ACCC rejects Telstra push for wholesale broadband price hike

In a draft decision the Australian Competition and Consumer Commission has rejected Telstra's push to increase the prices it charges other telcos that deliver services over its copper network.

In October, Telstra has told the Australian and Competition and Consumer Commission that it should be allowed to raise its wholesale charges for fixed line services by 7.2 per cent.

However, in a draft decision issued this morning the regulator said it was instead eyeing a one-off 0.7 per cent drop in pricing for the seven access services regulated by the ACCC – ULLS, LSS, WLR, LCS, FOAS and FTAS and wholesale ADSL [see box below].

If the ACCC pushes ahead with the decision, it will cover the period from 1 July this year until 30 June 2019.

"The draft decision on prices ensures nominal price stability in the wholesale market for telecommunications services and will promote competition in the transition to the NBN," ACCC head Rod Sims said in a statement.

"Given current inflation however, this uniform price fall means the prices access seekers pay will decline in real terms over the next four years by around 12 per cent," the ACCC chairperson said.

"There are two conceptual underpinnings to this decision. First, Telstra will no longer bear all the costs of declining consumer demand for fixed line services. Second, however, access seekers will only pay for the assets needed to supply them, and not for any under-utilisation caused by the NBN."

The draft decision states it is based "on information received from Telstra over a long period and up to 30 January 2015".

"Since then Telstra has submitted additional information, including revised forecasts. Moreover, the ACCC is making its draft decision without some information it needs to form a view on the prudent and efficient costs of supplying the declared fixed line services," the document states.

The ACCC is assessing further information provided by the telco. It's also considering cost allocations proposed by Telstra and whether charges should rise as a result of declining demand as more services are migrated to the National Broadband Network.

"These are draft prices only and the ACCC has made it clear they are still processing a lot of the detail and supporting data," said Telstra's executive director, regulatory affairs, Jane van Beelen.

"The starting point for this decision should be the ACCC’s own fixed pricing principles that the regulatory asset base is locked in and we should have the opportunity to recover our actual costs fairly across all users of the copper network.

"We are still reviewing the document but it is disappointing the ACCC is proposing to remove infrastructure costs from the asset base as a result of the NBN, which will prevent recovery of costs fairly across all users of our network. NBN Co has not compensated Telstra for these costs.

"The ACCC has acknowledged they still have a lot of work to do to finalise the FAD. We will continue to engage fully with the ACCC to demonstrate our cost forecasts are robust and to achieve an outcome that allocates network costs across both Telstra Wholesale customers and Telstra Retail."

"As most of Telstra’s network costs are fixed, it is inevitable that if the number of people who use the network declined the cost per user would rise," the telco argued in a submission last year to the ACCC inquiry.

"The likely impact of the NBN transition on the demand for and costs of operating the fixed line network, as well as the impact on the allocation of these costs among different users of the network, will mean that current regulated fixed line service prices will have to increase – in nominal terms – to provide Telstra with a reasonable opportunity to recover its costs over the regulatory period."

As a result, the telco should be allowed to raise wholesale prices for the fixed line services used to deliver voice and Internet services by 7.2 per cent across the board, Telstra argued.

The competition watchdog has called for submissions on its draft decision by 30 April 2015.

Declared service: A service that the ACCC regulates under Part XIC of the Competition and Consumer Act 2010. Once declared, a service provider must supply the service to other parties in accordance with the standard access obligations and the terms and conditions set in the final access determination.

FOAS: Fixed Originating Access Service. The declared service replacing the previously declared PSTN (Public Switched Telephone Network) OA service. Enables a telephone call to be connected from the caller to a point of interconnection with another network.

FTAS Fixed Terminating Access Service. The declared service replacing the previously declared PSTN TA service. Enables a telephone call to be carried from the point of interconnection to the party being called on another network.

LCS: The declared Local Carriage Service. Enables access seekers to resell local calls to end-users without having to invest in their own network and switching equipment. The LCS is purchased in conjunction with the WLR service.

LSS: The declared Line Sharing Service. Enables access to share the use of the copper line connecting consumers to the telephone exchange, allowing them to provide fixed internet services using their own equipment.

ULLS: The declared Unconditioned Local Loop Service. Allows access seekers to use the copper line connecting end-users to the local telephone exchange, allowing them provide both fixed internet (broadband) and voice services using their own DSLAMs and other exchange equipment.

Wholesale ADSL: The declared Wholesale ADSL service. Allows access seekers to purchase a Wholesale ADSL product from Telstra and resell internet services to end-users.

WLR: The declared Wholesale Line Rental service. For a monthly ‘per-user’ charge, it allows access seekers to purchase a line rental service from Telstra, which includes access to the copper line and associated services (including a dial tone and telephone number) supplied using Telstra’s equipment.

Source: ACCC