ACCC to exclude NBN payments from Telstra wholesale pricing

Australia's communications regulator has backed Telstra's efforts to exclude the payments it receives from its $11.2 billion agreement with NBN Co to migrate users off copper when setting prices for the telco's wholesale services.

The ACCC is currently consulting on its method for setting the primary prices included in the final access determinations (FADs) for Telstra's seven declared fixed line services.

As part of the consultation, Telstra earlier this month put forward its case to increase its wholesale prices by 7.2 percent, arguing that its costs will rise as a result of users moving off its network and onto the NBN.

It said it expected demand for fixed-line services to fall by 62 percent by FY2019, which it claimed would need to be combatted by a one-off increase to its wholesale prices for fixed-line services.

Telstra's proposal was strongly rejected by rivals including Optus, which argued that any increase would result in Telstra being overcompensated for the provision of fixed-line services, especially if the ACCC failed to consider the payments Telstra receives to migrate users off copper and onto the NBN when setting fixed-line prices.

Optus said many of the assets Telstra uses to provide retail and wholesale services are also accessed - and paid for - by NBN Co, and warned that competition in the fixed-line market could be severely affected should the payments not be taken into account.

But the ACCC today rejected Optus' calls and said it would not include the NBN payments in its calculations of priciong for the declared fixed line services.

"The ACCC does not propose to take the value of payments made by NBN Co to Telstra into account in setting prices for declared services," ACCC chairman Rod Sims said in the regulator's position paper [pdf].

"The ACCC will use the regulatory value of Telstra’s assets, not the higher payments agreed between Telstra and NBN Co in their definitive agreements, to adjust the cost base for NBN effects when determining regulated charges.

“This is a straightforward matter and our approach accords with common regulatory practice.”

The ACCC's position aligns with that of the Communications Minister Malcolm Turnbull and Finance Minister Matthias Cormann, who asked the regulator in a submission not to include the NBN payments in its considerations.

Optus has been approached for comment.

A Vodafone spokesperson said the ACCC's statement confirmed that Telstra's request for a wholesale price hike was 'deeply flawed'.

"In our view, the price hike is completely unnecessary and seeks to further enrich Telstra at the cost of consumers and competition," the spokesperson said.

"We urge the ACCC to remain vigilant into the next vital phase of competition reform."

iiNet CEO David Buckingham said that while it was "disappointing" that the "windfall gains" to be received by Telstra from NBN Co would not be considered by the ACCC, the ISP was pleased that the regulator's approach to the treatment of the payments meant it would avoid the "large increase in prices" Telstra was lobbying for.

"The good news for our customers is that Telstra’s push for a 7.2 percent price rise on it’s monopoly assets is clearly unjustified," Buckingham said in a statement to iTnews. 

"Our hope for Australians remaining on Telstra’s ageing copper network is they will not suffer the double whammy of missing out on faster broadband, while suffering significantly higher prices. There remains a number of key issues that the ACCC still needs to consider, and iiNet will continue engage with the ACCC on these issues."