Gov to extend existing Telstra price controls

The communications minister has ignored recommendations by the Australian Consumer and Competition Commission (ACCC) that would "streamline" the existing price controls for some Telstra services.

Minister Stephen Conroy avoided any changes to the existing arrangements - due to expire on June 30 - and proposed a draft amendment to extend the controls by another two years.

The ACCC recently completed a three-month review of the price controls, which cap prices on some Telstra services, such as local and international calls, residential and business customers, and connection services. 

It recommended the Government extend the deadline for some controls including the current structure of four 'baskets' of caps, and also retain the 22 cent price cap on local calls and 50 cent price cap on local calls from payphones.

The Government implemented this recommendation but ignored advice to streamline the controls by clarifying some conditions, and removing others already regulated by other Government compliance measures and contracts.

It also didn't act on a recommendation that Telstra not receive "carry-in" credits for changes in cap prices, which can be used to increase the cap level in future.

"In this case, permitting carry forward of credits would simply undermine the objective of protecting consumers from unjustified price increases," the ACCC wrote in a full report of the review, released in March 2010.

Telstra said some customers pay less than 22 cents a call and some plans include local calls, because of competitive market forces.

"Telstra has always strongly supported continuity of consumer protections such as untimed local calls available to all Australians and all Australians should have access to a uniformly priced standard telephony service," a Telstra spokesman said.

The Government's draft proposal said other measures could be considered in future, once the impact of its $42b national fibre rollout is clear.

"The present Determination seeks only to extend the current arrangements in their existing form, as this will offer certainty and appropriate safeguards for consumers during a time of significant uncertainty in the sector," the draft said.

At the time, the ACCC said that structural separation of Telstra could make the price controls redundant.

"The ACCC notes, however, that there may be potential in the future to wind back the scope of the retail price control arrangements," the review said.

"In particular, if appropriate structural reforms are implemented, it is possible in the longer term that Telstra's market power will reduce and it is unlikely that retail price control arrangements would be required for efficiency reasons. However social policy objectives may still necessitate targeted retail price controls in this scenario."

The Government flagged its intentions to extend the controls in January, when the ACCC was instructed to review the arrangements.

"Importantly, the Minister's direction provides that the ACCC is to have regard to the intention that the price controls will remain in place for a further two years (until June 2012), during which time consideration will be given to the impact the transition to the National Broadband Network (NBN) environment will have on pricing policy," the ACCC wrote in its March report.