Telstra local loop access prices tipped to rise

The ACCC has proposed a three-year "adjustment path" to cushion the impact of increases in the cost of ISPs accessing unconditioned local loop services on the Telstra fixed network.

The competition and consumer commission issued draft principles and indicative prices [PDF] for six fixed line wholesale services for the next three years.

The services include access to the unconditioned local loop (ULL). Competitive ULL access has long been considered critical to the ability of ISPs to roll out their own DSLAM network infrastructure for the provision of broadband services.

The ACCC had previously declared its intention to cost the services based a model developed by the third-party firm Analysys.

The model has been in development and consultation since mid-2007.

Where the current Telstra model prices ULL access into four bands based on the density of services per square kilometre, the Analysys model splits the services into 15 geographic areas.

The ACCC favoured the Analysys model because it provided "a more comprehensive understanding of costs" than Telstra's four-band approach.

But the commission voiced concern that immediate implementation could result in access price increases that compromised "the interests of access seekers and providers that have made business decisions on the basis of the ACCC's previous approach to pricing of the fixed services for regulatory purposes.

"It would be inappropriate to immediately move to indicative pricing based on the Analysys cost model where that pricing represents a significant shift in price," the commission said.

Instead, the ACCC will adopt what it is calling an "adjustment path" over the next three years that it hopes will give Telstra and access seekers time to adjust their business models to cope with price shifts brought about by the Analysys model.

Of most concern to access seekers would be proposed changes to ULL access pricing. Prices have been consolidated into two ‘zones', adapted from the Analysys model.

Zone A covered almost all existing ULL lines - 646,708 to be exact - leaving less than 1400 lines in the pricing band dubbed Zone B.

Zone A ULL prices were proposed to hit $16.90 this year, up to $20 next year and $23.60 the following year.

ULL prices in the past year were $6.60 in the central business districts of NSW, South Australia, Queensland, Victoria and Western Australia, and $16 in most areas outside (dubbed ‘Band 2' in the Telstra model, and referring to areas with a density of more than 6.56 services per square kilometre).

The ACCC said despite the revamped costing model, it would be "open" to reconsidering the prices and model if a "significant change in the regulatory environment" was to occur before they are due to end in 2012.

Regulatory changes were being considered by the Federal Government in the lead-up to the introduction of a national broadband network.

ACCC chairman Graeme Samuel said the commission aims "to give a direction to industry about the level of price the ACCC considers is a reasonable starting point for negotiations between Telstra and its wholesale customers over the next three years."

He called for comment on the indicative price proposals to be submitted by September 25.