Telstra’s competitors warn ACCC its decision will mean higher prices

The CEOs of seven of Telstra’s fixed line competitors – Netspace; Macquarie Telecom; Optus; iiNet; Primus; Internode and TransACT – have written to ACCC chairman, Graeme Samuel, warning that the ACCC’s recently published indicative prices for fixed line services, if implemented, would lead to a significant increase in prices of services to end users.

“The impact of the prices, if they were to ever be reflected in the market, would be to raise the inputs costs for all of our businesses. We would have no choice but to pass these significantly increased costs on to consumers,” they say.

Specifically they are concerned about the cost of the unconditioned local loop service (ULLS) which is becoming increasingly popular with competing telcos who want to provide both broadband and voice services from their own exchange based infrastructure. This is the only one of the six services for which the ACCC is proposing prices increases. Prices for all others would decrease under the proposed pricing principles.

The current indicative prices for ULL are $6.60 per month in CBD areas, $16.00 in other metro areas and $31.30 in regional areas (the ACCC has not determined pricing in rural areas). The ACCC is proposing a rezoning into just two zones based on the average length of road per service in operation and in rural areas the density of connected premises. Prices for Zone A, the most densely populated areas would be $16.90 per month in 2009-10 rising to $23.60 per month in 2011-12. Zone B prices would be $61.50 rising to $62.70.

The CEOs say the greatly increased pricing appears to be due to “a strict commitment to a theoretic cost model,” on the part of the ACCC and say it will “dramatically increase the cost to us of accessing the raw copper that we need to use to connect to customers, … deliver a windfall to Telstra and undermine the value of our investment.”

They remind the ACCC that one of its criteria in regulating access to underlying services is the long term interest of end users,” but other than this do not suggest how the ACCC should determine pricing. “The pricing principles [the ACCC] applies should be measured against this test, not whether they adhere to the output of a computer model of an entirely theoretical network… In no way can the longer term interests of consumers be met and competition advanced if competitors’ costs are forced up by the ACCC at a time when Telstra continues to capture 90 per cent of the profits attached to fixed telecommunications services in Australia.”

On 21 August the ACCC issued its draft pricing principles and indicative prices for the unconditioned local loop service (ULLS); the line sharing service (LSS); the public switched telephone network originating access (PSTN OA) service; the public switched telephone network terminating access (PSTN TA) service; the local carriage service (LCS); and the wholesale line rental (WLR) service, proposing that pricing for all six services be based on the cost of provision.

The ACCC said at the time that it now had “a range of information sources, including cost model data and international benchmarking, that provide…a better indication of the costs of providing fixed line services,” enabling it too “more accurately reflects the costs of providing services in these zones without distorting competitive signals in the market.”

The proposed prices are still only drafts and are open to submissions from interested parties until 25 September. The joint CEO letter appears to an attempt to bypass the ACCC formal review process, required by legislation by appealing direct to its chairman to intervene. No formal submissions are yet available,

- By Stuart Corner | iTWire

Related Posts

1. New Legislation Gives Greater Protection to Telstra Competitors
2. New York Times Paywall Decision Coming Within Weeks
3. Comcast tries pop-up alerts to warn of infections (AP)
4. Comcast tries pop-up alerts to warn of infections (AP)
5. Microsoft and McAfee warn of worms