Telstra loses legal fight over wholesale fee cut

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Telstra loses legal fight over wholesale fee cut

Court makes long-awaited judgment.

Telstra has lost its legal battle to overturn a decision by the ACCC that forces the telco to lower the fees it charges rivals for access to its copper network. 

Justice Foster today dismissed the appeal and ordered Telstra to pay the Australian Competition and Consumer Commission's costs.

The court case stemmed from an October 2015 ruling by the ACCC that lowered the regulated price Telstra charges its wholesale partners to access its fixed-line copper network by 9.4 percent.

Telstra had pushed previously for a 7.2 percent increase to the wholesale fees, arguing it needed to cover rising costs generated by users leaving the telco's copper network for the NBN.

But the ACCC rejected Telstra's argument, saying the telco's costs for NBN migrations were already being covered through its $11.2 billion definitive agreements with the federal government - a point pushed by Telstra's rivals and network access seekers.

The regulator said end users would suffer "absurd pricing" if the wholesale fees weren't decreased.

The telco took its fight to the courts soon after the ACCC decision.

Justice Foster today knocked back Telstra's argument that the ACCC had not followed its own fixed pricing principles to allow the telco to try to recover the costs of providing services to wholesale customers.

He also said the ACCC's approach had properly ensured that any costs associated with "the excess capacity caused by the NBN-induced under-utilisation" of its copper network had been removed from the wholesale price decision.

"This approach was expressely directed to ensuring that Telstra did not recover costs from access seekers in respect of which it had been provided with an avenue of recovery through the negotiation of the [definitive agreements]," Foster said.

The judge said all of Telstra's arguments in the case addressed "the same essential issue and seek, in different ways, to achieve the same result": bring the issue of cost recovery for NBN migrations into the wholesale price rate discussion.

"Telstra has failed to show that the ACCC committed any reviewable error in the course which it took," Foster said.

"At best, the grounds of review advanced by Telstra rise no higher than impermissible review of the merits of the ACCC's decision and impermissible attacks on methodologies employed by the ACCC which were plainly open to it."

Whether Telstra will also need to pay the costs of the telcos that joined the case to back the ACCC has not yet been decided. The telcos will need to file submissions on costs before April 4.

Telstra said it was disappointed with the outcome and would review the decision before considering its options.

The ACCC said the court's decision ensured "predictability and stability" for access prices while the NBN rollout is completed.

"The ACCC considered that users of Telstra’s network should not pay the higher costs that result from fewer customers as NBN migration occurs. If there were no adjustment for these higher costs, the customers who have not yet been migrated to the NBN will ultimately pay significantly higher prices for copper-based services," the regulator said in a statement.

"... Users of the fixed line network have not caused the asset redundancy and under-utilisation caused by the NBN and will not be able to use those assets and capacity in the future.

"The ACCC considered that it would not be in the long-term interests of end-users for these costs to be allocated to users of the network who do not cause them, given that Telstra had an opportunity to be compensated for these costs."

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