The Australian Competition and Consumer Commission today confirmed that it will use retail-minus pricing for local call resale (LCR). The retail-minus methodology involves determination of the wholesale LCR price by subtracting the retail costs of supplying local calls from the retail price of a local call.
LCR is a wholesale service used to resupply local calls to consumers. Currently, Telstra supplies almost all local calls, either as a retailer or via resale by its competitors.
"The ACCC decision means that local call resellers will receive the wholesale service at an appropriate discount from retail prices, which provides for competition in the retailing of local calls", ACCC Chairman, Professor Fels, said today. "This competition will benefit customers, and ensure telephone users have choice over their local call retailer".
The ACCC issued draft pricing principles in April 2000, in which it proposed to use the retail-minus methodology. All submissions supported this approach, except for Telstra.
"Telstra advocated an approach that, on its figures, would lead to a wholesale price greater than Telstra's own retail prices", Professor Fels said. "The retail-minus methodology will promote efficiency in the retailing of local calls. By enabling retail competition new entrants can develop a customer base, which can itself help promote new facilities-build by these firms".
However, the ACCC expects the importance of LCR regulation to diminish over time as facilities-based competition increases.
The ACCC indicated when deciding to regulate LCR last year that it may be appropriate to revoke or modify the scope of regulation once the use of Telstra's unconditioned local loop service became available to service providers.
The pricing principles are intended to assist in the arbitration of disputes. The ACCC is currently arbitrating seven individual disputes regarding the price Telstra charges for the LCR service.