Are state governments inflating your mobile bill?

Australia's telcos are fighting back against fees imposed by state governments to have telecommunications towers and equipment located on Crown land.

The telcos argue that high land access rents are inflating the cost of their networks, which is being passed on to end users of mobile and fixed wireless services.

Telstra alone predicts its underlying cost base in New South Wales could rise by a minimum of "nearly 14 percent" should the state government agree to proposals currently under review.

But the debate is not confined to New South Wales.

Telstra has initated a landmark legal challenge to similar land regulations and the lease fee structure for telecommunications infrastructure owners in Queensland. The case returns to court next week.

Adelaide's MIMP Wireless is meanwhile involved in a stoush with the South Australian government over land access fees to have microwave equipment co-located on a state-owned tower.

And a wide spectrum of carriers, including Telstra and NBN Co, are fighting a proposed new fee structure for towers on Crown land in NSW. The NSW Independent Pricing & Regulatory Tribunal (IPART) has completed its review of "rental arrangements for communications towers on Crown Lands" and passed a report to the state government on July 24, 2013.

There is no current guidance on when the report might be made public. But, as in Queensland, the regime could be ripe for legal challenge.

"[The Queensland] proceeding deals directly with an exercise of power under a law of a state, in relation to the setting of rents for telecommunications users, that Telstra says results in discrimination," Telstra's general manager of site acquisition Bob Joice said in June (pdf).

"A favourable result for Telstra in the proceeding will have significant consequences for the validity of the proposed NSW Crown land rental regime.

"...It would not be appropriate for any revised pricing regime to be recommended or implemented before a determination by the Federal Court [in Queensland]".

Fair price

The common thread in these challenges to state land management rules is that the telcos don't mind paying some sort of fee; they simply object to the current asking price and the way it has been calculated.

In Queensland, Telstra is objecting to the way telcos and data carriers pay substantially more than "government business units and other commercial" firms for towers on Crown land.

Fees for the operator of a tower range from $8249 to $24,752 for telcos, compared to $3849 to $11,550 for other commercial users (aside from broadcasters - pdf)

Telstra argues it should be charged the same fees as "other commercial and government entities".

The telco wants the Federal Court to rule that Queensland "discriminates" against carriers (pursuant to the federal Telecommunications Act, Schedule 3, Clause 44), which would infer that the state's high rent rules for telcos would be unlawful.

In NSW, IPART is proposing to scrap a similar construct that currently has telcos paying between $8810 and $26,432 per tower they operate on Crown land.

However, it is also proposing to review the zoning categorisations of existing towers, hiking rents in metropolitan areas — much to the dismay of telcos.

The proposed rates for 2013/14 "are generally more applicable to high quality, air-conditioned commercial office accommodation, not vacant land," Joice said.

Telstra argues the existing NSW regime is persuading carriers against putting towers on Crown land, and proposed changes will entrench that avoidance.

Telstra has only put up 16 new towers on state land since 2005 to avoid the rents, and believes some of the draft changes — if finalised — will see more carriers do the same, or fall back on federal laws to get around the state-based ones.

It proposes a model to "reset" rents based on land values.

The dispute involving the South Australian government is slightly different, in that it involves a company — MIMP Connecting Solutions — that is co-locating microwave equipment on a tower that is owned by the state and sits on Crown land.

MIMP CEO Allan Aitchison told iTnews the company paid $17,000 to the tower owner, the state's Government Radio Network, only to be billed another $4500 for land access by the Department of Environment, Water and Natural Resources (DEWNR).

Land management agencies charge both the tower owner and carriers that co-locate equipment on the tower. "Co-users", such as MIMP, pay 50 percent of the land access fees charged to the tower owner.

Aitchison disputes the validity of this construct, particularly when the tower is government-owned.

"I'm not paying anything until they come up with a reasonable fee," he said.

"I don't mind paying a fee, but if I'm already paying $17,000 to the Government, what am I paying another $4500 for?"

Aitchison is not alone in asking such questions. Telstra's Joice also notes "that when co-users locate on a [tower] site, the land management agency receives a further lease or license fee, that is directly attributable to the investment made by the primary user [the owner of the tower] — as distinct from any value added by the land management agency".

In other words, towers become popular places for co-locating equipment through no action or investment by the land management agency, yet they reap the benefits of the site's popularity by charging the tower owner and everyone on it rental fees.

Read on for the telco's suggested alternatives. Is it possible to simply fly under the radar of state government rents?

Under the radar

MIMP's dispute with the South Australian government is now over a year old and shows no obvious sign of resolution.

Aitchison believes MIMP is a "test case" for charging high rents to equipment co-hosts in the state, and alleges that other telcos with equipment co-located on government infrastructure on Crown land aren't being pursued for similar fees.

A DEWNR spokesperson told iTnews that it has forged "about 120 license agreements" in the state — "80 percent of which are with tower owners and 20 percent with co-users."

"All companies that we are aware of who co-host are licensed and charged a standard fee in line with our policy," the spokesperson said.

"It is an obligation under a lead licence for the owner [of the tower] to direct those potential co-hosts to DEWNR to apply for a license to access and occupy."

Aitchison, however, alleges that co-hosts fly under the radar of the Department and its land access rents.

"I could put a dish on a tower and not tell DENWR and how would they know?" he said. "That's what is happening in South Australia right now."

New models of engagement

Aitchison wants South Australia's land management agencies to ditch the model of separately charging land access fees to the tower owner and each co-host on the tower.

He wants agencies to simply charge the tower owner a fee, and let them pass on the costs.

The model is known as a head license arrangement, but it does not have widespread support.

In NSW, IPART is touting a similar scheme to have land management agencies only charge rent to the tower owner — leaving the owner to recoup costs from co-hosts, just as Aitchison proposes.

If approved, it would only apply to "high value" tower sites on Crown land, and agencies could resort to the old method of just charging everyone rent, not just the tower owner, if they chose.

Telstra's Joice believes the model won't float, not least because the tower owner doesn't want the responsibility, nor the increase in rent to cover other users of the tower infrastructure.

"Without knowledge of the number of co-users at a site, no primary user [tower owner] would agree to a head license and an inflated rent," he said.

"Further, there is no guarantee that co-users would agree to having the license costs passed down, and if they did not, the primary user would be left paying an excessive rental amount with no means of recovery".

In MIMP's case, DEWNR sees no pressure to evaluate such a charging model.

"DEWNR charges a licence fee for access and authority to occupy Crown land for communications purposes," its spokesperson said.

"If the primary licensee or tower owner also charges the co-user a fee, this has nothing to do with the agreement with DEWNR."

Telstra bunkers down

Telstra is due back in court on September 10 for an interlocutory hearing before Justice Darryl Rangiah.

The hearing is understood to relate to demands for payment of rental fees while the case is in train.

"The State of Queensland has issued an interlocutory application seeking declaration that the current prescribed rent be paid pending determination of the proceeding, which has not yet been heard by the Court," a Telstra spokesman told iTnews.

All carriers are likely to be watching the Federal Court in Queensland for clarity on land access rents.

"Telstra is the only carrier party to the litigation, although it is anticipated that the outcome may affect other carriers," the spokesman said.