The Australian Competition and Consumer Commission has concluded its inquiry into the regulation of transmission services (known as the Domestic Transmission Capacity Service or 'DTCS'). The ACCC has decided to maintain regulation for a further five years until 31 March 2019.
The DTCS is a high capacity wholesale service used by communications companies to carry large volumes of data, video and other communications traffic. It is a critical input for the supply of other telecommunications services that are delivered to consumers and businesses, including services provided over both fixed and mobile networks.
The ACCC decision enables telecommunications companies to access the DTCS in areas where there is little competition. Telecommunications companies typically use the DTCS to aggregate and transport communications traffic between geographic locations where they do not own their own telecommunications infrastructure. The DTCS will continue to be an essential input for retail broadband services during and following the transition to the National Broadband Network.
Due to the high capital costs in building transmission networks, competition is less developed in a number of areas including outer metropolitan and regional areas. The ACCC considers that maintaining regulation where there is insufficient competition is important to ensure those who wish to access the declared DTCS can do so, and do so at regulated rates.
Where competition has developed on certain transmission routes, the ACCC will remove regulation where it is no longer necessary.
“Competition for transmission services like the DTCS typically provides lower prices for this essential wholesale service. Retailers are then able to pass this on to consumers in the form of lower prices,” ACCC Commissioner Cristina Cifuentes said.
“Those areas where a competitive environment has not developed require regulation to protect the interests of access seekers and ultimately consumers. However, in those transmission markets where a healthy level of competition exists or competition is likely to develop, the ACCC believes that it is appropriate to remove regulation,” Ms Cifuentes said.
To assess the state of competition for the DTCS, the ACCC has adopted a more comprehensive methodology than previously applied to ensure that appropriate factors are taken into account when assessing the need for regulation.
The ACCC’s competition assessment has found that an additional 112 metropolitan Exchange Serving Areas (ESAs) and eight regional routes are sufficiently competitive to be removed from regulation. In total, 200 metropolitan ESAs (around 40 per cent of all metropolitan ESAs) and 27 routes from capital cities to the major regional areas are now not subject to regulation under the DTCS.
The ACCC has also decided to re-regulate routes from Brisbane to three regional areas in Queensland, where the routes failed to meet the new criteria of the competition assessment.
“The ACCC has applied a broader assessment of competition during this inquiry and assessed each exchange area in which the DTCS is supplied. It has found that competition has emerged on some metropolitan and regional routes and that it is appropriate to withdraw regulation from those areas,” Ms Cifuentes said.
“The ACCC expects to see further competitive pricing to emerge in these areas where regulation has been removed.”
The ACCC has made a number of variations to the DTCS service description to reflect the ACCC’s competition assessment and improve its general clarity.
Some submissions to the inquiry raised issues regarding the pricing of the DTCS service and access to facilities. These matters will be considered in the upcoming access determination inquiry.
The ACCC will be reviewing the price of transmission in the DTCS access determination inquiry, which will commence by mid-2014. That inquiry will also consider the terms and conditions on which access to the DTCS is provided in regulated exchange areas and routes.
For further information see: Domestic transmission capacity service declaration 2013-2014