The Australian Competition and Consumer Commission has completed its public inquiry into the geographic exemption provisions of the Wholesale Line Rental (WLR), Local Carriage Service (LCS), and PSTN Originating Access (PSTN OA) services. The ACCC’s decision will vary the final access determinations for these services to remove the exemption provisions.
“The ACCC believes that removing the exemptions will promote competition, the efficient use of and investment in infrastructure, and the long-term interests of end-users,” ACCC chairman Rod Sims said.
“Telstra is currently exercising its market power to charge WLR prices that are significantly above supply costs in the exempt areas. There is a strong case for removing the exemptions.”
The ACCC’s analysis found three key reasons for removing the exemption provisions. First, uncertainty surrounding the timing and location of the roll-out of the National Broadband Network, and subsequent de-commissioning of the copper network, increases the risks associated with investing in copper-based infrastructure that will be redundant on the NBN.
These risks and the costs of installing infrastructure mean that there is no business case for access seeker investments in traditional copper-based voice-capability.
However, access seekers are likely to continue to invest in infrastructure to provide a range of data services, particularly where the infrastructure will be used on the NBN.
Second, Telstra remains the main provider of wholesale voice-only services and there is little prospect of a wholesale market developing in voice-only resale services in the exempt areas.
Third, Telstra’s continuing dominance in retail markets as well as a number of supply-side constraints significantly limits the effectiveness of retail competition in restraining Telstra’s exercise of its wholesale market power.
The ACCC’s decision effectively re-regulates the supply of the WLR, LCS and PSTN OA services in the currently exempt exchange service areas (ESAs). Telstra and other carriers providing these services will now be obliged, on request by access seekers, to supply these services in the previously exempt areas at the regulated price and non-price terms and conditions set out in the final access determinations for the 3 services.
Parties will remain free to negotiate alternative price and non-price terms and conditions where they agree to depart from the regulated terms and conditions.
Telstra and other carriers providing WLR and LCS services in the major CBD areas will continue to be able to set their own price and non-price terms and conditions as the CBD areas are excluded from the declarations for these two services.
The ACCC has consulted twice this year on the issue of exemptions: first during the public inquiry into making the final access determinations and second during its recent inquiry into varying the final access determinations.