The Australian Competition and Consumer Commission today issued its final determination concerning model price and non-price terms and conditions for access to core telecommunications services, which are mainly supplied by Telstra to its competitors.
These core services are the main fixed network access services that are used by competitors to compete with Telstra for a variety of retail services, such as local, long-distance, international and fixed-to-mobile calls as well as various high-speed data and broadband services.
The ACCC's decision follows recent amendments to the Trade Practices Act 1974, which required the ACCC to make such a determination, and a draft determination, issued in June. The final determination largely confirms the ACCC's draft views.
"The model terms and conditions are not binding, but provide guidance as to the ACCC's views on fair terms and conditions of access to these core telecommunications services", ACCC Chairman, Mr Graeme Samuel, said today. "In particular, the final determination specifies lower access charges for use of Telstra's fixed network over the next three years".
ACCC's model price terms and conditions
"In general, the ACCC's model prices not only involve reductions to access prices from prevailing levels, but the rates are significantly lower than those proposed by Telstra in its access undertakings submitted to the ACCC earlier this year", Mr Samuel said.
In relation to charges for the Public Switched Telephone Network originating and terminating (PSTN O/T) services, which are the main fixed network access services competitors use for providing telephony services, the ACCC reaffirms its view that the access deficit contribution,* which is currently added to such charges, is a significant distortion to competitive outcomes. It therefore recommends a transition to cost-based pricing of this service over the next three years.
"After informed discussion with industry participants, the ACCC concluded this approach was appropriate in order to promote a stable regulatory environment.
"This represents a fair balancing of the competing interests of access providers and access seekers and should reduce the incidence of costly disputes".
The transition to cost-based pricing means PSTN O/T rates should initially be reduced by around 10 per cent from current commercially determined rates. The PSTN O/T rates would also be around 38 per cent lower than the rates outlined in Telstra’s most recently proposed undertakings.
The final determination also maintains the ACCC's proposed model prices for access to the Unconditioned Local Loop Service (ULLS), a service which enables Telstra’s competitors to directly gain access to Telstra's local copper network and provide their own range of telephony services, including DSL broadband services.
"The prices for local loops recommended by the ACCC compare favourably with international averages and it is hoped this will encourage the further uptake of the broadband services which are provided via the ULLS service".
The ACCC's proposed approach features an adjustment mechanism, which addresses the uncertainty of future ULLS demand as well as encouraging the take-up of the service and promoting the broader objective of facilities-based competition.
With respect to the Local Carriage Service (LCS), which enables competitors to resell Telstra's local calls, the ACCC endorsed the current pricing arrangements, observing they broadly reflect costs.
"The LCS is seen as a 'stepping stone' to facilities-based competition and the ACCC's approach is designed to ensure this continues to be the case".
The pricing principles for LCS services, however, are likely to be reviewed within the next two years, as progressive reductions to the PSTN O/T rates are expected to place pressures on the sustainability of the existing approach to LCS pricing.
"Overall, these relatively large reductions to access charges for most of these services is expected to lead to more competitive retail offerings and lower prices for consumers".
ACCC's model non-price terms and conditions
In formulating non-price terms and conditions the ACCC consulted widely with industry and identified the key issues arising from the existing arrangements, including terms and conditions relating to access to information systems, service migration, creditworthiness and ordering and provisioning.
The ACCC developed an "in-principle" position and drafted model clauses to address each of the concerns raised by industry participants.
"In developing these clauses, the ACCC has attempted to strike a balance between the legitimate business interests of access providers and the rights of access seekers to use the declared services", Mr Samuel said.
The ACCC considered industry responses to its draft determination in finalising these principles.
Consistent with recent changes to the Act promoting the use of access undertakings, the ACCC continues to welcome industry-wide undertakings from Telstra which are broadly in line with the ACCC's views as set out in its model terms and conditions determination.
*The access deficit contribution refers to the contribution by competitors to Telstra's access deficit. The access deficit contribution currently represents approximately 50 per cent of the charges levied to competitors for fixed interconnection. The access deficit is generally defined as the difference between the costs associated with providing telephone lines to customers and the retail revenues that can reasonably be generated from those lines in the form of line rentals and connection charges by Telstra.
Final determination model prices for core telecommunications service
The ACCC's model price terms and conditions for the core telecommunications services are detailed. These rates exclude Goods and Services Tax.