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Australians face AU$3 billion 'price premium' for Telstra services

A new Vodafone-commissioned report has found Australians are paying a "substantial price premium" for Telstra's services, amounting to $20 per month for fixed-line services and $9 per month for mobile.

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A new report says Australians pay a significant "price premium" for Telstra's services. William West/Getty Images

Vodafone has fired a salvo in the battle between Australian telcos, commissioning a new report that claims high prices are leaving Telstra customers across Australia AU$3.1 billion worse off.

The report on "Australia's telecommunications market structure," compiled by the Centre for International Economics, breaks down the average prices consumers pay for fixed line and mobile services through major telcos. According to the CIE, "households pay a substantial price premium for the incumbent, Telstra, over other operators."

When comparing the elements that go into plan pricing -- such as included call value, data allowances and excess data charges -- the CIE found Telstra was priced well above the average of its competitors. The report states that for fixed line services Telstra customers pay $20 more per month (compared average prices across the likes of Optus, TPG, iiNet and Dodo) while mobile customers pay $9 per month more when compared to competitors.

The report also added that, "if all other measureable aspects of the service are held constant, consumers pay 50 percent more for data on a Telstra service than with another carrier [and] a $13.3 additional monthly premium for obtaining a phone package with Telstra relative to other carriers."

According to the report, Telstra's dominance is partly down to its history as the sole 'universal service provider' -- a term used to describe the telco's legacy responsibility in ensuring equitable telecommunications access to all Australians. The CIE claims that this "historical and continued subsidisation of Telstra" has helped the telco carve out a powerful position.

"Telstra has not used these subsidies to provide lower prices for Australian consumers. Instead, these subsidies have allowed Telstra to entrench its market dominance," the report said.

The CIE report also touches on telco competition outside Australia's big cities, with the research pointing to the lower availability of spectrum in regional areas, meaning "regional consumers are heavily affected" by a lack of competition.

While the Vodafone-commissioned report puts the spotlight on Telstra and the "price premium" its customers pay, it's not the first time the CIE has released research on the Australian telco market.

In a 2014 report prepared for the Federal Department of Communications, the CIE found that while "despite Telstra's substantial market share, there are sufficient constraints around Telstra pricing in the retail component of the delivery of telecommunications services."

The CIE wrote that although the infrastructure used to provide fixed line services is "natural monopoly," other providers are still able to access this infrastructure to provide services and "there are no economic barriers" to retailing these services.

For its part, Telstra responded to the Vodafone-commissioned CIE report by saying its market leadership is down to a good offering.

"This simply confirms that over several years Telstra has been attracting more customers because we offer the things they value most, better network coverage and more innovative products and services," a Telstra spokesperson said in a statement.

"The experience of the Australian market makes it clear, the companies willing to invest in their network are able to attract more customers and drive increased consumption, while under investment results in the opposite."