On the House: Costs must drop!

The Australian Competition and Consumer Commission (ACCC) is set to decide whether to turn its draft ruling on ending Telstra's 96-year monopoly on the $5 billion local call market into a firm directionThe ACCC's draft ruling, released just before Christmas, came only after IT & Communications Minister Senator Richard Alston had repeatedly urged the government watchdog to use the stronger powers it had been granted at the start of last year.

Perhaps the august body was too preoccupied with hitting wharfies with punitive damages after the ill-fated waterfront dispute to react any sooner.

If the ACCC now goes ahead to ratify the ruling, Australians can hope to pay significantly less for local phone calls -- and that can only be good for our adoption of e-commerce. The effect will be to allow Optus Communications and other smaller telcos to provide local calls and other key services.

ACCC chairman Professor Alan Fels says the move will also stimulate introduction of high-speed data services, fast Internet access and other interactive services.

Let us hope so. Despite Telstra's repeated denials, and its claims that comparisons between itself and other telcos overseas are odious because of the way they compare apples with oranges, there is growing evidence Telstra's local call rates are right up there with the highest in the world.

Indeed consultancy NUS International claims the price of local calls in Australia, at an average 23c a call, is the highest in the world. The ACCC draft ruling came just a fortnight after Cable and Wireless chief executive Dick Brown slammed Telstra's local loop pricing structure, branding it anti-competitive and claiming it was undermining Australia's ability to compete into the next century.

With Fels in the audience, Brown told an Australia-Israel Chamber of Commerce luncheon in Canberra in November that even taking geographical comparisons into account, there was a compelling case that Australia had the highest interconnect rates in the world.

He said the fees Telstra charged Cable & Wireless Optus to interconnect with the Telstra network equated to more than three cents a minute or more than three times higher than any other major telecommunications company he could think of elsewhere in the world. That meant Telstra was making a 250 per cent margin on the deal.

"That's monopoly at its best," he said.

"The debate should centre soon on how we reduce those interconnection fees, but unfortunately I'm advised by my people the debate is going to be on how much higher they should be."

Perhaps those comments hit home. In a surprise move announcing the draft ruling two weeks later, Fels criticised the pace of reform in the local call market despite deregulation in July the precious year, and said he envisaged the decision would speed that pace.

But Telstra is unhappy with the move, and has reportedly said it is unconvinced of the benefits for consumers.

Now the Australian Consumers Association fears Telstra might hike up the price of line rentals to compensate for the cost of cheaper local calls.

That would be regrettable, and should, if Alston is serious about giving Australia a competitive edge into the new millennium, prompt him to find new ways to force competition on Telstra.

Sue Bushell is a Canberra-based political correspondent