included four mobile network carriers,
Telstra, Optus, Vodafone and Hutchison, who own and operate six mobile networks
as well as resellers and Virtual Mobile Network Operators (VMNOs). The CSP
sector is the largest individual sector in the mobile telecommunications industry.
Retailers are the third sector of the mobile telecommunications industry. They offer
mobile services to end-users on behalf of the CSPs. Customers can purchase mobile
telecommunications hardware and services from retail outlets such as speciality
outlets that may be branded by a CSP or outlets that sell mobile telecommunications
as part of a broad range of products. A recent development in the retailing of mobile
telecommunications is the facility for customers to purchase mobile phones and
connect to services online.
The relatively new sectors of content providers and program developers are
growing in importance. Content providers develop and provide information and
entertainment on mobile phones. Program developers extend applications and
develop new applications for mobile phones, through extending the functionality of
mobile devices and/or integrating data. The emergence of these sectors is linked to
the third generation (3G) network and as such, the importance of these sectors to the
mobile industry will grow alongside the growth in Australia’s 3G network.
1
Australian Communications Authority (ACA), 2002, Telecommunications Performance Report 2001-02,
Melbourne, p. 161.
The Allen Consulting Group vii
Economic significance of mobile telecommunications
The mobile telecommunications industry is a high revenue, high cost industry that
makes a substantial and growing contribution to the wider telecommunications
industry and the Australian economy. The following indicators demonstrate this:
∑ Industry Gross Product for the CSP sector in 2002-03 was $4.8 billion.2,3
– Industry Gross Product (IGP) is a measure of the economic contribution of
a specific industry to the economy or value added.
– The contribution of the mobile telecommunications sector to the economy
was larger than the free to air television services industry and also larger
than the newspaper printing and publishing industry. The contribution of
the mobile telecommunications sector was almost one third of the entire
accommodation, cafes and restaurants industry.
∑ The industry contributes substantially to government revenues through charges
and levies and through the full range of Commonwealth and State generic
industry taxes and charges.
– It is estimated that on-going industry specific payments made by the
mobile telecommunications industry to government are in the order of
two per cent of revenue per year or $178.2 million in 2003-04.
– The industry has contributed almost $2.9 billion to government through
payments made to access spectrum.
– The industry contributes to effective industry operation through payments,
some voluntary and some compulsory, that support various industry
associations and schemes, for example the Telecommunications Industry
Ombudsman and the National Relay Service.
∑ Employment in the mobile telecommunications industry is growing.
– Over 34 500 people worked in the industry (on a full-time, part-time or

casual basis) in 2002-03. Over the period 1997-98 to 2002-03,
employment in the mobile telecommunications industry increased by
48 per cent, compared to an increase of around 30 per cent in the
telecommunications industry as a whole.
– In 2002-03, the mobile telecommunications industry paid around

$1.2 billion in wages.
– Mobile telecommunications accounted for over one third of total
telecommunications employment in 2002-03. By comparison, in 1996-97,
mobile telecommunication employees accounted for just under one quarter
of total telecommunications employment.
2
The estimates of IGP are derived from a combination of sources. Mobile network carrier IGP is taken
from IBISWorld publication J7122 Mobile Telecommunications Carriers in Australia. Mobile resellers
IGP has been derived from IBISWorld publication J7123 Telecommunications Resellers in Australia and
ABN AMRO publication Telecom Networks- Australia: Industry Overview.
3
The figures presented are in nominal terms. Given the downward trend in prices, it is likely that the real
growth in IGP would be higher than that indicated in the nominal figure.
The Allen Consulting Group viii
∑ Capital expenditure by the industry has been substantial.
– In 2003-04, the industry continued its capital expenditures to support new

networks and expansions and upgrades to existing networks. This is in
addition to regular operating expenditures.
4
– Since 1997, capital expenditure on new networks has exceeded $8 billion.
These investments underpin expansions to mobile network coverage that
make mobile services available to more people in more places as well as
supporting the development of innovative services.
∑ Revenue in the mobile telecommunications industry exceeds $8 billion

annually:
– An estimate of mobile telecommunications industry revenue for 2003-04
5
was $8.8 billion;
– In 2002-03, mobile revenue represented 28 per cent of total

telecommunications revenue.
Expectations of continuing industry development
The measures of economic significance of the mobile telecommunications industry

identify that the industry has experienced strong growth in its first ten years. The
industry has evolved substantially over this time. The emerging trends suggest that
industry development continues to be driven by competition, innovation and a focus
on meeting customer needs.
Subscriber numbers have shown strong growth since the early 1990s. The estimated
growth rate in mobile subscriber numbers from 2003 to 2004 was above 10 per
cent. Peaks in subscriber growth appear to be associated with the introduction of
new networks. The 3G network commenced in 2003. The full impact of this new
network on growth rates will be observed over the coming years.
Mobile penetration rate is the number of mobile phone services per 100 people.
Australia’s mobile penetration rate grew from 64 per cent in 2001-02 to be
6
72 per cent in 2002-03 and is forecast to be around 80 per cent in 2004. Currently,
Australia is ranked equal 20th in terms of per capita mobiles. Although it may seem
unlikely, a penetration rate above 100 per cent is possible and has been achieved in
a number of countries. This comes about when mobile phone customers make use
of more than one SIM card and/or mobile phone handset, allowing them to have
different mobile numbers for business and personal use. Another factor likely to
drive mobile penetration rates over 100 per cent is the uptake of mobile
technologies by business and government, for example demand for mobile devices
that wirelessly enable different parts of their enterprises and make use of devices for
7
asset tracking.
4
IBISWorld publication J7122 Mobile Telecommunications Carriers in Australia. p. 17.
5
Information provided via industry survey and publicly available information.
6
ABN-AMRO, November 2004, Telecommunication Services: Australian Telecommunications 2004, p.29
7
Merrill Lynch Global Wireless Matrix, First Quarter 2004, publication date 7th July 2004. p 16, as
provided by Telstra.
The Allen Consulting Group ix
Pre-paid customers are driving the continued growth in subscriber numbers (see
figure E.1). In June 2003, around 40 per cent of all mobile phone services were pre-
paid. Prepaid services offer an inexpensive way to enter the mobile market without
the credit-worthiness checks associated with many mobile contracts, and allow
customers to better manage their mobile phone expenditure. The increasing
preference for prepaid services suggests that customers value choice and flexibility.
Figure E.1
PREPAID VERSUS POST-PAID SUBSCRIBERS
Note: F indicates forecasted values.

Source: ABN-AMRO, November 2004, Telecommunication Services: Australian Telecommunications
2004, p.29.
Short message service (SMS) is another major source of growth in the mobile
telecommunication industry. In 1998 data revenue accounted for only one per cent
of total carrier revenue. In 2002-03, SMS services accounted for an average of
8
9 per cent of revenue received by mobile service providers. In 2002-03, an
estimated 3.95 billion messages (or an average of 294 messages per mobile phone
subscriber) were sent, reflecting an increase of 44 per cent since the previous year
9
(see figure E.2). Huge peaks in SMS use are experienced at significant times in the
community, for example Christmas and New Year. Many industry innovations are
being developed around the use of SMS.
8
Australian Communications Authority, 2003, Telecommunications Performance Report 2002-03,
Melbourne, p.89.
9
Melbourne, p.89.
The Allen Consulting Group x
Figure E.2
NUMBER OF SHORT MESSAGE SERVICES (SMS)
Source: Australian Communications Authority, 2003, Telecommunications Performance Report 2002-

03, Melbourne, p.89.
On-going innovation
The convergence of the internet and mobile communications technologies introduce

new ways of delivering content and applications to the end user. Advances in both
telecommunications network capabilities and the functionality of end-user devices,
has started to provide internet and television-like services that were previously only
available in a fixed line environment. The three critical and inter-related features of
technological innovations in mobile telecommunications are:
∑ improving speed of data networks, that supports the efficient delivery of larger
file sizes;
∑ increased capability of devices. Handsets have evolved from devices that
support voice, SMS and MMS to devices that integrate these functions with
capability to send and receive music, sound, video and information; and
∑ availability of information that can be integrated for example, linking of visual
data with geographic reference points, such as a location-based mobile data
service for the real estate industry.
Innovations in mobile telephony are impacting on the way individuals go about
their day-to-day activities, helping to improve the quality of life, and the way
businesses operate, helping to improve productivity.
The Allen Consulting Group xi

Innovations provide more options to manage business and personal activities. For
example, being able to book airline and movie tickets via SMS, having automated
systems to alert parents when their child is not attending school, or being able to
access data away from the office at high speeds. Taking personal applications of
wireless technologies recent developments allow customising, chat and discussion,
news and information, and entertainment. For businesses, mobile
telecommunications offers increasing flexibility, for example, using mobile
telecommunications to schedule field service staff, such as people servicing
building lifts.
The mobile telecommunications industry anticipates that quizzes, images, chat,

multimedia content, and interactive applications will continue to be taken up by
customers during 2004.
Social contribution
Data on measures such as IGP, employment, and payments to government

demonstrate the economic contribution of the mobile telecommunications industry
to the telecommunications industry as a whole and to the Australian economy.
However, those measures do not capture the many ways in which mobile telephony
contributes to improvements in the quality of people’s lives.
For many people, mobile telecommunications is more than a tool to make voice
calls: the extensive coverage, array of services and information available mean that
the mobile phone can make ‘life mobile’. A significant benefit of mobile
telecommunications continues to be the accessibility and freedom to reach people
on the move and for them to be able to maintain contact with other people.
For individuals, mobile phones can provide some security and safety benefits. There
are many cases where people have been able to use a mobile phone to convey their
need for help. A recent innovation is a home alarm system that will send an alert to
10
a mobile phone if the alarm is triggered.
New innovations in mobile telephony are assisting people in various ways in their
every day lives. For example, for the first time in 2003, New South Wales senior
students were able to receive their HSC results via a text message on their mobile
11
phone. This was up to four days before the HSC results arrived by mail.
These types of innovations for individuals mean that the role and thus importance of
mobile telephones in our society is growing. To further understand the nature and
extent of the impact of mobile telecommunications on Australian society, AMTA
has produced a discussion paper that examines areas for future research
opportunities.
Future reports
This is the second AMTA sponsored report to examine the economic significance
of the mobile telecommunications industry. Ideally, this type of report would be
produced regularly and become a key source of information on the industry. AMTA
welcomes comments on the methodology used and on the material presented in the
report.
10
Telstra Media Release, ‘Home alarms that alert your Mobile’.
11
Sydney morning Herald, 23 November 2003, ‘Textbook to text msg: HSC results by mobile’,
http://www.smh.com.au/articles/2003/11/22/1069027379010.html
The Allen Consulting Group xii
Glossary
ABS Australian Bureau of Statistics

ACA Australian Communications Authority
ACCC Australian Competition and Consumer Commission
ACLC Annual Carrier Licence Charge
AMPS Analogue Mobile Phone Service
AMTA Australian Mobile Telecommunications Association
ARPU Average Revenue Per User
CDMA Code Division Multiple Access
CSP Carriage Service Provider
DCITA Department of Communications, Information Technology and the Arts
GDP Gross Domestic Product
GPRS General Packet Radio Service
GSM Global System for Mobile Communication
IGP Industry Gross Product
IMEI International Mobile Equipment Identifier or Identity
IP Internet Protocol
IVM Interactive Voice Messaging
IVR Interactive Voice Response
LAN Local Area Network
LBS Location Based Services
MCF Mobile Carriers Forum
MMS Multimedia Message Service
MPIRP Mobile Phone Industry Recycling Program
NHMRC National Health and Medical Research Council
OECD Organisation for Economic Co-operation and Development
SMS Short Message Service
TDMA Time Division Multiple Access
UMTS Universal Mobile Telecommunications System (or Service)
USO Universal Service Obligation
VAS Value Added Services
VMNO Virtual Mobile Network Operator
WAP Wireless Application Protocol
WASP Wireless Application Service Providers
WCDMA Wideband Code Division Multiple Access
WHO World Health Organisation
2G Second Generation Technology
3G Third Generation Technology
4G Fourth Generation Technology
The Allen Consulting Group xiii

Chapter 1
Introduction
1.1 The project
Mobile telecommunications have become a part of every-day life across our

society: in working and home life and across age groups. The Australian industry is
now more than ten years old. The industry continues to contribute to the economy,
recording growth in the last year in a number of key measures for example,
revenue and employment. The innovative drive that has given impetus to this
growth remains a feature of the industry with continuing advances in both mobile
telecommunications products and services.
The Australian Mobile Telecommunications Association (AMTA) engaged The

Allen Consulting Group to undertake research and prepare this report on the
economic significance and contribution of the Australian mobile
telecommunications industry. This is the second year the report has been produced.
Like the 2003 report, this year’s report brings together a broad range of information
available from many public sources, and builds on it by including information
gained from a survey of selected AMTA members.
The report brings together detailed information on the participants in the industry,
industry growth and examples of mobile phones enhancing the way people do
business and manage their daily lives. It also presents measures of the economic
significance and contribution of the entire industry to the Australian economy.
The report is a valuable tool for industry in promoting an increased level of

awareness of the economic and social importance of Australia’s mobile
telecommunications industry and the factors likely to shape its future.
1.2 The project approach
The project was conducted from May to July 2004. It involved:
∑ desk-based research to gather relevant national and international information

on the mobile telecommunications industry;
∑ surveying selected AMTA member firms in various sectors of the mobile
telecommunications industry;
∑ the collection, collation and analysis of data from selected firms; and
∑ analysis and presentation of publicly available and survey data in this report.
This is the second AMTA sponsored report to examine the economic significance
of the mobile telecommunications industry. Ideally, this type of report would be
produced regularly and become a key source of information on the industry.
AMTA and The Allen Consulting Group would welcome comments on the
methodology used and on the material presented in the report.
The Allen Consulting Group 1

Chapter 2
Snapshot of Australia’s Mobile
Telecommunications Industry
2.1 A short history
Australia’s first mobile phone system commenced operation in Melbourne in

August 1981. Although this service was fully automatic, it was a long way from the
mobile services received and used today. Figure 2.1 shows the development of
various mobile telecommunications networks in Australia since 1981.
A description of the various network technologies is in box 2.1.
Figure 2.1
MOBILE TELECOMMUNICATIONS TIMELINE, AUSTRALIA
Source: The Allen Consulting Group
In 1987 the first analogue, or Analogue Mobile Phone Service (AMPS), cellular
network was launched and hand-held phones could be purchased. These phones
were big and bulky and sold for over $4000. Industry development over the next
five years included increasing numbers of mobile network operators, growth in
customer numbers and improvements in mobile telecommunications hardware. The
majority of the analogue network (about 80 per cent) closed on 31 December 2000,
including in all major capital cities and many major regional areas. The remaining
analogue network was progressively closed during 2000.

Box 2.1
MOBILE TELECOMMUNICATIONS TERMS/DEFINITIONS
st
1 Generation Technology
Advanced Mobile Phone System (AMPS) — a mobile telephone system predominantly
based on analogue transmission. The AMPS system in Australia has now been switched
off and replaced by Code Division Multiple Access (CDMA).
Analogue Signal — an emission created by converting sound waves or other information
into electrical impulses of varying strengths or amplitudes. See digital signal.
nd
2 Generation Technology (2G)
Code Division Multiple Access (CDMA) — a digital standard, designed for use in cellular
mobile networks, which assigns a unique code to each user and spreads transmission of
user channels across a wide band of radio frequencies. CDMA mobile technology was
introduced in Australia in September 1999 to replace the analogue mobile phone system.
Digital Signal — an emission created by conversion of sound waves, radio waves or
other information into binary computer code (a series of zeros and ones). It provides
sharper, clearer, faster transmission of information and suffers less from noise and
interference than analogue. It will retain a high quality signal until the signal strength is
very low, at which point it will 'drop-out'. The quality of an analogue signal begins
declining even at high strength levels but is less likely to drop-out completely. See
analogue signal.
Global System for Mobile communications (GSM) — a European digital standard for
mobile phones based on Time Division Multiple Access (TDMA). Launched in Australia
by Telstra, Optus, and Vodafone in 1993.
rd
Wideband Code Division Multiple Access (WCDMA) — a technology for wideband digital
radio communications of internet, multimedia, video and other capacity-demanding
applications.
1xRTT — an upgrade to the CDMA network to provide packet data capability. 1xRTT
provides burst speeds up to 154Kbps.
EVDO — a further upgrade to the CDMA network. EVDO provides a separate data
channel and supports burst data speeds over 1Mbps.
th
Advancement on the 3G network where all wireless standards interoperate. 4G is
expected to deliver fast broadband quality internet services directly to the mobile
handset.
In 1993, the new second generation (2G) digital global system for mobile
communications (GSM) networks was launched and growth in customer numbers
‘skyrocketed’ (see chapter 3). Three carriers, Telstra, Optus and Vodafone
launched GSM services in that year. These networks remain in operation today and
in 2001-02 it was estimated that 93 per cent of mobile telecommunications services
12
were provided on GSM networks. These carriers have also implemented General
Packet Radio Service (GPRS) (‘2.5G’) networks that deliver multimedia services.
In 1998, plans to introduce a new 2G network based on Code Division Multiple

Access (CDMA) technology were introduced. The CDMA network commenced in
September 1999 and growth rates in customer numbers increased in 1999 and
2000. Telstra and Hutchison operate CDMA networks. Telstra's CDMA system
completely replaced its analogue AMPS system, in both city and country.
12
Australian Communications Authority, Telecommunications Performance Report 2001-02, p. 157.
In 2003, Hutchison introduced a new network: the 3G network, under the brand
name 3, utilising the Wideband CDMA standard. 3 enables live, person-to-person
video calling and the delivery of advanced multi-media services to the mobile
handset at high speeds. The other three carriers have indicated the following:
∑ Optus has announced a Heads of Agreement with Vodafone to build and

operate a joint national 3G radio network infrastructure across Australia (see
box 2.2). Optus is providing ‘3G like’ services to the existing 2.5G network.
For example, the launch of Optus Zoo which enables live TV streaming.
Vodafone is also currently providing ‘3G like’ services over its 2.5G network,
such as Vodafone live!
∑ Telstra is deploying its CDMA2000-1xRTT version of 3G services nationally.
Telstra and Hutchison have entered into a Heads of Agreement to establish an
enterprise that will own and operate the existing 3G network and fund future
network development (see box 2.2); and
Box 2.2
3G NETWORK SHARING AGREEMENTS
Optus and Vodafone

On 26 August 2004, Optus and Vodafone announced a Heads of Agreement to share 3G
network sites and radio infrastructure across Australia. Under the agreement Optus and
Vodafone will work together to build and operate a joint national 3G radio network
infrastructure.
Optus and Vodafone have indicated that the agreement is expected to lower the 3G cost
structure and provide customers with access to a robust and reliable network. Optus will
draw on SingTel’s regional presence and expertise and Vodafone will draw on its global
experience in rolling out 3G networks around the world.
Optus and Vodafone will continue to provide completely separate customer service and
to compete for customer business. The arrangement is conditional upon the necessary
regulatory approvals.
Telstra and Hutchison
On August 4th 2004, Telstra and Hutchison announced the signing of a Heads of
Agreement to establish a 50/50 enterprise to jointly own and operate H3GA's existing 3G
radio access network and fund future network development. Under the agreement, the
H3GA radio access network will become the core asset of the joint enterprise. In return
for the 50 per cent ownership of the asset, Telstra will pay Hutchison $450 million, under
a fixed payment schedule, in four instalments, starting November 2004.
The joint enterprise is expected to open opportunities for new revenues for Telstra and
H3GA, stimulate growth in 3G service uptake and provide significant savings in 3G
network construction capital expenditure and operating expenses such as site rental and
maintenance.
Hutchison already provides 3G services and Telstra will launch its 3G services to
customers in 2005, utilising the entire H3GA network footprint of more than 2000 base
stations covering Sydney, Melbourne, Brisbane, Adelaide and Perth. Telstra and
Hutchison expect to significantly increase the size of the network over the next three
years, expanding into Canberra and other regional centres. Decisions on network
development will be made and funded jointly. The joint enterprise will utilise the existing
spectrum holdings of both partners and will operate until the expiry of those spectrum
licences in 2017 or later.
Telstra and Hutchison will each continue to own separate core networks, application and
service platforms, and will conduct their retail 3G businesses independently and in
competition with each other.
Sources: Optus and Vodafone Media Release 2004, Optus and Vodafone ‘Australia announce plans to
roll out shared 3G network’ 26 August 2004. And Telstra Media Release ‘Australia’s first 3G network
sharing to expand and accelerate customer access to world leading mobile services’.

2.2 Australian mobile telecommunications: current industry structure
The mobile telecommunications industry is one of the fastest growing

telecommunications markets and includes all calls from mobile phones to either
fixed or other mobile phones. The industry involves a number of government,
industry and consumer organizations (see Appendix C). The current industry
structure, involves a number of sectors (see figure 2.2) that in combination provide
the services that make mobile telecommunications available to final customers.
There are a number of individual businesses that operate in multiple sectors. This is
particularly true for the CSPs. However, there are also some businesses that operate
exclusively in one sector, particularly in the hardware sector (see section 2.3).
Figure 2.2
THE MOBILE TELECOMMUNICATIONS INDUSTRY
Hardware / Production
Carriage Service Providers

(CSPs)
Mobile Network Carriers
Content Suppliers
Content Aggregators
Virtual
Resellers Mobile
Operator
Retailers
Retail Customers
Recharge of Bill payment

prepaid (inc. online or
accounts at phone
over 12 000 banking)
retail locations
Source: The Allen Consulting Group

2.3 Mobile telecommunications industry sectors described
This section describes the main activities of each sector in the Australian mobile
telecommunications industry.
Hardware
There are two distinct elements in the mobile telecommunications hardware sector:
infrastructure that supports the volume of mobile telecommunications services and
the end-users’ hardware which is owned and operated by individuals to use mobile
telecommunications services.
Infrastructure hardware
The infrastructure component of the hardware sector includes: base stations,
switching equipment, antennas, and towers. Activities in the infrastructure sector
involve installing and maintaining the extensive network. In addition, there is a
range of support activities involved in the design, construction and installation of
the infrastructure. The mobile network operators own the infrastructure, but tend to
outsource its maintenance.
In Australia the major providers of infrastructure hardware products are Ericsson,

Nortel and Nokia. Box 2.3 describes how the various components of infrastructure
operate to provide mobile telecommunications services.
The operation of the main infrastructure components used in mobile to mobile and
mobile to fixed calls are represented in figure 2.3.
End-user hardware
The end-user component of the hardware sector includes the equipment owned and
operated by individuals to provide access to mobile telecommunications services.
This includes handsets, motor vehicle hands-free kits, earpieces and mobile phone
cases. Over the 12-month period up to June 2004, more than 7 million handsets
were sold in Australia: approximately 90 per cent were GSM and 10 per cent were
13
CDMA. In the first quarter of 2004, more than 3.5 million handsets had been sold.
New mobile handsets can now include the capability to both send and receive data
and send and receive pictures and video clips. 3G handsets can send and receive
video calls/messages, as well as allowing the user to video call any PC in the world
that has a web cam and broadband connection.
Handsets are purchased by new subscribers, but also by existing subscribers when
they update or replace old handsets.
The nature of the activities undertaken in Australia by players in the end-user

hardware market include:
∑ importing hardware exclusively for the purpose of distribution of that

hardware;
∑ importing hardware, developing infrastructure networks, investing in R&D;
∑ end-to-end mobile solutions across mobile networks, mobile applications,

microwave radio and handsets; and
∑ service and repair of mobile phones.
13
Industry statistics provided by AMTA, http://www.amta.org.au/
In Australia the majority of end-user hardware products are imported and supplied
by, for example, Motorola, Nokia, Panasonic, Samsung, Siemens, Sony Ericsson
and many others etc. The development of mobile telecommunication services, in
addition to voice services, has been associated with on-going innovations in
handsets. This includes Australia’s first one megapixel camera phone that allows
customers to take print quality digital images with their mobile phone. Also,
Vodafone has branded mobile handsets available from a range of handset
manufacturers including Motorola, Nokia, Panasonic, Sharp and Sony Ericsson that
are required to access the full spectrum of services offered by their Vodafone live!
service.
Box 2.3
INFRASTRUCTURE SUPPORTING MOBILE TELECOMMUNICATIONS
To make or receive a call on a mobile phone requires the use of a substantial amount of
infrastructure. Mobile phones use a series of locally based radio networks or cells. The
term ‘cell’ refers to the geographical area covered by the network base station, which
contains the radio equipment serving the cell. Areas with high mobile phone use tend to
have small cells. In Australia, mobile phones transmit radio signals at a frequencies in
the ranges 825~845 MHz (CDMA) and 935~960 MHz (GSM).
Each base station operates in conjunction with adjacent base stations. Base stations
must therefore be located so that each cell in the network can function efficiently. This
ensures minimum network congestion and good signal quality.
In Australia, mobile carriers typically own the base stations. The more base stations a
particular carrier has in a particular area the smaller the cells, meaning the power and
energy levels of each are lower. In large and remote areas such as Western Australia, it
is not practical to establish a system of base stations that will cover the entire state. More
and more, telecommunications satellites are used to perform the functions of base
stations in those areas.
Base stations consist of antennae that transmit and receive signals from mobile phones
and are mounted on towers or tall buildings. The length of antennas depends on the size
of the cells: where cells are small antennas do not need to be very high and can be
installed on building roofs or small poles. In low usage areas, however, the cells are
larger and the antennas are mounted on taller masts and towers.
After receiving the signal from a mobile phone, the base station transmits the signals to a
‘switching centre’, i.e. a telephone exchange for mobile phones. The switching centre
connects (or ‘switches’) the call to another mobile phone or a conventional telephone
line.
Antennas are located on telecommunications towers. A mobile phone tower is often a
self-supporting structure that can either act as an antenna itself or support one or more
antennas on its structure, including microwave dishes. The antennae are often located at
or near the top of the tower mounted in groups on a triangular or rectangular frame. Each
group of antennae services a separate cell.
Mobile phones usually transmit their signals to the closest mobile phone tower, from
where the towers transmit radio signals that travel in straight lines. Therefore, the higher
the tower is sited, the greater the range at which the signal can be received.
Co-Location refers to the sharing of one carrier’s tower or pole by another. This may also
include the sharing of equipment shelters if space is limited but does not include the
antennas and cabling for macro-cell facilities. The vast majority of telecommunications
towers and poles in metropolitan Australian have at least one co-locating carrier and
many have two or three additional carriers. However due to the separate evolution of 4
competitive networks, it is not always possible for carriers to co-locate. Since the Mobile
Carriers Forum (MCF) came into operation, there has been a marked increase in co-
location of facilities and a decrease in community opposition to mobile phone
infrastructure (resulting from increased awareness and education of base stations).
Australian Communication Authority (ACA) legislation also encourages
telecommunications carriers to share infrastructure where it is technically feasible and
economically rational.
Source: Department of Communications, Information Technology and the Arts (DCITA), 1998, About
mobile phone networks, cited 13/08/2003, www.dcita.gov.au/article/0,,0_1-2_1-4_12884,00.html

Figure 2.3
THE NETWORK REQUIRED TO MAKE A MOBILE CALL
Source: Mobile Carriers Forum ‘How does a mobile phone network operate?’
Carriage service providers
CSPs are defined as suppliers of telecommunications services to the public using

carrier network infrastructure. In 2002 there were 13 CSPs operating in Australia.
This includes four mobile network carriers Telstra, Optus, Vodafone and Hutchison
who operate their own mobile networks and nine resellers. The mobile network
carriers are the largest individual sector in the mobile telecommunications industry.
Mobile network carriers

Nationally, four mobile network carriers, Telstra, Optus, Vodafone and Hutchison,
own and operate six mobile networks (see description of the infrastructure
hardware sector above). They also hold licences to use spectrum space needed for
telecommunications services and offer a variety of mobile services to customers
utilising their networks (see box 2.4).

Box 2.4
BACKGROUND ON SPECTRUM SPACE AND LICENSING
What is Spectrum Space?

Spectrum space is a pre-determined multi-dimensional space. The extent of a spectrum
allocation can be pictured as a cube. The geographic area is represented by the floor of
the cube, while the height of the cube is measured in terms of radiofrequency bandwidth.
Spectrum licensing
In Australia, spectrum licensing was introduced by the Radiocommunications Act 1992.
Spectrum licences authorise the use of spectrum space and give licensees the freedom
to deploy any device from any site within their spectrum space for a fixed non-renewable
period (15 years), provided they comply with stringent out-of-band and out-of-area
constraints aimed at avoiding interference with their neighbours.
Source: Australia communications authority (ACA), PCS 2000 Spectrum Licence Allocation 1.8 GHz
Bands, November 1999, Applicant Information Package, cited 15/08/2003, http://auction.aca.gov.au/
auction_results/pcs_2000_results_page/aip_pcs2000.asp
Telstra provides mobile service via both GSM and CDMA networks. Optus and
Vodafone supply mobile services via GSM networks. Optus also resells Telstra
CDMA services. Hutchison provides mobile services via both a CDMA network
and the 3G Wideband CDMA (WCDMA) standards. Table 2.1 provides an
overview of the mobile carriers in Australia.
As described above, a recent and significant change in the carriage service

providers sector is agreements to share 3G network infrastructure (see box 2.2):
∑ Optus and Vodafone have agreed to share 3G network sites and radio
14
infrastructure across Australia; and
∑ Telstra and Hutchison have agreed to establish a 50/50 owned enterprise that
will own and operate the existing 3G network and fund future network
development.
In addition to their large infrastructure investment and significant investment in
spectrum licences, CSPs are directly involved in the retail sector of the industry.
14
Optus and Vodafone Media Release 2004, Optus and Vodafone Australia announce plans to roll out
shared 3G network, 26 August 2004.
Table 2.1
OVERVIEW OF MOBILE CARRIERS IN AUSTRALIA
Mobile Mobile Standard

Launch Coverage
Carrier
Telstra
GSM/GSM1800 1993 Available in most areas of
population, (more than 95 per
cent of population).
CDMA 2000 Available in most areas of
population, (more than 98 per
cent of population).
3G (1xRTT) 2003 Launch coverage of greater
metropolitan areas of: Melbourne,
Sydney, Brisbane, Gold Coast,
Canberra, Perth, Adelaide Hobart,
Gippsland and Launceston.
Substantial progress has been
made to extend coverage to be
available to 98 per cent of
population by the end of 2004.
3G higher speed 2005 See ‘Shared Infrastructure’ below.
Optus
GSM/GSM1800 1993 Available to 95 per cent of
Australia’s population.
3G 2005 See ‘Shared Infrastructure’ below.
Vodafone
GSM/GSM1800 1993 Available in most areas of
population, (93 per cent of
population)
3G 2005 See ‘Shared Infrastructure’ below.
Hutchison
CDMA 2000 Melbourne and Sydney and
roaming on Telstra CDMA
network outside of Hutchison’s
licence area.
3G (WCDMA) 2003 Melbourne and Sydney, Adelaide,
Brisbane and Perth and roaming
outside of the Hutchison licence
areas provided by Vodafone GSM
network.
Shared Infrastructure
Optus/Vodafone
3G 2005 Sydney, Melbourne
Telstra/Hutchison
3G (WCDMA) 2005 Melbourne, Sydney, Brisbane
Note: Satellite services have been available since the mid-1990s. They are currently offered to
customers by Optus, Telstra and Vodafone and provide 100 per cent coverage.
Source: BIS Shrapnel, 2001, Telecommunications infrastructure in Australia 2001, the Australian
Competition and Consumer Commission (ACCC), Melbourne, p.110-111; Australian Competition and
Consumer Commission (ACCC), Mobile Services Review 2003: An ACCC Discussion Paper, April
2003; and information provided by industry.

Mobile coverage
Australia’s terrestrial mobile phone networks (GSM and CDMA) now reach over
98 per cent of the population and cover 20 per cent of the Australian landmass (see
15
figure 2.4).
Figure 2.4
MOBILE TELECOMMUNICATIONS COVERAGE IN AUSTRALIA, 2002
Source: Department of Communications, Information Technology and the Arts (DCITA), A Users' Guide
to Australian Telecommunications 2002, 12 November 2002. (http://www.dcita.gov.au/Article/0,,2_3-
3_143-4_112188,00.html)
The availability of mobile services to Australia’s population and across Australia’s

landmass continues to grow.
Box 2.5
EXTENDING MOBILE TELECOMMUNICATIONS COVERAGE
The Australian Government has provided $15.6 million funding to improve mobile phone
coverage to 62 towns in regional and remote Australia. It is estimated that the project will
see more than 30 000 people, across 45 000 square kilometres receive new or improved
mobile coverage and wireless data services.
The project will benefit 21 Indigenous communities, farming, mining, agricultural and
tourism centres, and people travelling on regional highways near these towns. Telstra
was awarded the tender to complete this work.
Source: Media Release Senator the Hon Helen Coonan, Minister for Communications, Information
Technology and the Arts, New contract to improve regional and remote mobile coverage 1 September
2004 and Telstra Media Release, Mobile phone coverage and wireless data delivered to remote towns.
15
Telstra Media Release, Telstra Country Wide $250 million package to customers, 4 June 2003,
162/2003.
The coverage provided by individual mobile network providers varies from place
16
to place. Extensive geographic coverage makes mobile telecommunications
services available to people living and visiting rural and remote parts of Australia
(see box 2.6). Across OECD countries, population coverage has been identified as
a factor that supports growth in mobile penetration.
Box 2.6
GP RECEIVES LIFE-SAVING SURGERY INSTRUCTIONS VIA MOBILE PHONE RURAL
SOUTH AUSTRALIA
A doctor in South Australia's south-east recounted how he performed a life-saving

operation on an 11-year-old boy while receiving instructions over a mobile phone.
A trail-bike accident near his Naracoorte home left Harry Moyle with brain swelling that
only a neurosurgeon would normally operate on.
The boy’s GP, Jeff Taylor, performed the surgery while receiving instructions over the
phone from the head of neurosurgery at the Adelaide Women's and Children's Hospital.
Dr Taylor says he had to act quickly when the boy's condition deteriorated.
Source: ABC News Online Tuesday, 8 June 2004, www.abc.net.au/news/newsitems/s1126959.htm
In addition to investment in networks, undertaken largely (but not exclusively) by

CSPs, mobile network carriers enter into resale agreements with other mobile
network carriers to offer a broader product range or to offer service more
effectively in regions where their network has little or no coverage. For example, to
facilitate more extensive geographic coverage than licence areas alone, Hutchison
has entered into ‘roaming’ agreements with Telstra and Vodafone that allow its
customers to access the mobile service networks across Australia.
The Australian Government has created a series of programs to increase mobile

17
coverage. The 2004-05 Regional Partnerships for Growth and Security form part
of the Australian Government’s $147.3 million package of initiatives responding to
the Telecommunications Service Inquiry to improve the level of
telecommunications services to regional and rural Australia.
∑ Mobile Phone Highway Program — provided $22.7 million to facilitate near

continuous mobile phone coverage along almost 10 000 kms of 16 major
highways. This has increased GSM mobile coverage on some of the major
road transport routes in regional Australia.
∑ Mobiles for Towns — over 500 programs were funded with $21.8 million
over three years from 2001-02 and are increasing mobile phone coverage for
132 towns with populations over 500. Under the program, towns have been
progressively receiving CDMA coverage with 40 of these towns also targeted
to receive GSM coverage to supplement existing coverage. Telstra, the
successful tenderer, has encountered delays in rolling out the infrastructure in
some towns. By August 2004, Telstra had provided mobile phone coverage to
121 out of 132 towns.
16
Each mobile network provider has publicly available maps that provide detail of the specific mobile
coverage provided by their networks.
17
Department of Communications, Information Technology and the Arts (DCITA), A Users' Guide to
Australian Telecommunications 2002, 12 November 2002. (http://www.dcita.gov.au/Article/0,,2_3-
3_143-4_112188,00.html) p. 3. and advice from industry.
∑ Regional Mobile Phone Program — completed in 2004. The program received

$49 million over two years from 2002-03. The Program provided: $18.8
million towards improving mobile phone coverage to 55 towns with
populations of less than 500; $19.1 million is being provided towards
coverage of 62 lengths along 34 regional highways; $7 million to improve
mobile phone coverage in the south west of Western Australia under the
Wireless West project, and $3.9 million for the Satellite Phone Subsidy
Scheme for people living or working in remote areas without mobile phone
coverage. The remaining funds under this program will be expended in 2004-
05 and the expanded Scheme will continue.
∑ Expansion of Terrestrial Mobile Phone Coverage Program — this Program
involves $15.6 million to provide new or improved mobile phone coverage to
30 000 people in 62 rural and regional towns between January 2005 and
November 2006 (see box 2.5).
Market share
The market share for the four mobile network carriers, Telstra, Optus, Vodafone
and Hutchison changed slightly between 2002-03 and 2003-04. Figure 2.5
illustrates the market share of each carrier in terms of mobile revenue. The figure
shows that although Telstra still has the largest market share, Optus, Vodafone and
Hutchison are continuing to grow.
Figure 2.5
MOBILE REVENUE MARKET SHARE BY MOBILE NETWORK CARRIERS
Note: ABN-AMRO, November 2004, Telecommunication Services: Australian Telecommunications

2004, p.31.

Resellers
Resellers are also considered CSPs and in 2001-02 there were nine resellers in the
18
Australian market. Examples of resellers in Australia include, but are not limited
to, Primus Mobile (Telstra CDMA and GSM), SIMplus (Optus), and B-Digital
(Optus).
Resellers are distinguished from mobile network carriers as they do not necessarily
own network infrastructure or have a spectrum allocation. Instead, resellers
purchase end-to-end mobile services from the mobile network operators and bill
customers in their own names. At the end of the reporting period 2002, 10 per cent
19
of services in operation were billed by resellers according to these arrangements.
Virtual mobile network operators (VMNOs)
VMNOs are also regarded as CSPs and offer mobile services to customers using a
third party’s network. For example, Virgin Mobile purchases wholesale mobile
capacity from Optus. AAPT Mobile is also a VMNO. Although there is some
industry debate regarding what exactly constitutes an VMNO, they:
∑ bring existing and well-known consumer brands to a mobile retail operation;
∑ usually use existing networks of a mobile carrier, but establish a technical

support layer that replicates the carrier’s mobile switching centre;
∑ operate their own pre-paid and post-paid billing and value-added services
(voice mail box, etc) and facilities; and
∑ generally have control over their subscriber information, independent of any
20
mobile carrier.
These characteristics differentiate VMNOs from conventional resellers, particularly
because they have more control over their retailing operation and therefore
increased capacity to provide different service offerings and prices.
Although VMNOs do not have their own spectrum allocation, they do have their
own mobile network code, issue their own SIM cards, and operate their own
mobile switching centres. Bills to customers are issued by the CSP.
One of the factors underpinning the emergence and growth of VMNOs is their
ability to utilise existing networks and thus avoid the capital investment required to
build their own network.
Content service providers and program developers
Content service providers make available information and entertainment services,

and act as a ‘middleman’ between mobile network operators and CSPs. The
information is sourced and purchased from a number of channels, before it is
structured and bundled in such a way that it can be distributed over mobile
networks. These ‘mobile’ information-bundles add value to the mobile
entertainment value chain by delivering valuable content in a format appropriate
for mobile distribution.
18
Melbourne, p. 161.
19
Melbourne.
20
Australian Competition and Consumer Commission (ACCC), Mobile Services Review 2003: An ACCC
Discussion Paper, April 2003.
The relationship between mobile network operators and content service providers
has been redefined with the introduction of 3G mobile services. The content
available on 3G services is a key distinguishing feature between second generation
and third generation technology. Alliances between carriers and content providers
give ready access to the latest entertainment services (see box 2.7).
Box 2.7
ENTERTAINMENT SERVICES ON YOUR MOBILE
OPTUS makes TV mobile

In November 2003, Optus Mobile made viewing television on mobile phones a reality
with the launch of a new streaming service offering 24x7 retransmission of ABC and SBS
and transmission of CNN's international service.
Optus Zoo offers a suite of mobile services including: TV streaming, video downloads,
sports results, games, ring tones, horoscopes, jokes and webcams.
Optus customers using the latest mobile phones are able to view live TV programs and
access other entertainment, information and mobile content.
‘3’ video highlights
In July 2003, Hutchison’s 3 announced a take over of the sponsorship of the Australian
Test Cricket Team. This provides video highlights of every wicket that falls during a
match, every batting milestone and wrap-ups at the end of each innings. 3 customers
could watch video clips of the action, previously only seen on a television screen.
Since its inception, 3 customers have been able to access footage from news programs,
sporting events and even television shows such as Big Brother, footage only ever able to
be view on a television set or, more recently, the internet. The development of 3G
technology makes the latest entertainment services far more accessible.
Source: Information from www.optus.com.au and information provided by Hutchison
Hutchison has upwards of 45 content providers for 3 services. Some examples of

the types of content available and the content providers operating on 3 include:
∑ comedy - supplied by ABC, Channel Nine, and the Comedy Channel;

∑ news – supplied by AAP and Sky News;
∑ sport – supplied by Channel 9, Fox Sports as well as Coastalwatch, which
provides Surfcam, live streaming of beach footage, including surf conditions;
∑ music – supplied by Sony and Warner; and
∑ general entertainment information - Supplied by HWW, providing restaurant

and bar reviews and listings. Included in this, is ‘Your Movies’, the first m-
site, a website formatted especially for a mobile phone.
Examples of content aggregators operating in Australia are:
∑ Legion Interactive — facilitates interactive communications through

Interactive Voice Response (IVR), Short Message Services (SMS), Multi-
media Message Services (MMS), Interactive Voice Messaging (IVM), Email,
the internet, Wireless Application Protocol (WAP) and interactive television;
∑ Infospace — delivering application services to leading wireless carriers; and
∑ ITouch — a WASP offering mobile services to both consumers and

businesses through an international presence.

Aggregators also add value to CSPs by negotiating intricate and time-consuming

distribution deals with the individual network carriers, resulting in wider content
distribution. For the carriers, content aggregators create valuable mobile data
applications by combining content from numerous sources and integrating it into a
single interface. Content is increasingly being seen simultaneously across fixed
internet access as well as wireless access.
A content aggregator can also position itself as a Wireless Application Service

Provider (WASP).
Program developers
The expansion of services available via mobile devices is supported by the work of
program developers who use industry development tools to create new and
innovative applications for mobile phone users. The work of the program
developers is often supported through mobile businesses providing access to
development tools, as well as other supports. The work of Ericsson and Hutchison
is described below.
Ericsson Australia works closely with program developers through Ericsson

Mobility World, a global partnering program, to accelerate the development and
market deployment of innovative applications and services to stimulate end-user
uptake of new telecommunication services. Ericsson has over 6,000 members
registered in the Australian and New Zealand program. This open, industry-wide
initiative brings together all the various players — operators, ISPs, content
providers, enterprises and developers — to increase revenue through new mobile
services. Ericsson Mobility World supports developers across applications with
practical, hands-on tools, information and services. These include:
∑ technical documents;
∑ software development kits (SDKs);
∑ testing and verification services;
∑ developer support;
∑ discussion forums;
∑ business and technical training;

∑ invitations to global and local events, application competitions;
∑ monthly newsletter;
∑ latest update via email and SMS notification; and

∑ competition news (see box 2.8)
Box 2.8
FRONTIER – ERICSSON APPLICATION DEVELOPER’S COMPETITION
In an effort to accelerate the development and market deployment of other innovative

applications and services, The Australian and Ericsson have launched a Trans-Tasman
developer competition called Frontier. Frontier is an initiative of Ericsson Mobility World,
running annually since 2002. New Zealand or Australian developers with a market-ready
and demonstrable mobile and/or broadband application are eligible to enter.
Source: Information provided by Ericsson Australia

3 has also established formal relationships with program developers. It is through

these relationships, that include providing developers with access to development
tools, that industry specific applications are built for 3G mobile applications (see
box 2.9). The ‘Developers on 3’ program provides the latest development tools,
software downloads and up-to-date information on industry initiatives. The
program is specifically targeted at:
∑ independent and corporate developers;
∑ independent software vendors (ISV);

∑ system integrators (SI); and
∑ application service providers (ASP).
‘Developers on 3’ gives the Australian developer community the power to create
industry-leading 3G applications. All handsets support J2ME Java and the
Motorola A920 and A925 support the Symbian operating system.
Box 2.9
A NEW MOBILE APPLICATION
3 has joined forces with Australian developers Echo Solutions and Mapshed to launch
Loc3, the first location-based mobile data service for the real estate industry.
Loc3 harnesses the speed of 3’s network and the versatility of Motorola A925 phones
and NetConnect wireless data cards, to boost revenue and cut operating costs for the
real estate industry. Using the Motorola A925, Loc3 has saved real estate agents several
hours a day by enabling them to download, enter and send data at high speed in the
field. Reports can be generated on the spot and properties are able to be viewed online
only a few minutes after their valuation.
By entering the required location into Loc3, agents can use the high-speed 3 phones or a
lap top with a wireless, 3 NetConnect Card, to download accurate maps and aerial
photos, calculate distances from points of interest (eg schools or transport), call-up sales
histories, current listings, appraisals and forcats while on location with a potential vendor.
Downloads at broadband speeds are available in 3’s Video Zones.
After providing an on-the-spot valuation, images and videos of a new property shot using
the A925 phone can be emailed back to the office and to the vendor just seconds after
the meeting.
Source: Information provided by Hutchison
Retailers
Retailers offer mobile services to end-users on behalf of CSPs. Customers can

purchase mobile telecommunications hardware and services from two types of
retail outlets: speciality outlets that may be branded and sometimes owned by the
CSP, or outlets that sell mobile telecommunications hardware and services as part
of a broad range of products.
Most CSPs have their own retail shops where customers can purchase the hardware
they require to access mobile services and to enter into arrangements to use the
network hardware infrastructure. This access may be achieved via a pre-paid
arrangement or on an on-going post-payment basis where customers are billed for
the services they use. The exclusive retail outlets of mobile network carriers are:
∑ Hutchison — ‘3’ Shops;

∑ Telstra — Telstra Shops; and

∑ Optus — Optus World.
In September 2003, Vodafone sold the remainder of its Vodafone branded retail
stores to retailers Digicall Australia and First Mobile, following its sale of stores to
the Blackenbury Group in April 2003.
There are also many ‘non-branded’, but still speciality telecommunications or

electronics retail outlets that offer hardware and services of multiple mobile
network carriers. Examples include Crazy John’s, Strathfield and Fone Zone.
When mobile telecommunications were initially introduced in the Australian

market, hardware and services could only be purchased from these types of
speciality shops. Over the last ten years, there has been a significant change in
retailing of mobile telecommunications products. The branded and specialty shops
provide services alongside a broad range of non-specialty retail stores. Today, it is
possible to obtain mobile telephones, products and equipment from retail outlets
including convenience stores, petrol stations, supermarkets, Australia Post etc.
Vodafone’s retail distribution strategy is an example of the change in the retail
model for mobile telecommunications. The most recent development in the retail
services allows customers to purchase mobile phones and connect to services
online, for example iSIM’s mobile products and services can be ordered, activated
and recharged online.

Chapter 3
Industry growth
3.1 Introduction
The mobile telecommunications industry has been one of the fastest growing
telecommunications markets. Over the last decade there has been continued growth
in mobile services and the industry is regarded as one of the largest growing
sources of revenue in the telecommunications industry. Today there are an
estimated 16 million mobile phones used by nearly 80 per cent of the Australian
21
population, in over 70 per cent of households.
Over the past five years, Australia’s mobile telecommunications revenue grew at
an average of 15 per cent per year, and the industry earned estimated revenue of
22
around $8.8 billion in 2002-03.
This chapter looks at features of Australia’s mobile telecommunications industry

growth, considering:
∑ subscriber growth and characteristics;
∑ competition in Australia’s mobile telecommunications industry; and

∑ trends in international mobile markets.
3.2 Subscriber growth and characteristics
In 2002-03, Australia’s mobile penetration rate (i.e. mobile phone services per 100
inhabitants) reached 72.4 per cent (or 14.3 million mobile subscribers). It is
estimated that the mobile penetration rate will reach almost 80 per cent (or 16
23
million subscribers) in 2004. Growth in mobile penetration accounted for 42 per
cent of overall revenue growth in the telecommunications industry in 2002-03, and
is expected to increase up to 52 per cent in 2003-04.
Figure 3.1 illustrates the increase in mobile penetration in Australia from 1998 to
2004.
21
ABN-AMRO, November 2004, Telecommunication Services: Australian Telecommunications 2004,
p.29.
22
p.13.
23
p.29.
Figure 3.1
MOBILE PENETRATION RATE — AUSTRALIA, 1998 TO 2004

2004, p.29.
Figure 3.2 illustrates the strong growth in subscriber numbers since the early
1990s. The year-on-year rate of growth in subscriber numbers had a substantial
peak of 128 per cent between 1993 and 1994 (as Vodafone, Telstra and Optus
launched their GSM networks). This is the highest growth rate over all periods at a
time when the market was in its infancy. In recent years the growth rate has not
been as strong given the high penetration rate in the market. The estimated growth
rate in mobile subscriber numbers from 2003 to 2004 remained above 10 per cent.
Figure 3.2
MOBILE TELEPHONE GROWTH RATE

2004, p.29.

Peaks in subscriber growth appear to be associated with the introduction of new

networks. As described in chapter 2, the 2G GSM network was introduced in 1993
and the subscriber growth increased by 128 per cent in 1994. The jump in
subscriber growth rates in 1999 occurred alongside the introduction of the CDMA
networks.
Australia’s first 3G network commenced in April 2003, with the launch of Telstra’s
‘3G Mobile Loop Service’ and Hutchison’s ‘3’ services. Compared to GSM, the
introduction of 3G services has not had an equally significant effect on subscriber
numbers. By February 2004, Hutchison had over 100 000 customers signed on to
24
it’s 3 network.
The full impact of 3G services on mobile growth rates will be observed over the
coming years, when more mobile carriers are providing 3G services (e.g. when
Optus, Vodafone and Telstra launch their 3G services in 2005), as handsets evolve
into user devices and as opportunities to develop new content and applications are
taken up (see chapter 8).
Prepaid mobile services
Recent subscriber growth has been mainly driven by the continued increase in
prepaid customers. From 1998 to 2003, prepaid customers in Australia increased
25
by 36 per cent. By June 2003, more than 39 per cent of all mobile phone services
were prepaid, compared to 33 per cent in the previous year. It is estimated that 45
per cent of total mobile subscribers will be prepaid customers by the end of
2003-04.
Figure 3.3
MOBILE PREPAID SUBSCRIBERS AS A PERCENTAGE OF ALL SUBSCRIBERS,
AUSTRALIA 1998 TO 2004

2004, p.29.
24
Hutchison Telecom, Annual Report 2003, p.10.
25
p.29.
This continued growth in prepaid customers in 2003 underpinned the overall

growth in subscriber numbers (see figure 3.4).
Prepaid services offer an inexpensive way to enter the mobile market without the
credit-worthiness checks associated with many mobile contracts, and allow
customers to better manage their mobile phone expenditure.
The trend to greater use of prepaid mobile telecommunications services evident in

the Australian market is also occurring worldwide. Globally, customers using
prepaid cards increased from one per cent in 1996, when prepaid cards were
26
introduced, to nearly 45 per cent by the end of 2004.
Figure 3.4
PREPAID VERSUS POST-PAID SUBSCRIBERS

2004, p.29.
Short message service (SMS)
SMS services are another major source of growth in the mobile telecommunication
industry. During the 12-months to June 2003, an estimated 3.95 billion messages
(or an average of 294 messages per mobile phone subscriber per year) were sent,
27
reflecting an increase of 44 per cent since the previous year. Furthermore, 57 per
cent of households and 40 per cent of small businesses reported using SMS
services, reflecting an increase of 10 per cent since 2001.
26
OECD, Communications Outlook 2003, 2003.
27
Melbourne, p.89.
Box 3.1
MOBILE DATA SOLUTIONS FLY HIGH
Optus Mobile has launched an Australian first — a SMS ticket-less flight booking and
information service for new airline Jetstar.
Optus and Start Corporation, an Australian provider of enterprise SMS applications, have
worked together to develop ‘JetSMS’ following an initiative by Jetstar. Once registered
for the service, a Jetstar customer will be able to use SMS to make flight bookings.
To make a flight booking, a customer types an SMS from their mobile phone to request
flight information. An SMS is then sent back with the details of available flights. The
customer then sends another SMS to confirm the flight required. Details of the confirmed
booking are then sent to the phone, again via SMS. The customer simply retains the final
SMS as confirmation of the booking and presents this to the check-in staff at the airport.
Source: Information from www.optus.com.au
By June 2003, SMS services accounted for an average of 9 per cent of revenue
received by mobile service providers, illustrating the growing importance of SMS
28
services in the mobile telecommunications market (see figure 3.5 below).
Figure 3.5
NUMBER OF SHORT MESSAGE SERVICES (SMS)
Source: Australian Communications Authority, 2003, Telecommunications Performance Report 2002-

03, Melbourne, p.89.
In May 2003 Optus, Telstra and Vodafone launched premium SMS. Initially
premium SMS services related to reality TV and media competitions, but the
breadth of services continues to grow with new services, for example the ability of
TV viewers to submit comments to television shows and to take part in interactive
treasure hunts.
28
Melbourne, p.89.
Premium SMS services seem likely to continue to grow as brands have more
confidence in adopting premium SMS with the release of the permanent premium
SMS number range. Following a successful industry trial of premium rate SMS and
multi-media message services (MMS) using seven-digit 188 numbers, the
Australian Communications Authority (ACA) released new number ranges for
these services. The numbers released are 4000 six-digit numbers starting with 191,
193, 194 and 195 and 300 000 eight-digit numbers beginning with 196, 197 and
199. The allocation of more numbers provided certainty about availability of
numbers for use by companies, allowing marketing activities incorporating
premium SMS to be planned in advance.
The industry expects significant increases in premium SMS volumes. Big Brother
was the first reality show to use premium SMS. Other shows will also generate
high SMS volumes include Australian Idol and Getaway. (See box 3.2 for more
information regarding the interaction between SMS and television.)
Box 3.2
INTERACTION BETWEEN TELEVISION AND MOBILE TECHNOLOGIES
Hutchison’s 3 MMS capabilities have led to a new level of interaction with television
programs. Big Brother, the first reality show to use premium SMS, joined with 3 to
become the first reality program to stream live video footage to a mobile handset. 3
customers were also able to partake in ‘Virtual Big Brother’, a world first interactive game
that rewards members for interacting with the Big Brother series.
In addition to this, 3 customers can send video messages to Big Brother Housemates
and take part in eviction voting.
Source: Information provided Hutchison
Households with mobile phones
Between 1998 and 2002, the proportion of Australian households with access to a
mobile telephone increased from 44 per cent to 72 per cent (see table 3.1).
Table 3.1
HOUSEHOLD ACCESS TO MOBILE PHONES — BY STATE
Digital mobile phones

State
1998 (%) 2000 (%) 2002 (%)
NSW 34 58 72
Victoria 36 60 74
Queensland 33 58 71
SA 28 51 69
WA 37 57 73
Tasmania 25 46 62
NT 39 61 73
ACT 41 67 80
Australia 44 61 72
Source: Australian Bureau of Statistics (ABS), 2000, Household use of information technology, ABS
Cat. No. 8146.0; and Australian Bureau of Statistics (ABS), 2001-02, Household use of information
technology, ABS Cat. No. 8146.0

Household access to mobile telecommunications was highest in the ACT, where 80

per cent of households had access to a mobile phone in 2002. Tasmania had the
lowest proportion of households with access to mobile telecommunications, at 62
per cent in 2002 — however, this represented a 37 per cent increase in the
proportion of households that had access only four years before. South Australia
showed the highest increase in the uptake of mobile phones, increasing from only
28 per cent in 1998 to almost 70 per cent in 2002.
Growth in metropolitan and regional markets
Growth in the uptake of mobile telecommunications has occurred in both

metropolitan and regional markets, but at different rates. In 2002, the metropolitan
market accounted for 88 per cent of mobile revenues. Figure 3.6 identifies the
relatively smooth growth rates for revenue in the metropolitan market (peaking at
31.7 per cent in 2000), in contrast to the relatively sharp increase in regional
revenue growth (55.2 per cent in 2001). In 2004, revenue growth is anticipated to
remain above 10 per cent in metropolitan markets and around 5 per cent in
regional markets.
Figure 3.6
METROPOLITAN AND REGIONAL MOBILE REVENUE GROWTH (%)

2004, p.38.
The mobile subscriber market shares in metropolitan and regional areas remains
relatively unchanged since 1998. The market share of metropolitan subscribers was
90 per cent in 1998 compared to 88.8 per cent in 2003. The market share of
regional mobile subscribers increased from 10 per cent in 1998 to be 11.2 per cent
29
in 2003.
Box 3.3 describes how mobile telecommunications are being developed for use by
consumers in rural and regional Australia.
29
p.38.
Box 3.3
MOBILES IMPROVES HEALTH SERVICES IN AUSTRALIA
Telstra is working together with health group Loddon-Mallee Health Alliance (LMHA) to
create the service known as a single carrier radio transmission technology (1xRTT)
which operates over the CDMA network.
The service will give customers a 100 per cent mobile network upgrade and enables a
high-speed wireless data service that is an alternative connection to the internet. It allows
customers to surf the internet, access their own office networks and send and receive
emails and information through various technologies including a mobile phone.
The rollout of this technology is the first stage of a comprehensive upgrade for hospitals,
medical practitioners and ancillary services, The new service is important for the future of
health care services in rural Australia. Increased speeds in mobile data will assist health
professionals to access files and information faster and in a more flexible way. The new
technology creates an opportunity to deliver high quality health care services in remote
areas of Australia and in addition, help such remote areas respond effectively to future
advances in technology.
As of June 2004 Victoria was the first state to receive the new service. Telstra expects a
98 per cent coverage rate across Australia by the end of 2004.
Source: Pharmacist Magazine, Volume 22, Number 3, March 2004.
3.3 Competition in Australia’s mobile telecommunications industry
Statistics also show that the Australian mobile telecommunications markets,

benchmarked across all OECD countries, offers a very high degree of competition.
In February 2002, the competitiveness of mobile telecommunications pricing was
measured across 27 countries. The study showed that Australia ranked fifth in the
level of competitiveness for business mobile services and third for residential
mobile services.
During 2001-02, Australians could choose a mobile service and fee structure from
30
thirteen CSPs and select one of about 700 different rate plans. It is possible to
obtain a handset and connect to a mobile service in Australia, for at least a few
31
months, for less than $100.
The rate at which customers change providers is called ‘customer churn’. It

provides an indication of the competitive pressures in the market as customers
either port their number to another provider or when they switch to another
provider without retaining their number. In 2003, based on net growth and mobile
number portability (MNP), the ACA estimated that the churn rate was somewhere
between the five per cent level associated with MNP and an estimated maximum of
32
20 per cent. Factors that can impact on churn rates include use of 24-month
contracts, early termination charges, porting fees, subscriber identity module locks
for prepaid services, and the increasing availability of customer loyalty packages.
30
As reported in the Australian Communications Authority (ACA), Telecommunications Performance
Report 2001-02: Industry overview, 2001, p.163.
31
OECD, Communications Outlook 2003, 2003.
32
Melbourne, p.89.
Trends in retail prices
The recent growth in mobile service subscriber numbers (as described in section
3.2) has occurred during a period of significant decreases in the price of mobile
telephony. From 1997-98 to 2001-02, the price of mobile telephony decreased by
33
around 23 per cent. Price decreases were also reported for the period 1996-97 to
34
1997-98. However, in recent years the price decreases have become smaller, and
in the most recent period 2001-02 to 2002-03 a price increase of 1 per cent was
recorded (see figure 3.7).
Figure 3.7
PERCENTAGE CHANGE IN THE PRICE OF MOBILE TELEPHONY, 1997-98 TO 2002-03
Source: Australian Competition and Consumer Commission (ACCC), Telecommunications report:

Report 2 Changes in the prices paid for telecommunications services in Australia 1997-98 to 2002-03,
p.66.
Substituting mobile telephones for landlines
Since 2000-01, Australia has had more mobile services than fixed services. In June
2003, there were 14.3 million mobile services compared to 11.6 million fixed
35
services.
… roughly 24 percent of all calls made in Australia are made on a mobile phone
(compared with 50 percent for the United States).36
33
The Allen Consulting Group Australian Mobile Telecommunications Industry Economic Significance
Report for 2003 reported that in the period 1996-97 to 2001-02 the price of mobile telephony decreased
by almost 30 per cent. This information was sourced from the ACA Report Telecommunications report:
Report 2 Changes in the prices paid for telecommunications services in Australia 1997-98 to 2001-02, p.
137. The ACA’s report for 1997-98 to 2002-03 has revised the data on the price decreases in mobile
telephony. The information in this section, including in figure 3.7, relies on the data presented in the
most recent ACA report.
34
Australian Competition and Consumer Commission (ACCC), Telecommunications report: Report 2
Changes in the prices paid for telecommunications services in Australia 1997-98 to 2001-02, p. 137.
35
IBISWorld Pty Ltd, 20 May 2004, J7122 - Mobile Telecommunications Carriers in Australia, p.5.
36
Traditionally, households have had a mobile telephone in addition to a fixed

telephone. However, anecdotally there is an emerging trend in some customer
groups to have a mobile phone service and no fixed telephone at home. Factors
likely to be driving this change include the convenience of having a single phone
number on which a person is contactable regardless of their location, the
decreasing price of mobile telephony services that offers a mobile-only household
a financially competitive proposition, and the increase in mobile phone usage by
the over 50 year customer age group.
This trend is also evident worldwide. Today, there are around 1.3 billion mobile
subscribers compared to 1.045 billion landlines, and it is estimated that there are
37
more mobile telephones in the world than PCs. In 2002, the number of mobile
phone subscribers exceeded the number of fixed line subscriber’s in Europe as a
38
whole.
3.4 Trends in international mobile markets
Australia compared to the international mobile market
Figure 3.1 above identified the rapid growth rates in mobile telecommunication
subscriber numbers in Australia since the early 1990s. This growth translated to a
mobile telecommunications penetration rate of 26 percent by mid-1997. By mid-
1999, this rate had increased to 39.5 percent, and in 2003 Australia had a mobile
telecommunications penetration rate of 72 percent.
In contrast to Australia’s strong uptake of mobile telephony in the early 1990s,

OECD countries have experienced strong uptake of mobile telecommunications in
the late 1990s and early 2000s. For example, in OECD countries, more than 60 per
cent of people with mobile phones in 2001 had obtained that connection since
1999. By 2001 more than one in every two people in the OECD countries had a
mobile phone and in countries like Luxembourg, there was nearly one mobile
phone for every person.
Figure 3.8 illustrates the increase in mobile penetration in selected OECD

countries, including the OECD average, over six years. In 2001, Luxembourg had
the highest penetration rate and Mexico the lowest. In 2001, Australia ranked just
above the OECD average.
37
38
netsize Mobile Business and Entertainment, 2004, The netsize Guide – 2004 Edition, Paris.
Figure 3.8
MOBILE PENETRATION IN SELECTED OECD COUNTRIES — PENETRATION PER 100
INHABITANTS (1996 – 2001)
Source: OECD, Communications Outlook 2003, 2003.
In 2003, Australia’s mobile penetration rate ranked Australia fifth in terms of

market development in the Asia-Pacific region (see table 3.2) Taiwan was the top
ranking country with a penetration rate of 110 per cent, followed by Hong Kong
with more than 90 per cent penetration and Japan with 82 per cent. Australia is now
ranked equal 20th in terms of per capita mobiles worldwide.
Penetration rate of more than 100 per cent may seem unlikely, but clearly are being
achieved in some countries. These high penetration rates are associated with both
private and corporate mobile telephony use. There is an increasing trend for mobile
phone customers to make use of more than one SIM card and/or mobile phone
handset, allowing them to have different mobile numbers for business and personal
use. Corporate users, including government and business, could drive mobile
penetration rates over 100 per cent as they take up new mobile technologies for
example, mobile devices that wirelessly enable different parts of their enterprises
39
and make use of devices for asset tracking, etc (see chapter 8).
In three countries (Israel, Sweden, Taiwan) mobile penetration has now exceeded
100 per cent of the resident population. In a further four countries (Czech
Republic, Greece, Hong Kong, Italy) it has now exceeded 95 per cent mobile
penetration. It is reported that demand by business and government for mobile
devices that can wirelessly enable different parts of their enterprises, make use of
devices for asset tracking, etc is one of the major area of growth with potential to
40
drive penetration well above the 100 per cent.
39
40
Table 3.2
ASIA-PACIFIC RANKING IN MOBILE SERVICE PENETRATION
Penetration
Country 2002 (%) 2003 (%)
Taiwan 104.5 110.0

Hong Kong 78.3 90+
Singapore 69.4 79.4
Australia 64.5 72.4
Korea 63.9 68.8*
Japan 55.7 82.0
Macau 49.3 65.0
Brunei 41.4 45.0
Malaysia 36.4 38.0
* For 2003, penetration rate in South Korea.

Source: Australian Communications Authority (ACA), Telecommunications Performance Report
2001-02: Industry overview, 2001, Paul Budde Communication Pty Ltd, June 2003, Taiwan, Hong Kong
and Macau — 2003 Telecommunications and Information Highways in Asia (Volume 6),
http://www.budde.com.au/; IDA Singapore, Statistics on Telecom Services for 2003 (Jan – Jun),
http://www.ida.gov.sg/; total telecommunications, Brunei Darussalam - Data, Wireless Communications
and Broadcasting, February 2004, http://www.totel.com.au/; and Hong Kong Productivity Council,
Lawrence Cheung, 2003, A perspective on the mobile markets in Japan and Korea,
www.trp.hku.hk/papers/2003/japan3.pdf
International development in mobile telecommunications
The growth trends of the mobile telecommunications industry in Australia display

some similarities and some differences to trends observed in the Asian and
European markets.
The Asian mobile telecommunications market

Currently, there are a number of mature mobile markets in the Asian
41
telecommunications industry. Countries with mature mobile markets are:
∑ Taiwan (fully saturated) — mobile phone subscribers in Taiwan totalled 25.1

million at end the June 2003, representing over 100 per cent penetration rate.
∑ Hong Kong (saturated) — the market reached a penetration rate of over 90 per
cent in 2003, representing over 6 million mobile phone subscribers.
∑ Singapore — while highly saturated the market continues to expand modestly,
with the penetration rate of 82 per cent.
∑ South Korea — as of May 2004, the three wireless operators, SK Telecom,

KTF and LG Telecom have over 35 million subscribers.
In these mature markets there is a significant focus by operators to increase

revenue from value-added services (VAS), i.e. revenue from ringtones, games,
icons and other personalisation services.
41
Gordon Bennett, Asia Pacific Research Group, 2004, Introduction to the Asian Mobile Services Market,
www.aprg.com, cited 27 May 2004.
42
Asia’s developing markets are also showing strong growth trends, for example:
∑ China — one of the most attractive potential markets. If China achieves a

43
penetration rate similar to that of Hong Kong and Taiwan, the PRC market
for mobile phones will easily exceed 750 million (see box 3.4).
∑ The Philippines — in April 2004, there were more than 20 million mobile
subscribers (with a population of 75 million), forecast to reach 23 million by
the end of 2004.
∑ Malaysia — the mobile penetration rate is 38 per cent with 11 million
subscribers. This is expected to increase to 14.8 million subscribers by the end
of 2005.
∑ India — although the penetration rate is below 1 per cent, the market is
growing rapidly. Over the two-month period from April 2003 to June 2003 the
number of subscribers increased from 13.3 million to 15.1 million.
∑ Indonesia — a growing market with significant potential for premium SMS

and VAS services. Today there are an estimated 20 million GSM subscribers
in the Indonesian market and it is expected that mobile penetration will more
than double by 2007.
Like many markets, the market for handsets and mobile devices is a global one.
Some industry participants report that growth in these markets assists the
Australian market. For example, high demand for handsets in Asian markets was
44
identified as a factor helping to maintain a low handset unit price in Australia.
Box 3.4
THE CHINA MOBILE SERVICES MARKET
In late 2001, China surpassed the United States and became the world’s largest market
for mobile phone services.
The growth in the Chinese market is clearly reflected in the increase in mobile
subscribers, with the number of mobile subscribers increasing from 43 million by the end
of 1999 to more than 200 million by early 2003. In May 2004, China Mobile announced
that its subscribers rose by another 3 million, bringing their subscriber base to
153.3 million. According to China Mobile this increase is due to its efforts to promote
prepaid services, targeting low-end consumers. Currently, over 96 per cent of new
subscribers are prepaid subscribers.
China Unicom offers both GSM and CDMA based services. Currently, they have 76
million GSM clients and 20 million CDMA users.
Source: Gordon Bennett, Asia Pacific Research Group, 2004, Introduction to the Asian Mobile Services
Market, www.aprg.com, cited 27 May 2004.
The European mobile telecommunications market

In 2003, Europe was the second largest GSM market in the world with an average
mobile penetration rate of 83 per cent. The highest penetration rate was recorded
by Italy, Sweden and Portugal (92 per cent), while Germany, Italy and the UK have
45
the largest mobile services markets (see figure 3.9 below).
42
Gordon Bennett, Asia Pacific Research Group, 2004, Introduction to the Asian Mobile Services Market,
www.aprg.com, cited 27 May 2004.
43
Peoples Republic of China (PRC)
44
Industry survey response.
45
Figure 3.9
NUMBER OF MOBILE USERS IN EUROPE (MILLIONS)
Source: netsize Mobile Business and Entertainment, 2004, The netsize Guide – 2004 Edition, Paris.
In a mature market, new customers generally prefer prepaid accounts. This

explains some of the strong growth currently experienced in the prepaid mobile
market. In 2003, prepaid users accounted for 63 per cent of the total European
46
market, compared to 60 per cent in 2002. However, there are still significant
differences between some European countries. For example, while more than 90
per cent of users in Italy use prepaid accounts, only 6 per cent of end-users in
Finland are prepaid customers. Factors that can contribute to the differences in the
level of prepaid adoption across countries include the level of tourism and the size
of the ‘cash’ or informal economy.
46
Figure 3.10
EUROPEAN PRE-PAID VERSUS POST-PAID END-USERS
Source: netsize Mobile Business and Entertainment, 2004, The netsize Guide – 2004 Edition, Paris
Another trend in the European mobile market is a continuous decrease in the

ARPU for voice services, while data revenue is increasing significantly This
decrease is due to the increased use of SMS, MMS and internet browsing.
The use of SMS is widespread. In Europe a total of 15 billion SMS messages are
sent every month, i.e. an average of 35 SMS messages per mobile phone subscriber
per month. In 2003, Ireland recorded the highest usage of SMS services with an
47
average of 82 SMS messages being sent per subscriber per month. The rate of
SMS messages in Europe is considered higher as the average Australian rate at 24
SMS messages per mobile per month.
47
Figure 3.11
EUROPEAN SMS MARKET (MILLION)
Source: netsize Mobile Business and Entertainment, 2004, The netsize Guide – 2004 Edition, Paris.
In 2001, Europeans spent around €590 million on downloading content to their

mobile phones (ringtones, logos, sports results, stock exchange prices etc), nearly
twice as much as the amount of downloads from the internet by PC-users for
similar products. By 2003, ringtones alone generated US$3.5 billion on the global
48
market — an increase of 40 per cent since 2002.
Some studies forecast that by 2006, European users will be willing to spend as
much as €3.3 billion on downloadable mobile phone content, compared to just €1.7
billion for similar PC content. While other sources forecast worldwide ringtone
49
sales will reach a high of US$5.2 billion in 2008.
48
49
Chapter 4
Industry revenue and value added
4.1 Industry revenue
In the year to June 2003, total mobile revenue reached $8.8 billion (including
50
terminating revenues and handset sales) representing almost 28 per cent of total
telecommunications revenue. In the past, subscriber numbers have driven the
growth of mobile telecommunications revenue. As the market matures, a slow
down in mobile subscriber growth has led to a slow down in mobile revenue
growth (see table 4.1).
Total year-on-year growth in mobile revenue is declining after peaking in 2000

and 2001 with 20.7 and 19.3 per cent respectively. Although subscriber growth has
moderated somewhat during recent years, mobile revenue will continue to grow as
a proportion of total telecommunication revenue and is estimated to account for 52
51
per cent of total telecommunications revenue growth in 2004.
Table 4.1
THE MOBILE TELECOMMUNICATIONS INDUSTRY REVENUE
2000 2001 2002 2003 2004F
Total revenue ($ m) 6 125 7 305 8 110 8 791 9 582

Growth (year-on-year) 20.7% 19.3% 11.0% 8.4% 9.0%

2004, p.29.
The increasing importance of data services
The global trend in recent years has seen average revenue per user (ARPU) follow
a downward trend, reflecting the combined effects of decreasing air-time charges
and an increasing proportion of lower spend customers, notably prepaid
subscribers. The trend is estimated to continue, and industry players are expected to
specifically focus on high volume, high spend customers via VAS and mobile data.
However, as mobile telecommunications technology continues to develop there is

increased use of data compared to voice services. In 1998 data revenue accounted
for just over one per cent of total carrier revenue. By 2003, data revenue has
increased to 4.6 per cent and is forecast to reach around seven per cent by June
2004.
Table 4.2 shows the trend in the average revenue per user (ARPU) of data and
voice components respectively. The proportion of revenue accounted for by data
and voice services differs between the carriage service providers. Thus, the impact
of the overall ARPU trend is expected to differ between providers.
50
p.13.
51
p.29
Table 4.2
AVERAGE REVENUE PER USER OF MOBILE SERVICE COMPONENTS ($ per month)
2000 2001 2002 2003 2004F
Data services* 1.32 2.61 3.57 4.57 6.78

Voice services* 58.27 51.50 50.17 46.56 43.79
Total ARPU 59.59 54.11 53.74 51.13 50.57
Note: * indicate ACG estimates; and

F indicates forecasted values.
2004, p.29, 31.
Industry commentators expect future growth in revenue to be driven by increased

data usage (see box 4.1). The most commonly used data service is SMS, which was
introduced in 1993 and has shown substantial growth since. As identified in
chapter 3, SMS message volume grew by 44 per cent from 2002 to 2003, with
52
consumers sending 14 million messages per day across all networks. This growth
is evident in the volume of messages, the contribution to revenue and the customers
53
using these services. For example:
∑ during 2003, 3.9 billion messages were sent in Australia — about 294 SMS
per mobile phone user annually, with more than 46 million messages sent on
New Years Eve 2003-04 alone;
∑ Optus handles more than 35 million SMS messages each week from its
customer base of 5.5 million, with mobile data representing 15 per cent of
54
Optus’ annual mobile service revenue;
∑ Data revenue for Vodafone increased by 29.3 per cent for the year ended 31
March 2004. Vodafone customers sent over 4 million text messages on
Christmas Day 2003 and a further 7 million on New Year’s Eve and New
Year’s Day — with a total of 22.5 million text messages being sent across the
Vodafone network during the period from Christmas Eve to New Year’s Day.
In addition, more than 42 000 PXT messages were sent across the Vodafone
network on New Years Eve alone;
∑ Vodafone is expecting that MMS messages will increase by 20 to 25 per cent

during the remainder of 2004; and
∑ Hutchison experienced healthy growth in MMS usage along with sales of

MMS handsets in 2004.
52
http://www.legioninteractive.com.au/, accessed 7 July 2004.
53
ACA Telecommunications Performance Report 2001-02, p. 167-8.
54
Optus Financial Results, 2004.
Box 4.1
INTERACTION BETWEEN SMS DATA SERVICES AND TELEVISION
The vast majority of SMS usage is accounted for by consumer applications, including
person-to-person messaging, voice mail, fax, unified messaging, games, ringtones,
pictures, gambling, information services, mobile banking etc.
However, television networks are increasingly focusing on the potential for viewer
interaction via mobile phones. SMS/TV applications include voting, games, and
reminders.
Not only does this interaction between mobile phones and television give television
stations the opportunity to become closer to their viewers, but it also provides a source of
revenue.
With SMS services multiple people in a household can enter competitions or take part in
voting etc, compared to only one person per household when using the traditional 1900
dial-in services. An estimated one-fifth of Australians have already responded to a TV
promotion via their mobile phones. Furthermore, it is estimated that application-to-person
traffic, while representing only 12 per cent of total messages, will account for 28 per cent
of the commercial value by 2008.
Examples of SMS and television interactions in Australia, include:
∑ Big Brother 3 — the use of SMS has lifted the number of eviction votes registered at
by 20 per cent in 2003, accounting for more than 60 per cent of votes. Note that this
increase in the number of votes is despite a 13 per cent decline in total audiences
tuning into evictions compared to the previous year;
∑ MMS was introduced into Big Brother 4, when viewers could send video messages
to their favourite house mate using their 3 phone;
∑ the National IQ Test — with more than 300 000 viewers playing along; and
∑ the Getaway: Your Call program— receiving about 500 000 SMS votes during the
one hour program.
Source: Jane Schulze, The Australian, 17 July 2003, Rapid Response Program, accessed 7 July
2004, http://www.legioninteractive.com.au/News/ViewNews.asp?NewsID=32, and Hutchison.
Box 4.2 provides an example of how SMS messaging being trialled in schools to
reduce truancy.
Box 4.2
SMS INCREASES SCHOOL ATTENDANCE
Some public schools in South Australia are using text messages to tell parents if their
children skip school, with early results showing significant reductions in truancy.
Four high schools in South Australia are using text messages in a bid to improve the
state’s 92 per cent school attendance rate. The new computer technology automatically
informs parents by mobile phone text message when students are absent from school.
The text message system is being used extensively in South Australian government
schools where absentee rates have reportedly decreased by at least 50 per cent.
Source: Sydney Morning Herald, Linda Doherty, 22 May 2004, School Attendance: ‘Y is your child
wagging school 2dA? Parents track truants by text message’, http://www.smh.com.au/
articles/2004/05/21/1085120120340.html
4.2 Industry Gross Product
Industry Gross Product (IGP) is a measure of the economic contribution of a

specific industry to the economy. (IGP can also be referred to as value added.) The
IGP figure describes the market value of goods and services produced by an
industry, minus the cost of the inputs used by the industry to produce its goods or
services. The figure is calculated as:

Turnover
+ the increase (or – the decrease) in the value of stocks
– (purchases of inputs used to produce the good or service + transfers in + selected

expenses)
= Gross product of the industry or IGP
For the nation, Gross Domestic Product (GDP) is obtained by summing the gross
product of all industries.
Industry Gross Product for the CSP sector
In 2002-03, the estimated IGP for the CSP sector (mobile network carriers and
resellers) of the Australian mobile telecommunications industry was $4.8 billion. ,
55 56
To provide context of the significance of the economic contribution of the mobile

telecommunication industry, figure 4.1 provides estimates of IGP for selected
industry sectors. It can be seen that mobile telecommunications IGP is higher than
that for the free to air television services; newspapers, printing and publishing; and
computer consultancy services sectors and less than accounting services,
automotive vehicle component and manufacturing sectors, and accommodation,
café and restaurant IGP. Of note, mobile telecommunication services IGP is
approximately 30 per cent of size of the IGP for the entire accommodation, café
and restaurant industry (see box 4.1).
55
The estimates of IGP in this section are derived from a combination of sources. Mobile network carrier
IGP is taken from IBISWorld publication J7122 Mobile Telecommunications Carriers in Australia 2004.
Mobile resellers IGP has been derived from IBISWorld publication J7123 Telecommunications
Resellers in Australia 2004, and Industry Data Powered by IBISWorld, C2819 — Automotive
Component Manufacturing n.e.c. in Australia, 30 June 2004, accessed 8 July 2004,
http://www.ibisworld.com.au/. The figures presented in this section are in nominal terms.
56
The Allen Consulting Group Australian Mobile Telecommunications Industry Economic Significance
Report for 2003 presented information on IGP using the IBIS World publications J7122 and J7123 for
2003. The data in this chapter uses the 2004 IBIS World publications J7122 and J7123. The 2004
publications have updated previous years data. The information in this section relies on the data
presented in the 2004 reports.
Figure 4.1
INDUSTRY GROSS PRODUCT FOR SELECTED INDUSTRIES, 2002-03
Source: IBISWorld data.
The sector has experienced strong growth in recent years. IGP increased over
80 per cent (in nominal terms) in the CSP sector over the period 1998-99 to
2002-03 (see figure 4.2). The mobile network carriers accounted for over
95 per cent of the mobile sector IGP, although the contribution of the resellers has
increased in each period. It is worth noting that the IGP measure provides a
financial measure but does not reflect the quality improvements in mobile
telecommunications over the period.
Box 4.3
NEW WAYS TO FIND A RESTAURANT OR BAR
With profiles of over 2500 restaurants and bars, ‘Eat and Drink on 3’ enables 3
customers to search over 2000 restaurants by location, cuisine and price range. A listing
of over 500 bars is also provided and can be searched based on their location.

Figure 4.2
INDUSTRY GROSS PRODUCT FOR MOBILE NETWORK CARRIERS AND MOBILE
RESELLERS, 1997-98 TO 2002-03 ($M, NOMINAL)
Source: The estimates of IGP in this section are derived from a combination of sources. Mobile
network carrier IGP is taken from IBISWorld publication J7122 Mobile Telecommunications Carriers in
Australia; and Mobile resellers IGP has been derived from IBISWorld publication J7123
Telecommunications Resellers in Australia.
The strong growth in the mobile telecommunications sector is evident by its

increasing share of IGP in the broader communications services industry. In
1998-99, CSPs accounted for 16 per cent of total communications services IGP. By
2002-03, this had increased to 23 per cent (see figure 4.3).
Figure 4.3
MOBILE NETWORK CARRIERS AND MOBILE RESELLERS CONTRIBUTION TO
COMMUNICATIONS SERVICES IGP, 1998 TO 2004

2004, p.13.

Chapter 5
Employment
5.1 Trends in employment
Mobile telecommunications stronger growth than telecommunications
It is estimated that in 2002-03 the mobile telecommunications sector (including

CSPs and resellers, but excluding hardware and retail) employed approximately
33 000, of the estimated total of 102 000 people employed in the
57
58
Over the period 1997-98 to 2002-03, employment in the mobile industry
increased by 48 per cent compared to an increase of around 30 per cent in the
telecommunications industry as a whole. Note that the telecommunications
industry as a whole experienced a decline in employment numbers in both 2000-01
and 2001-02, while the mobile industry only experienced a decrease in
employment numbers in 2001-02 (see figure 5.1).
Figure 5.1
TOTAL EMPLOYEES IN TELECOMMUNICATIONS AND MOBILE INDUSTRY, 1996-97
TO 2002-03
Source: The estimates of employment in this section are derived from a combination of sources.
Mobile network carrier employment is taken from IBISWorld publication J7122 M o b i l e
Telecommunications Carriers in Australia; Mobile resellers employment has been derived from
IBISWorld publication J7123 Telecommunications Resellers in Australia; and the Australian Bureau of
Statistics, ABS companion data 6291.040.001/6291.055.001 Data Cub e06 (1984 to 2003) (Updated as
at 6 June 2003).
57
Employees include the number of working proprietors, working partners, permanent, part-time,
temporary and casual employees, and managerial and executive employees working for an establishment
during the last pay period in the financial year each year. Employees absent on paid or prepaid leave are
included.
58
For the purposes of this study, employment in the mobile industry included those employed in the
mobile CSP sector and mobile reseller sector. Mobile CSPs and reseller make up nearly 99 per cent of
the industry. Data used as published by IBISWorld 2004, publication J7122 and J7123.
An implication of the employment trends is the increasing importance of the

mobile industry as an employer in the telecommunications industry. In 1996-97,
the mobile industry accounted for just under a quarter of total industry
employment. By 2002-03, this had increased to almost one third of total industry
employment. Both sectors experienced a slight increase in employment numbers
following the decline experienced in 2001-02. Employment in the
telecommunications industry as a whole increased by 4 per cent while an increase
of more than 1 per cent was experienced in the mobile industry.
The mobile hardware sector comprises two main sub-sectors: mobile

telecommunications infrastructure and mobile phone handsets. The number of
employees in the mobile hardware sector is not publicly available. However, on the
basis of the survey results, it is estimated that there are more than 1500 employees
currently working in the Australian mobile hardware sector.
Thus, the mobile telecommunications industry including CSPs, resellers and the
hardware sector has at least 34 500 full-time-equivalent positions in 2002-03.
Employment growth trends within the mobile telecommunications industry
Within the CSP and reseller sectors of the mobile telecommunications industry,
CSPs are by far the most substantial employer, accounting for 94 per cent of
employees in 2002-03, while 6 per cent of industry employees worked in the
reseller sector (see figure 5.2). Between 1996-97 and 2002-03 the number of full-
time equivalent employees increased by 43 per cent in the CSP sector and 66 per
cent in the resellers sector.
Figure 5.2
MOBILE TELECOMMUNICATIONS INDUSTRY EMPLOYMENT BY SECTOR, 2002-03
Sources: Mobile network carrier figures are from IBISWorld publication J7122 Mobile
Telecommunications Carriers in Australia. Mobile resellers data has been derived from IBISWorld
publication J7123 Telecommunications Resellers in Australia and ABN AMRO publication Telecom
Networks- Australia: Industry Overview. Hardware data is based on response to the Issues Paper.

5.2 Wages paid
In 2002-03 the value of wages paid by CSPs and resellers in the mobile industry
59
was approximately $1.2 billion (see figure 5.3). Wages growth in the industry has
been consistent over the period and nominal wages in the CSP sector increased by
almost 60 per cent from 1997-98 to 2002-03.
Figure 5.3
MOBILE TELECOMMUNICATIONS VALUE OF WAGES PAID
Networks- Australia: Industry Overview.
Consistent with its role as the largest employer sector, in 2002-03, the CSP sector
accounted for 91 per cent of the value of wages paid in the total mobile
telecommunications industry (see figure 5.4), while resellers accounted for
9 per cent of wages paid.
59
The wages figure includes wages paid to full-time equivalent employees, as well as part-time and casual
employees. Thus, the figure cannot be used to derive an average wage paid in the mobile
Figure 5.4
MOBILE TELECOMMUNICATIONS INDUSTRY WAGES PAID BY SECTOR, 2002-03
Networks- Australia: Industry Overview.

Chapter 6
Payments to Government
6.1 Mobile telecommunications specific payments to government
The mobile telecommunications industry is required to make a number of industry

specific payments to government. The payments include on-going and one-off
charges. In 2003-04, the estimated value of annual payments alone, made by the
mobile telecommunications industry to government, was $178.2 million (see
table 6.1). This is equivalent to around 2 per cent of total industry revenue paid to
government on an on-going basis in industry levies and charges. In addition, in
recent years the industry has made substantial one-off payments for access to
spectrum as well as being subject to generic taxes and charges which are described
in section 6.2.
Table 6.1
MOBILE TELECOMMUNICATIONS SPECIFIC PAYMENTS TO GOVERNMENT
Estimated
Frequency value of
Basis for calculating
Payment type of most recent
payment amount
payment payment
($m)
ONE-OFF PAYMENTS TO GOVERNMENT

Spectrum auction Auction result (1998 to One-off $2877
present)
ON-GOING PAYMENTS TO GOVERNMENT
(a)
Spectrum licence fee Amount paid at auction Annual $0.085
USO Eligible Annual $68.39
telecommunications
revenue
NRS Eligible Annual $3.8
telecommunications
revenue
Radiocommunications Annual $58.5
licence fee
Numbering charge Quantity of mobile Annual $32.9
telephone numbers
Licence fee for fixed Number of fixed point-to- Annual $7.7
service point installations
Annual Carrier Fixed amount of $10 000 Annual $6.4
Licence Charge plus a % of the carrier’s
annual revenue
calculated in relation to
the cost of maintaining
the regulatory regime
Health Research Levy Radiocommunications Annual $0.45
licence fee
(a) This figure represents the amount paid in 2002-03. It has not been possible to update the figure for
2003-04.

In addition to the industry specific charges and levies discussed in this section,
industry also contributes to the effective industry operation through payments,
some voluntary and some compulsory, that support various industry associations
and schemes, for example the Telecommunications Industry Ombudsman, the
National Relay Service, Australian Communications Industry Forum and AMTA.
Whilst these bodies are not Government they do form important elements of the
self-regulatory regime.
Charges to access spectrum
There are three charges incurred by mobile telecommunication businesses

associated with the use of spectrum. These are an initial access fee that is paid for
the right to use spectrum and two annual licence fees.
Spectrum auctions
Since 1998, the ACA has conducted five auction processes for the rights to access
mobile telecommunications spectrum. The total revenue paid by industry for access
to the mobile telecommunications spectrum is approximately $2.87 billion (see
60
table 6.2).
Table 6.2
TOTAL REVENUE FROM MOBILE TELECOMMUNICATIONS SPECTRUM AUCTIONS
Auction Date Value

($m)
PCS (first) — 800/1800 MHz May 1998 350.1

PCS (second) — 800/1800 MHz Sept 1998 30.63
PCS (third) — 800 MHz May 1999 0.02
PCS (fourth) — 1800 MHz May 2000 1327.7
3G spectrum —2GHz March 2001 1168.9
Total 2877.35
Note: Further detail of the 3G spectrum auction is in table 7.1.
Source: Information provided by the Australian Communications Authority
Radiocommunication licences
In 2003-04, $58.5 million was paid for radiocommunications apparatus licence
fees. This is an annual licence fee paid by three carriers (Optus, Telstra and
61
Vodafone) with GSM 900 apparatus licences.
Annual spectrum licence tax

The ACA recovers a share of the overhead costs of maintaining spectrum from all
licensees through an annual fee or ‘spectrum licence tax’. In 2002-03, the annual
62
spectrum licence tax paid by the four carriers was approximately $85 000.
Spectrum licensing taxes are calculated by adjusting the base amount paid for the
spectrum according to the geographical area of the spectrum and the proportion of
the population included in the spectrum area.
60
Information provided by the ACA.
61
Information provided by the Australian Communications Authority.
62
These arrangements were introduced in July 2000, and each licensee’s contribution to the base amount
are calculated according to the requirement contained in the Radiocommunications (Spectrum Licence
Universal Service Obligation (USO)
Universal service arrangements aim to give residents in relatively sparsely

populated areas of Australia access to standard telecommunications services at a
63
price comparable to those available to the rest of the population. This is achieved
through a cross-subsidisation arrangement. The levy paid to support the cross-
subsidy is the universal service obligation (USO).
It is estimated that in 2003-04, 30 per cent of the USO, which is $68.39 million,
will be attributable to the mobile network carriers (see table 6.2). All
telecommunications carriers (fixed and mobile) contribute to the USO. Individual
businesses contribute according to their share of eligible telecommunications
revenue. For example, if a carrier earned 20 per cent of the total eligible
telecommunications revenue, they would pay 20 per cent of the universal service
levy. Thus, if mobile telecommunications revenue continues to grow at a faster rate
than total telecommunications industry revenue, the share of the USO paid by the
mobile network carriers will increase.
Since November 2000, mobile telecommunication CSPs have paid the universal
service levy to the Universal Service Provider — currently Telstra — to provide
standard telecommunications services to people living in rural and remote
Australia.
Consistent with the Telecommunications (Consumer Protection and Service

Standards) Amendment Act (No.2) 2000, the Minister determines the amount of the
USO having regard to advice from the Australian Communications Authority
(ACA).
Table 6.3
ESTIMATE OF THE VALUE OF THE USO SUBSIDIES ATTRIBUTABLE TO MOBILE
TELECOMMUNICATIONS
2001-02 2002-03 2003-04 2004-05

($m) ($m) ($m) ($m)
USO amount $240.00 $234.10 $231.7 $211.3
Mobile telecommunications
share $63.05 $65.90 $68.39 $63.96
Note: The mobile telecommunications amount has been calculated by estimating mobile revenue as a
proportion of total telecommunications revenue (less inter-carrier revenues) then applying this proportion
to the total value of the USO. Figures for 2003-04 and 2004-05 are based on revenue forecasts. The USO
amount in the table has been rounded for the purpose of presentation.
Sources: Australian Communication Authority, USO subsidies and funding, cited 28/08/2003,
www.aca.gov.au/telcomm/universal_service_regime/universal_service_obligation/costing_funding/funding
.htm and ABN Amro Australian Telecommunication Market 2003, 9 December 2002, p. 13
Tax) Act 1997 and the Radiocommunications (Spectrum Licence Tax) Determination 2000. Information
was not available to update this figure for 2003-04.
63
Currently, the universal services regime is defined in the Telecommunications (Consumers protection
and Services Standards) Act 1999 (TCPP Act).
The National Relay Service (NRS)
The NRS allows people who are deaf or have a hearing or speech impairment to
use the telephone. The National Relay Service is a national telephone service
available to everyone at no additional cost to consumers. People who are deaf, or
have a hearing or speech impairment and/or use a telephone teletypewriter (TTY)
or a computer with a modem, can access anyone in the wider telephone network
through the NRS. The NRS also enables anyone in the community to communicate
with people who are deaf, hearing or speech impaired.
Telecommunications carriers are required to contribute to the cost of the NRS. In

64
2003-04 the total cost of the NRS was $14.3 million. The four mobile carriage
service providers paid an estimated $3.8 million in 2003-04.
Licence fees for fixed services
Mobile network operators are required to have fixed licences issued by the ACA.
The licences authorise licensees to operate radiocommunications devices, such as
transmitters and receivers. In effect, they are licences to use specific segments of
the radiofrequency spectrum for particular purposes.
In 2003-04, it is estimated that the mobile telecommunications industry paid $7.7

million in fixed service licence fees.
Numbering charges
Since 1998, the Commonwealth Government has collected $60 million per year
65
from CSPs holding telephone numbers (fixed and mobile). This is referred to as
the ‘numbering charge’ and is collected by the ACA in accordance with a statutory
66
‘numbering plan’ that they are required to develop.
In 2004, the numbering charge paid by the mobile telecommunications industry

67
was $32.9 million. This was an increase on the amount paid in 2003, which was
$30.2 million. In effect, the proportion of the charge paid by the mobile
telecommunications industry increased from 51 per cent in 2003 to 54.9 per cent in
2004. This charge is not paid on local geographic numbers (or landline numbers),
so the burden of paying the charge falls disproportionately on other
telecommunications sectors, including the mobile telecommunications sector.
According to the numbering plan, CSPs are liable for all charges relating to the
numbers they hold on a pre-determined census date. The census date is determined
by the ACA and usually occurs in April each year. In 2004, CSPs were charged
$1.058 for each mobile phone number held on the ‘census’ date of the 4th April
2004.
64
Australian Communications Authority, Fact Sheet ‘Carrier Fees and Levies’ and ACA website
http://www.aca.gov.au/consumer_info/disability_services/national_relay_service/
65
The amount of revenue to be collected is set by the Commonwealth Government through the Federal
Budget process.
66
The annual numbering charge process is administered by the ACA according to the Telecommunications
Act 1997, the Telecommunications (Numbering Charges) Act 1997 and five determinations made by the
ACA under these Acts. These determinations sets some key parameters for the numbering charge
process, for example, the census date and the charge applied to particular numbers. Furthermore, the
determinations can be changed from year to year, as necessary. The revenue is collected by the ACA in
accordance with a Numbering Plan they develop. The development of the Numbering Plan is required in
Part 22 of the Telecommunications Act 1997.
67
ACA Numbering Advisory Committee, Meeting Minutes, Agenda item: 5.4, 12 May 2004, Update on
Annual Numbering Charges – 2004.
Annual carrier licence charge
Each licensed carrier is required to pay the Annual Carrier Licence Charge
(ACLC). Revenue generated from this charge is used to operate the various
telecommunications regulatory bodies. In 2003-04 the four mobile network carriers
68
paid $6.4 million in ACLC charges.
The licensing fees consist of a $10 000 application fee, an annual $10 000 fee, and
a variable percentage of the annual revenue calculated in relation to the cost of
maintaining the regulatory regime. As a result of a recent review by the ACA, the
approach to calculating the ACLC has changed, effective from 1 July 2004.
Research levy
Since 1996, each radiocommunications apparatus licence fee has included an

additional one per cent to fund research into the possible health impacts of mobile
phone use. In 2001-02, the mobile telecommunications industry accounted for
almost 45 per cent of the total value of radiocommunications licence fees, and thus,
contributed approximately $450 000, to the total $1 million research levy.
The research is conducted through the independent National Health and Medical
Research Council (NHMRC) in the Commonwealth Government’s Health and
Ageing portfolio and is part of an international research effort facilitated by the
World Health Organisation (WHO) into possible health impacts of mobile phone
use. The WHO Research Coordination Committee is monitoring a broad ranging
series of scientific studies into electromagnetic field exposure.
The Government has made provision for funding of $1 million per annum for
public education activities and to continue research into possible health effects
from the use of mobile phones and other radiocommunications devices. The levy is
expected to continue until at least 2006.
6.2 Generic taxes paid by the mobile industry
In addition to the industry specific government charges and levies discussed in

section 6.1, mobile telecommunications businesses are subject to the generic range
of government taxes and charges applicable to all businesses operating in Australia,
such as company tax, payroll tax and stamp duties (see box 6.1). Like the industry
specific taxes, the quantum of these payments is significant. For example, it is
estimated that the industry paid approximately $64 million in payroll tax in
69
2001-02; this is equivalent to just less than one per cent of industry revenue.
68
This amount has been calculated assuming 100 per cent is attributable for Vodafone and Hutchison.
Optus and Telstra’s amounts were calculated based on mobile revenue /total revenue.
69
This estimate was calculated using the total value of wages presented in chapter 5, and applying a
national average of the payroll tax rates in box 6.2.
Box 6.1
EXAMPLES OF TAXES PAID BY AUSTRALIAN BUSINESSES
Company Tax
Company tax is a Commonwealth tax paid by all companies. The tax is applied at
standard rate across the country without a tax-free threshold. From 2001-02, the
company tax rate is 30 per cent.
Payroll Tax
Payroll tax is levied on employers and is incurred once the value of the payroll exceeds
pre-determined amounts (see table below). In most states, the base also includes
employer superannuation contributions. Employers are liable for payroll tax when their
total Australian wages exceed a certain level called the ‘exemption threshold’. Exemption
thresholds vary between states.
Payroll Tax by States and Territories — 2003-04
NSW VIC Qld WA SA TAS NT ACT

Basic rate 6.00% 5.25% 4.75% 6.00% 5.67% 6.10% 6.20% 6.85%
Tax-free
threshold 600 550 850 750 504 1 010 600 1 250
— $’000
Source: NSW Department of State and Regional Development, Payroll Tax — Australian States,
2003-04, accessed 13/07/2003, www.business.nsw.gov.au/factsReports.asp?cid=20&subCid=51
Stamp Duties
Stamp duty is a tax on written documents (‘instruments’) and certain transactions
including motor vehicle registrations and transfers, insurance policies, leases,
mortgages, hire purchase agreements and transfers of property (such as businesses,
real estate or shares).
The rate of stamp duty varies according to the type and value of the transaction involved.
Depending on the nature of the transaction, certain concessions and exemptions may be
available.

Chapter 7
Industry Investment
As discussed in Chapter 2, in Australia mobile networks are owned and operated

by the four mobile network carriers. This involves significant investment by the
carriers to maintain and continue the expansion and development of the
infrastructure that supports the industry. This chapter presents the recent levels of
investment by the CSPs in the industry, provides examples of specific expenditures
by the carriers and identifies the spending by this section of the industry on
research and development.
7.1 Investment in network infrastructure
From 1997 to 2002, the value of the investment in new networks undertaken by
70
mobile network carriers is estimated at $8 billion, and it is anticipated that the
71
industry invested a further $1 billion into its infrastructure during 2003. Figure 7.1
illustrates the expenditure on infrastructure by Australia’s major mobile carriers
over a four-year period.
Figure 7.1
MOBILE NETWORK CARRIER EXPENDITURE ON INFRASTRUCTURE — 1998-99 TO
2002-03
Source: Australian Communications Authority (ACA), 2002, Telecommunications Performance Report

2001-02, Melbourne and information provided by mobile network carriers.
There has been a trend in recent years for telecommunications businesses in

Australia, including mobile businesses, to find ways to reduce levels of capital
expenditure.
70
IBISWorld, 2003, J7122 - Mobile Telecommunications Carriers in Australia, p. 17.
71
IBISWorld, 2004, J7122 - Mobile Telecommunications Carriers in Australia, p.24.
7.2 Examples of capital expenditure projects
Generally, capital expenditure includes costs such as spectrum fees and auctions,
licenses and mobile network infrastructure, such as base stations, new data services
and updates to billing systems. Expenditure tends to be ‘lumpy’ in nature, that is,
there are periods of relatively high and relatively low expenditure. For example,
periods where new networks are rolled out will be associated with high
expenditure, however when such projects are completed, capital expenditure will
fall.
All mobile network carriers have paid to gain access to spectrum, build and
maintain networks and are constantly working to upgrade networks and improve
the quality and diversity of services provided to customers. This section provides
select examples of capital expenditure projects undertaken or planned by the
mobile network carriers.
Spectrum auction
Chapter 6 identified that mobile network carriers pay the government for the right
to access the spectrum they require to provide mobile telecommunications services.
The most recent auction was for 3G mobile spectrum auction for licences in the 2
GHz band. This 3G auction ended in March 2001 after 19 rounds of bidding with
bidders paying varying amounts for access to spectrum (see table 7.1).
Table 7.1
3G AUCTION — SUCCESSFUL BIDS (MARCH 2001)
Company Licence Value

($m)
3G Investments (Australia) 10 MHz paired spectrum in all capital cities 159

Pty Ltd
CKW Wireless Pty Limited 5 MHz unpaired spectrum in all capital 9 .45
cities
Hutchison 15 MHz paired spectrum in Sydney and 196.1
Telecommunications Melbourne,
(Australia) Limited 10 MHz paired spectrum in Brisbane,
Adelaide and Perth
Optus Mobile Pty Ltd 10 MHz paired spectrum in all capital cities, 248.87
5 MHz paired spectrum in regional areas,
5 MHz unpaired spectrum in Sydney,
Melbourne, Brisbane, Adelaide and Perth
Telstra 3G Spectrum 15 MHz paired spectrum in all capital cities, 302.02
Holdings Pty Ltd 10 MHz paired spectrum in regional areas,
5 MHz unpaired spectrum in all capital
cities
Vodafone Pacific Limited 10 MHz paired spectrum in all capital cities, 253.55
5 MHz paired spectrum in regional areas,
5 MHz unpaired spectrum in all capital
cities
Total 1 168.99
Source: Australian Communications Authority (ACA), March 2001, 3G Spectrum Auction Ends, cited
29/07/2003, www.aca.gov.au/aca_home/media _releases/media_enquiries/2001/01-02.htm

Hutchison’s 3G network
The first 3G (WCDMA) network in Australia was launched by Hutchison under the
brand ‘3’ in Sydney and Melbourne mid April 2003 with Brisbane, Adelaide and
Perth launched in early July 2003.
By mid-2003, Hutchison 3G Australia (H3GA) had invested over $1 billion with

an expected total investment to be in the order of $3 billion. Of this, $1 billion was
required to build the network, including the $196.1 million paid to secure 2.1Ghz
spectrum licences for 3G.
In addition to the capital investment required to build and operate a mobile

telecommunications network, investment is required in the associated elements of
the industry:
∑ Hutchison has over 1000 employees in various capacities dedicated to its ‘3’
service.
∑ In the retail sector Hutchison has 190 outlets in the five major capital cities to
support ‘3’ services.
∑ Hutchison is committed to the development of new services for its customers,
priding itself on the array of content features available on the 3 handsets.
∑ Hutchison released in May 2004, that it had over 500 000 mobile customers,
both Orange and 3.
72
Optus’ GSM network
On 18 May 1993 Optus launched its digital Global Systems for Mobiles (GSM)
network in Australia. Optus has invested over $2.5 billion to develop its digital
mobile network over the past 12 years. Optus has engaged in a network coverage
improvement program since the third quarter of 2002-03, with a $330 million, two
year investment program. This has seen the number of base stations increase by
11 per cent to 3919.
Optus' digital GSM network provides coverage to 95 per cent of the Australian
population and handles more than 96 million calls and more than 35 million SMS
messages each week.
On 26 August 2004, Optus announced a Heads of Agreement with Vodafone to

share national 3G network sites and radio communications infrastructure across
Australia, meaning that consumers will have access to a robust and reliable
network that will tap into the expertise of Optus’ regional presence and Vodafone’s
global experience in rolling out 3G networks.
Telstra investing to expand CDMA landmass coverage

Telstra has made significant investments to CDMA 1xRTTT coverage to make it
national serving 98 per cent of the Australian population. In January 2004, Telstra
announced that it would upgrade the CDMA mobile network in rural and regional
Australia by the end of the year, at a cost of $31 million, to complete the first
73
national 3G wireless data network. Telstra has also invested in research that will
assist the planning of future network growth (see box 7.1).
72
Information provided by Optus.
73
Information provided by Telstra, and Media Release 21 June 2004 ‘CDMA technology providing ‘future
proof’ potential for rural Australia.
A further investment is introducing capacity for mobile customers to send and

receive SMSs to and from residential fixed line services. As content becomes more
critical to customers larger sums are allocated to investments that support
managing content to mobile devices such as RIM Blackberry and i-mode®
alliances.
Box 7.1
PLANNING FOR GROWING TECHNOLOGIES
Telstra has awarded a $950,000 contract to the University of Adelaide's Traffic Research
Centre (TRC) Mathematical Modelling unit to develop analysis tools and techniques
applicable to network infrastructure that will cater for next generation telephony,
broadband data and mobile services.
A major focus of the research will be ensuring the availability of the required tools and
techniques to efficiently plan and monitor the network infrastructure that will allow it to
respond to the predicted growth in traffic levels. Specific issues are ensuring that
Telstra’s telecommunications infrastructure is ready for the next generation of services
that will be offered by broadband internet and mobility. The performance must be of the
highest quality, robust, and scalable into the future.
The research will be carried out over the next three years. The contract is the
continuation of an 18-year partnership and secures TRC's services to provide technical
expertise as it relates to traffic analysis and engineering.
The TRC Mathematical Modelling is a centre within the University of Adelaide devoted to
solving industrial problems involving modelling, measurement and performance. Its
historical focus has been in the area of telecommunications, with recent expansion into
solving resource optimisation problems in manufacturing.
Source: Telstra Media Release, University of Adelaide helps Telstra plan for growing technologies, May
2004, Reference Number: 149 / 2004
Vodafone
Vodafone has invested over $2 billion in its network that now covers 93 per cent of
the Australian population. Vodafone was awarded the third Australian mobile
telecommunications carrier licence in December 1992. In September 1993 the
company began providing GSM mobile telecommunications services with network
coverage in Sydney, Melbourne and Canberra. By March 1994, the mobile network
was extended to the cities of Brisbane, Adelaide and Perth.
Vodafone announced Nokia is to build its third-generation network for Australia

and New Zealand. Vodafone is committed to provide the service by mid-2005.
Vodafone forecasts it will invest hundreds of millions of dollars over the next two
years in order to develop a globally compatible 3G network. Vodafone is also
currently providing '3G like' services over its 2.5G network, such as Vodafone
Live! (see box 7.2)

Box 7.2
CONCIERGE AND INFORMATION SERVICES
Vodafone 123 is a 24/7 concierge and information service available to Vodafone

customers. Vodafone customers dial 123 from their mobile phone anywhere in Australia
and ask the Vodafone 123 team anything they need to know in a hurry - from street
directions, transport timetables, telephone numbers and addresses to quirky trivia facts.
The most common reasons customers dial Vodafone 123 is to ask for sports and lotto
results, check the weather forecast, find out the time overseas and obtain contact
numbers for the nearest takeaway restaurants.
Vodafone 123 has also been able to help light aircraft navigate their way home, rescue a
Santa trapped in a toilet and ring for assistance for quite a few people stuck in elevators.
The service is especially popular on Friday afternoons between 1-3pm (when customer’s
are sorting out their plans for the weekend) and on sport-frenzied Saturdays, with the
majority of calls to Vodafone 123 coming from 21-35 year olds. Increasingly, calls are
being made to Vodafone 123 from younger customers asking for ‘cheat’ information for
computer games.
Source: Information provided by Vodafone
7.3 Expenditure on research and development
The results from industry survey shows that Mobile telecommunications businesses
invested at least $90 million on research and development during 2003-04.

Chapter 8
Industry initiatives and future directions
8.1 Introduction
The previous chapters in the report have demonstrated in various ways the growth
and economic significance of the mobile telecommunications industry. These
measures are important but they do not fully capture the many ways in which
mobile telephony contributes to improvements in the quality of people’s lives. It is
also important to recognise the substantial impacts that the growth and
development of the industry has on the way our community functions.
For many people, mobile telecommunications is more than a tool to make voice
calls: the extensive network coverage, array of services and information available
mean that a mobile phone can make ‘life mobile’ — as demonstrated by the
capabilities of 3G. A significant benefit of mobile telecommunications continues to
be the accessibility and freedom to reach people on the move and for them to be
able to maintain contact with other people. This is particularly important for
businesses and has driven the development of a range of innovations that support
voice and data communications via mobile telephony.
From an individual perspective, mobile phones can provide convenience, security

and safety benefits. There are many cases where people have been able to use a
mobile phone to convey their need for help. For example, the Optus in conjunction
with the Western Australian Police Force operate a dedicated SMS service for
74
people who are hard of hearing or speech impaired.
Box 8.1 and 8.2 respectively illustrates how mobile phones are changing
lives/businesses everyday. These types of innovations for business and individuals
mean that the role and importance of mobile telephones in our society is growing.
Hutchison has shown, through the solutions on their devices, that it is no longer
necessary to carry around a mobile and a laptop – 3 phones allow users to access
their office from their mobile. Vodafone reported that due to the launch and
development of data services, the real possibility exists where customers will no
longer have to carry around a handbag, wallet, credit cards or cash.
Box 8.1
‘DOWNLOAD AND DONATE’ SCHEME HELPS AUSTRALIA'S HOMELESS YOUTH
The Salvo’s Red Shield Appeal is an annual event that raises funds in support of the
growing number of homeless youth. This year mobile telecommunications technologies
provided an innovative approach to raise funds.
Every time a mobile user downloads the Salvo's Red Shield Appeal icon to their mobile
phone, Telstra and iTouch donate the download cost to help the youth on the streets.
This demonstrates and innovative way to raise funds for homeless young people, using
the latest technology in mobile telecommunications.
Source: Information provided by Telstra
74
Optus Media Release, ‘Optus joins forces with the WA Police’ 6 June 2003.
Box 8.2
HSC RESULTS VIA YOUR MOBILE PHONE
In November 2003, year 12 students were signing up in droves to be sent their Higher
School Certificate (HSC) results via text messages on their mobile phones.
More than 4 600 students have registered to learn with a text message how they went by
receiving a 6am wake-up message on December 18, four days before receiving their
results by mail. The message showed the student's marks for individual subjects and the
band they achieved. The cost of these SMS was $1.10 each, and was added to the
student's phone bill.
With this service, text messaging joined the internet and telephone hotline as instant
methods of finding out results.
Source: Sydney morning Herald, 23 November 2003, Textbook to text msg: HSC results by mobile,
http://www.smh.com.au/articles/2003/11/22/1069027379010.html
This chapter describes industry initiatives including technological innovation, new

and emerging applications and industry led initiatives, and demonstrates how these
initiatives are impacting on our community.
8.2 Technological innovations
The mobile telecommunications industry is particularly innovative. The discussion

below provides specific examples of recent product and service innovation in
mobile telecommunications.
Digital convergence
The convergence of the internet and mobile communications technologies

introduce new ways of delivering content and applications to the end user.
Advances in both telecommunications network capabilities and the functionality of

end-user devices has started to provide internet and television-like services that
were previously only available in a fixed line environment. The three critical and
inter-related features of technological innovations are:
∑ improving speed of data networks that supports the efficient delivery of larger
file sizes;
∑ increased capability of devices. Handsets have evolved from devices that
support voice, SMS and MMS to devices that integrate these functions with
capability to send and receive music, sound, video and information. The
additional functionality supports activities such as sending, receiving and
synchronising emails, integration of PDA functions, obtaining location
specific information via GPS receivers, storing and listening to music through
the incorporation of MP3 player technologies; and
∑ availability of information that can be integrated for example, by linking of
visual data with geographic reference points.
The new combination of network and device capabilities has prompted internet-
based operators to create mobile extensions of their existing services. For example:
∑ geo-located services that are able to link visual data with geographic data
references so that customers can use mobile devices to find the nearest service
(like a chemist shop), obtain an aerial map of a particular location, or take part
in multiplayer games
∑ mobile event and destination guides can provide information such as dining
options in a particular area including type of cuisine and reviews, television
and movie guides etc
The new combination of network and device capability has also resulted in specific
services being developed for the mobile environment. For example:
∑ person-to-person communication tools such as instant messenger, MMS, and

video calling
∑ tools enabling access to back-office applications for the mobile sales forces.
Another key development in the convergence of internet and mobile technologies
is the ability to stream media direct to user devices. Carriage services providers
such as Optus now offer branded streaming media of existing TV broadcasts such
as the ABC and SBS while Telstra has acquired the rights to stream CNN
properties to users of Telstra’s soon to be launched i-mode service (see box 2.7 and
box 8.5).
3 currently offers news, sports and weather reports, comedy and music video clips,
movie trailers and live surf cams – all available via downloading or streaming
media. Recently 3 provided 24 x 7 live cam streaming of activity from the Big
Brother House.
Other potential streaming applications include traffic cam and home security-cam.
It is now possible to connect a mobile user with a capable device to any web cam
via internet protocol (packet or circuit switched) technology. The technology also
exists to allow webcasting of any event (music concert, political event, sporting
fixture) via a mobile device.
More recent innovations in mobile telecommunications have opened a whole new

world of services never before available on mobile phones including the
opportunity for people to:
∑ conduct live face-to-face video telephone conversations between Australia’s

mainland State capitals, as well as to Rome, London, Tokyo, Hong Kong and
other European capitals;
∑ participate in services converged from other media such as television and the
internet (see box 8.3);
∑ watch near-live sporting highlights on the mobile phone; and

∑ play ‘live’ interactive multimedia games.
All of this is made possible by the introduction of 3G mobile network technology,

pioneered in Australia by Hutchison brand, 3, and which is expected to be
introduced by other major mobile operators in 2005.

Box 8.3
INTRODUCING VIDEOLINK TO PERSONAL COMPUTERS
Hutchison Telecommunications (Australia), in January 2004, announced the launch of

Vidoetalk to PC available to 3 customers.
Videotalk to PC allows customers to use their 3 mobile when in 3’s videozones, to call
any webcam and email enabled PC, both nationally and internationally, and see the
person with whom they are talking.
Video calling is no longer limited to 3 handsets, Videotalk to PC allows you to make
video calls to your friends and family all over the world, even in countries without 3G
services.
Multimedia Message Service (MMS)
With MMS you to take a colour picture and send it via your mobile phone.
Furthermore, MMS allows mobile phone users to send and receive messages
comprising a combination of text, sound and video. For example, with MMS
customers can send still or animated postcards, pictures, screensavers, greeting
cards, maps, cartoons and business cards.
75
MMS can be used for a large range of applications, for example:
∑ person-to-person applications — including audio and video messaging, photo

messaging, m-greetings and m-postcards; and
∑ valued-added applications — including entertainments (horoscope, comics,

collectables, adult content, movie reviews and music sampling), information
(sport, weather, financial news, general news, television and cinema listings),
interactive games and dating services.
MMS services use WAP protocol with high-speed data transport technology. This
means MMS requires additional network infrastructure, including new messaging
platforms for mobile networks (e.g. MMS Relay, MMS Server, MMS User
76
Databases and new WAP gateways).
However, MMS is still a new and complex technology and currently faces some
challenges, including:
∑ handset configuration — the configuration of an MMS handset is not always

automatic; and
∑ data transmission — a measure of success of MMS services will be when

users are able to send an MMS to any other telecommunications device.
Optus offers via MMS access to up-to-date general, business, entertainment and
sports news from AAP featuring a photograph with each main story, the latest surf
conditions at 20 beaches around Australia and fully animated Hallmark mobile
cards that can be sent to an MMS phone or emailed.
75
Netsize Mobile Business and Entertainment, 2004, The Netsize Guide: 2004 Edition, Paris, p40-42.
76
Netsize Mobile Business and Entertainment, 2004, The Netsize Guide: 2004 Edition, Paris, p40-42.
Box 8.4
PRINTING MOBILE PHOTO MESSAGES
Optus Mobile and FUJIFILM have launched a new printing service for mobile photo
messages. The service makes it possible for Optus Mobile customers to send photos
from their camera handset via MMS to the Optus Zoo website, where an online order can
be placed with FUJIFILM.
Prints are delivered to a customer’s nominated address or nearest FUJIFILM store within
a week.
Source: Information from www.optus.com.au
4G technologies
4G, or ‘the fourth generation’ of wireless communications, are expected to start in

2005.
Unlike 3G, which refers to a specific mobile standard and allows the transfer of
data at a minimum accepted speed, 4G refers to a collection of technologies and
standards that will find their way into a range of new computing and
communications systems. 4G will allow mobile users to connect to the internet and
one another through a variety of devices and standards anytime, anywhere, and at a
wide range of speeds, from narrowband to broadband.
The North Asia mobile market, the most advanced in the world, is focussing a lot
77
of attention on 4G research and development.
8.3 New and emerging applications
Mobile phone services can be broken down into to two main categories:
∑ consumer/personal applications; and

∑ business applications.
Wireless technologies — personal application
Personal applications of wireless technologies include customising, chat and

discussion, news and information, and entertainment. During 2003-04, these
technologies have seen rapid development including:
∑ the launch of 3G mobile services; and
∑ the availability of affordable handsets featuring various multimedia services.

It is expected that quizzes, images, chat, multimedia content, and interactive
applications will continue to penetrate the market during 2004 (see box 8.5). The
availability of MMS and WAP technology will boost the use of these services.
77
The information were obtained from the introduction to the publication North Asia’s 4G Frontier: The
Coming of Age for Asia’s Telecom Industry, published in June 2003, accessed 27 May 2004, Pyramid
Research, www.pyramidresearch.com/info/rpts/may03_4g.asp, cited.
Box 8.5
STRATEGIC PARTNERSHIPS FOR I-MODE
NTT DoCoMo, Inc., Japan's leading mobile communications provider, and Telstra
Corporation Limited formed an exclusive strategic partnership under which Telstra will
launch i-mode® in Australia. Under the agreement, Telstra can offer the i-mode service
with DoCoMo providing its brand, technology and patents.
i-mode is a mobile internet service that provides subscribers with access to rich content,
e-mail, games and other applications and services through their mobile handsets. i-mode
is leading the world in mobile internet innovation with over 43 million subscribers and
80,000 content sites in nine different countries.
The i-mode service is provided on an open platform based on de facto Internet standards
and in other markets has proved itself to be attractive to content and application
providers, stimulating a vibrant content market with thousands of content sites for
customers to choose from.
A partnership between Telstra and Turner Broadcasting will give i-mode® subscribers
access to the latest CNN news and Cartoon Network content on their mobile phones.
Under the agreement, Turner Broadcasting will offer world and regional breaking news,
sports news and scores, weather and entertainment news from CNN, plus some of the
highly acclaimed, quality programming content that has turned Cartoon Network into a
subscriber TV favourite.
Source: Telstra 2004 Media Release, NTT DoCoMo and Telstra Commence Strategic Partnership for i-
mode in Australia, June 2004 and Telstra 2004, Media Release, Telstra signs with Turner to offer CNN
news and Cartoon Network on I-mode, August 2004.
An increase in the use of MMS and WAP will also lead to an improvement in
78
entertainment applications that will soon feature interactive functions like:
∑ multi-player games, allowing mobile users to play together and participate in

real-time games;
∑ online colour chat sessions, allowing mobile users to view an image of the
person they are talking to;
∑ Java portals, which enables Java applet on mobile phones and allowing users
to download content via SMS or WAP;
∑ location based services (LBS), enabling end-users to receive information

relevant to their locations, eg street maps; and
∑ entertainment guides for restaurants and movies (see box 8.6).
Box 8.6
MOBILE MOVIES GUIDES
‘yourMovies on 3’ is the first fully integrated mobile movie guide in Australia that will
enable customers unlimited use of a purpose built yourMovies.com.au website on their
mobile.
‘yourMovies on 3’ allows 3 customers to watch the latest high quality movie trailers, read
independent movie reviews and movie news, and even look-up session times for their
favourite cinema, all at a touch of a button on their 3 mobile.
Customers can search ‘yourMovies on 3’ by their favourite cinema, a specific movie
review or trailer, or by a specific session time. Alternatively, customers can scan the Box
Office Top 10 or simply browse the latest release titles. This service will also remember
users’ favourite cinemas to save time when they next log on to ‘yourMovies on 3’
Source: Hutchison Media Release, 2 July 2004
78
Netsize Mobile Business and Entertainment, 2004, The Netsize Guide: 2004 Edition, Paris, p.18-19.
In a multitude of ways, day-to-day living could also be changed through the

development of wireless technologies. For example, a recent trial of wireless
technology involved customers using their mobile phones to pay for parking.
During the trial customers parking in specific locations could select the amount of
time they wished to park, pay for the parking using traditional methods (such as
smart card or coin options) or via their mobile phone. To pay using the mobile
phone the customer called a 1900 number for a cost of 55 cents. As part of the
service an SMS was sent to the customer’s phone ten minutes before the meter was
79
due to expire.
Vodafone Australia subscribers are now able to receive ninemsn Mobile Hotmail
via text messaging. Furthermore, those subscribers who are both a Commonwealth
Bank and Vodafone customer can use MobileBank. MobileBank is compatible
with most popular handsets, and allows you to check your balances on linked
statement accounts, passbooks, credit cards, home loans, investment home loans
and term deposits; transfer funds between your linked Commonwealth Bank
accounts, pay bills with BPAY® and read and store transaction receipts.
Wireless technologies — business applications
Not only does wireless technology enable business customers to access their
company’s local area network on their laptops while out of the office, this
technology extends to mobile devices, made possible through 3G networks.
The concept of the mobile office is now drawing close to reality with the benefit of
3G technology and single mobile devices which play the role of PDA, email, video
and digital camera, and business document reader in one mobile phone.
Mobile workers are now able to:
∑ Access their emails while away from their office without needing a web-
browsing function.
∑ Listen to their emails on their mobile device with text-to-voice conversion
software.
∑ Open and edit business documents on their mobile phone using 3’s advanced
business messaging.
The anticipated benefits to businesses of the new wireless technologies include:
∑ business efficiencies and enhanced productivity that allow mobile employees

to take their office on the road;
∑ ‘always on’ connectivity, eliminating repetitive and time consuming
reconnections (see box 8.7);
∑ cost savings through data volume charging rather than time based charging;
∑ value add business communication services such as TXT from the laptop; and
∑ impetus to develop new applications and products, such as Loc3 (see box 2.8).
79
Telstra Media Release, Wireless/Work Issue 6, ‘m-Commerce heralds cashless transactions’.
Box 8.7
PUSH TO TALK MOBILE PHONES
Push To Talk involves an innovative new mobile technology enabling mobile phones to
be used like 'walkie-talkies'.
Instead of dialling a number to start a conversation, you select the person or preset
group of people you want to contact, hold down a button and speak into the handset. The
recipient/s, who are also Telstra Push To Talk customers, can hear your voice via the
loud speaker on their compatible handset.
The push to talk service has been trialled with business customers such as Becton,
Accor Asia Pacific, Mornington Peninsula Shire Council, and Alpine Shire Council and
the feedback received was positive, particularly its ability to replace multiple
communications devices with a single handset.
The service is expected to be used by:
∑ small and large businesses, particularly businesses operating in the transport,
construction, security and courier sectors or any other organisation that uses two way
radios to communicate;
∑ government agencies and local councils; and
∑ consumers wanting to contact groups of people at the same time.
One of the major benefits reported during the trial was the ability to communicate with all
staff either within a specific site or the entire group at one time regardless of their
location. The communication channel stays open continuously, yet users only pay for the
time they hold down the button to speak, making it cost effective for short bursts of
conversation.
Source: Telstra 2004 Telstra launches Push to Talk mobile phone, Media Release, 22 June 2004.
The ‘wireless’ ATM is expected to save Australian businesses $35 million annually
(see box 8.8).
Box 8.8
WORLDS FIRST WIRELESS ATM GOES LIVE IN AUSTRALIA
In a world first, Australian ATM transaction processor, EFTEX is set to roll out ‘wireless’
ATMs using Vodafone’s GPRS network that will save ATM owners up to 50 per cent.
EFTEX has been running trials up until March 2004 and will begin rolling out the new
service to more than 300 ATMs by the end of 2004. Traditionally, financial institutions
operate their ATMs using a permanently connected leased line because it provides
relatively fast, secure and reliable transactions — but leased lines are expensive. The
alternative, favoured by many independent (non bank) ATM deployers are ‘dial up’ ATMs
that dial each time a transaction is attempted. While cheaper to operate, ‘dial up’ ATMs
are generally slow and concerns have been raised regarding reliability and security.
By moving ATMs from leased line to wireless technology it is estimated the ATM industry
(particularly the major Australian banks, building societies and credit unions) will save up
to $35 million dollars annually. Delivering a better performance at a fraction of the current
cost is obviously a huge boost for ATM owners, not only in Australia but also across the
world.
Source: Information provided by Vodafone
Business applications of wireless technologies include, but are not limited to,
marketing, business to employee solutions and Telematic applications (machine-to-
machine messaging). Some mobile phones also feature basic PDA features, e.g.
calendar, complete address book, tasks, to-do-list, notes, etc. This allows
professionals to access corporate applications online, for example their e-mail
accounts.

A real life example of the application of wireless technologies is evident in the

80
approach adopted by some businesses that have mobile sales forces. Wireless
technology can provide real-time access to corporate information that is critical for
mobile sales forces. Orders can be logged and turned around quicker, stock levels
can be checked remotely, and customer databases can be accessed anytime for
downloads or updates.
A Sydney based medical and safety products distributor has recently equipped its
sales team with a GPRS-based wireless product in an effort to reduce operating
81
costs, improve customer service and increase productivity. The technology links
the sales team to office operations, giving it round-the-clock access to real-time
data. This means that rather than faxing orders through at the end of each day the
sales force can log an order immediately, collect delivery details, obtain credit-card
payment information and customer signature authorisation all electronically and all
while still at the customer site.
The system speeds up the entire invoicing process and reduces the amount of
paperwork. The business expects to increase overall productivity by up to 15 per
cent and improve customer service.
Vodafone Mobile Connect provides mobile customers with secure GPRS access
through their laptop to internet, email, company networks and business
applications.
8.4 Industry led initiatives
New technologies also bring new challenges to the industry and society. Some of
the challenges being faced by the Australian mobile telecommunications industry
include lost or stolen mobile phones, recycling of mobile phones and the social
impact of mobile phones on the community. This section looks at the initiatives
launched by the mobile industry to meet these challenges.
Lost and stolen phones
More than 100 000 mobile phones go missing in Australia every year, with almost
half of them stolen from parked cars. In 2002 AMTA announced the ‘Mind Your
Mobile’ campaign, which is a joint initiative of the industry and law enforcement
agencies.
The ‘Mind Your Mobile’ campaign has three key elements:
1. industry-wide handset blocking — preventing stolen phones from being used

on any GSM network in Australia, since September 2003;
2. an education campaign — increase consumer awareness of the practical steps

users can take to prevent theft; and
3. government involvement — makes tampering with a mobile phone's serial
number, or using a tampered phone, a criminal offence.
80
The Australian, Tuesday, July 1, 2003 ‘Quest for wireless wonders’ page 27.
81
GPRS (General Packet Radio Service) is a high speed wireless data network. GPRS is a data network
that allows users to access internet services on the move. Like the Internet, it uses packet-switched
techniques rather than the circuit-switched techniques traditionally used in voice telephony networks.
The types of services available over GPRS include wireless email, PXT™, Video PXT™, access to web
content, instant messaging and specialised business applications.
Over the eleven-month period from September 2003 to August 2004, nearly
165 000 international mobile equipment identity (IMEI) blocking requests have
been actioned, i.e. the industry blocked between 17 500 and 18 000 handsets per
month. Of these blocks, 20 per cent have been unblocked.
The Australian Government has changed the legislation to address the following
offences:
1. ‘re-birthing’ of stolen mobile phones – it is an offence to illegally modify a

mobile phone's IMEI number, an ID number unique to each mobile phone;
and
2. ‘cloning’ of mobile phone SIM cards.
Mobile phone recycling
There have been some environmental concerns surrounding the use and disposal of
mobile telecommunications products and infrastructure. However, these products
and infrastructure are of fundamental interest to the mobile telecommunications
industry.
In 1999 AMTA initiated the Mobile Phone Industry Recycling Program (MPIRP)
in response to concerns about the potential environmental harm caused by the
disposal of mobile telephones and batteries into landfills. AMTA and its members
have invested considerable resources into the development of this world leading
program designed to recover, recycle and re-use mobile phone components.
Mobile handset manufacturers ceased the manufacture of NiCad battery technology

in 1996 by developing alternative power units such as NiMH and L-Ion batteries.
Since 1999, over 250 tonnes of mobile phone handsets, batteries and accessories
have been collected for recycling in Australia. Over this period a total of 61 tonnes
of batteries were collected, of which 32.5 tonnes were NiCad batteries. If it was not
for AMTA’s recycling initiative, the bulk of these NiCads may well have been
dumped in landfill. Over the six-month period from January to June 2004, the
recycling program collected over 400 000 handsets and 900 000 mobile phone
batteries for recycling.
The MPIRP is a voluntary scheme where the participating industry members

provide the necessary funding by paying a levy on each handset sold into the
Australian market. The non-profit recycling initiative is increasing its presence in
the community with over 1 700 retail stores and repair centres acting as collection
points Australia wide. Participating members in the program include the four
carriers, two service providers and twelve handset manufacturers.
Student guide for acceptable mobile phone use
AMTA has produced a guide for an acceptable use policy for mobile phones by
students. The school policy guide ensures mobile etiquette issues are addressed
seriously and responsibly. The school guide has received positive feedback from
schools in Australia and overseas.
Research on the social impact of mobile telecommunications
AMTA has worked with the Australian Social Science Academy (ASSA) to
produce a framework for an ongoing research program of three years or more into
the social impact of mobile telephony.

The extensive use of mobile devices in Australian communities and enterprises has
dramatically altered lifestyle, communication patterns and productivity, yet there is
no systematic collection of quantitative and qualitative information.
Many issues facing the mobile telecommunications industry are often dealt with in
isolation without an understanding of the major benefits that mobiles have brought
to society as well as many areas of business.
Nowhere in the world has such research been undertaken at peak industry level,
accordingly the project aims to demonstrate to stakeholders that this is a socially
responsible industry. The project discussion paper examines areas for future
research opportunities. It groups issues into four thematic sections:
∑ the structure of social groups and the impact of the mobile phone;
∑ work, home and leisure;
∑ social innovations in a digital context; and
∑ patterns of use of the mobile phone.

Appendix A
Project Working Group members
The members of AMTA Working Group overseeing this project are listed in table
A.1.
Table A.1
PROJECT WORKING GROUP MEMBERS
Name Position Representing

Graham Chalker CEO AMTA
Brian Currie Regulatory Affairs Manager Hutchison
Michelle Curtis Manager Govt & Community Relations Optus
(a)
Stephanie Huf General Manager, Public Affairs Ericsson
Louise Ingram Corporate Communications Manager Nokia
(b)
Paul Johnson Senior Policy Analyst Vodafone
(a)
Fran Lefroy General Manager, Public Affairs Ericsson
Fiona McAlister Research Officer AMTA
John Mills Manager — Investor Communications Telstra
(b)
Ian Wilson Policy Analyst Vodafone
Notes (a) Fran Lefroy was the Ericsson representative on the Working Group from May until August
2004. Stephanie Huf was the Ericcson representative on the working group from July until September
2004. (b) Ian Wilson was the Vodafone representative on the working group from May until August
2004. Paul Johnson was the Vodafone representative on the working group from August until
September 2004.

Appendix B
Request for information from industry
Part of this project involved the collection of information from selected businesses
in various sectors in the mobile telecommunications industry. The purpose of the
information collection was to supplement publicly available information. In
particular, it was hoped that the information collection process would assist in
gaining a more detailed understanding of the size and nature of activities that occur
in the various sectors of the industry and to provide up-to-date information.
The process of collecting information from industry involved sending a survey to

22 industry participants with a request that they complete and return the survey to
The Allen Consulting Group. The survey requested information on the following
topics:
∑ firm contact details and business activities;

∑ financial information;
∑ employment;
∑ industry capital expenditure; and

∑ future directions and issues.
In the course of the project ten completed responses were received. They included
information on businesses operating in the following sectors: end-user hardware,
mobile network carriers, reseller, content aggregator, retailer, virtual mobile
network operator and mobile network vendor.

Appendix C
Organisations involved with the mobile
telecommunications industry in Australia
Table C.1 lists those government departments, industry organisations and

consumer/user groups involved with the Australian mobile telecommunications
industry.
Table C.1
ORGANISATIONS INVOLVED IN THE MOBILE TELECOMMUNICATIONS INDUSTRY
Organisation Activities and role
Government departments
The Australian Communications The Australian Communications Authority (ACA) is
Authority (ACA) responsible for regulating telecommunications and
radio-communications, including promoting
industry self-regulation and managing the
radiofrequency spectrum. The ACA also has
significant consumer protection responsibilities.
The ACA was established under the Australian
Communications Authority Act 1997, and exercises
powers under the Telecommunications Act 1997, the
Radiocommunications Act 1992, and other related
legislation.
The Department of The Department provides policy advice and
Communications, Information, program support to the Australian Government on
Technology and the Arts (DCITA) arts, information technology, communications and
sport portfolio issues.
The Minister for Communications, Information,
Technology and the Arts is responsible for the
development of Australia's communications,
information technology and cultural industries.
The Australian Competition and The ACCC's Telecommunications group has
Consumer Commission (ACCC) prime responsibility for administering the
Commission's functions for competition and
economic regulation of telecommunications and
forms part of both the ACCC's Regulatory Affairs
Division (in terms of its regulatory pricing and
access work) and its Compliance Division (in
terms of its competition enforcement work).
The Australian Radiation ARPANSA, as part of the Health and Ageing
Protection and Nuclear Safety Portfolio, is a Federal Government agency
Agency (ARPANSA) charged with responsibility for protecting the
health and safety of people and the environment
from the harmful effects of ionising and non-
ionising radiation (including radio frequency
emissions)

Industry organisations
Telecommunication Industry Established in 1993 by the Australian Federal
Ombudsman (TIO) Government, the TIO is funded by industry but is
independent of industry, government and
consumer organisations. The TIO is authorised to
investigate complaints about the provision or
supply of telephone or Internet services. The role
and powers of the TIO are included in the
Telecommunications (Consumer Protection and
Service Standards) Act 1999.
Australian Communications ACIF is an industry owned, resourced and
Industry Forum (ACIF) operated company established by the
telecommunications industry in 1997 to implement
and manage communication self-regulation within
Australia. ACIF's role is to develop and administer
technical and operating arrangements that
promote both the long-term interests of end-users
and the efficiency and international
competitiveness of the Australian communications
industry. This primarily involves:
∑ developing Standards and Codes to support
competition and protect consumers; driving
widespread compliance; and
∑ facilitating/coordinating the cooperative
resolution of strategic and operational industry
issues.
Information Technology & IT&TITAB represents Australia's communication &
Telecommunications Industry information technology industries at a national
Training Advisory Body advisory level for Vocational Education & Training
(IT&TITAB) (VET).
Telephone Information Services TISSC is an independent regulatory body that sets
Standards Council (TISSC) standards for the message content and
advertising of any Australian telecommunication
service with the prefix 190, in the form of a Code
of Practice. Service providers of 190 numbers
must abide by this Code of Practice, which is
developed by TISSC
Consumer/user groups
Australian Telecommunication Formed in 1981, ATUG is a not-for-profit
users Group Ltd (ATUG) membership-based organisation of Australian
telecommunications users.
ATUG's focus is on delivering practical services
for its members, leveraging their experience to
identify new polices which can improve the
telecommunications regime. ATUG also helps
members share their experiences so that all
ATUG members get better value for their
telecommunications dollar.
The Small Enterprise SETEL is a national consumer association
Telecommunications Centre Ltd advancing the telecommunications and e-
(SETEL) commerce interests of Australian small business.
Representation of small business consumers in
relation to telecommunications and e-commerce
issues in national forums by SETEL is supported
by the Commonwealth of Australia through the
'Grants to Fund Telecommunications Consumer
Representation' program of the DCITA.

Consumers’ Telecommunications Telecommunications Network (CTN) is a national

Network (CTN) coalition of consumer and community
organisations that represents community interests
in the national policy arena on telecommunications
issues. CTN is an important voice promoting
better access, quality of service and affordability of
telecommunications services for residential
consumers. CTN's members include national and
state organisations representing consumers from
non-English speaking backgrounds, deaf
consumers, indigenous people, low income
consumers, people with disabilities, pensioners
and superannuants, rural and remote consumers,
women and consumers in general.
Source: Information provided by AMTA

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AMTA Mobile Industry Report 2004

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Australian Mobile Telecommunications

Research commissioned by AMTA

The Allen Consulting Group Pty Ltd

© The Allen Consulting Group 2004

The Allen Consulting Group ii

A ten member Working Group of industry representatives provided guidance and

In addition, the report includes information that individual mobile

The Allen Consulting Group iii

This report was commissioned by the Australian Mobile Telecommunications

AMTA is the peak industry body representing Australia's mobile

The Allen Consulting Group is a strategic consulting firm specialising in policy,

The Allen Consulting Group iv

Executive summary vii

The Allen Consulting Group v

The Allen Consulting Group vi

Australia’s mobile telecommunications industry has been a strong performer over

To better understand the economic significance of the mobile telecommunications

The mobile telecommunications industry

The mobile telecommunications industry is made up of three major sectors.

Carriage service providers (CSPs) are suppliers of telecommunication services to

Economic significance of mobile telecommunications

– Over 34 500 people worked in the industry (on a full-time, part-time or

– In 2002-03, the mobile telecommunications industry paid around

∑ Capital expenditure by the industry has been substantial.

– In 2003-04, the industry continued its capital expenditures to support new

∑ Revenue in the mobile telecommunications industry exceeds $8 billion

– In 2002-03, mobile revenue represented 28 per cent of total

Expectations of continuing industry development

The measures of economic significance of the mobile telecommunications industry

Note: F indicates forecasted values.

Source: Australian Communications Authority, 2003, Telecommunications Performance Report 2002-

The convergence of the internet and mobile communications technologies introduce

The Allen Consulting Group xi

The mobile telecommunications industry anticipates that quizzes, images, chat,

Data on measures such as IGP, employment, and payments to government

ABS Australian Bureau of Statistics

The Allen Consulting Group xiii

1.1 The project

Mobile telecommunications have become a part of every-day life across our

The Australian Mobile Telecommunications Association (AMTA) engaged The

The report is a valuable tool for industry in promoting an increased level of

1.2 The project approach

The project was conducted from May to July 2004. It involved:

∑ desk-based research to gather relevant national and international information

The Allen Consulting Group 1

2.1 A short history

Australia’s first mobile phone system commenced operation in Melbourne in

A description of the various network technologies is in box 2.1.

Source: The Allen Consulting Group

The Allen Consulting Group 2

In 1998, plans to introduce a new 2G network based on Code Division Multiple

∑ Optus has announced a Heads of Agreement with Vodafone to build and

Optus and Vodafone

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2.2 Australian mobile telecommunications: current industry structure

The mobile telecommunications industry is one of the fastest growing

Carriage Service Providers

Mobile Network Carriers

Recharge of Bill payment

Source: The Allen Consulting Group