Telstra sees red over expanded wholesale regulation

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Telstra sees red over expanded wholesale regulation

ACCC finds evidence of over-charging in CBDs.

Telstra has hit back at the ACCC over its decision to re-regulate Telstra's wholesale line rental and local carriage services in a number of CBD areas, claiming that it runs contrary to the Coalition Government’s agenda to reduce red-tape.

The ACCC today revealed [pdf] Telstra would remain under regulatory scrutiny from the competition watchdog over wholesale services provided on its copper network for the next five years.

The ACCC has been investigating the declaration of fixed line services for the last nine months, ahead of the expiry of existing declarations for six fixed line services at the end of July.

The ACCC was tasked with investigating whether current regulation of the unconditioned local loop service (ULLS), line sharing service (LSS), local carriage service (LCS), wholesale line rental (WLR) service, domestic public switched telephone network originating access (PSTN OA) service, and public switched telephone network terminating access (PSTN TA) service should be extended, changed, revoked or allowed to expire.

The regulator today announced it would extend declarations for each of the services for another five years in order to “ensure regulatory certainty in the transition to the NBN”, and that it would further make variations to existing service descriptions. All new arrangements will come into force at the start of August and continue until 2019.

Additionally, the ACCC decided to remove exemptions in the service descriptions for the wholesale line rental (WLR) and local carriage service (LCS) that currently allow Telstra to avoid having to supply the services in the CBDs of the five major cities.

“The ACCC has determined that removing the CBD exemptions will provide end-users with greater choice of service provider, functionality and retail service dimensions, particularly for the corporate segment of the market,” the report stated.

“Removing the exemptions will enable access seekers to compete more effectively with Telstra to supply small and medium sized business that require a small number of voice-only services to particular premises and to offer competitive ‘whole of business’ packages of services to corporate end-users.”

Telstra reacted angrily to the decision, with the telco’s executive director of regulatory affairs Jane van Beelen saying it flew in the face of the Government's commitment to reduce the burden of red tape and unnecessary regulation.

“CBD markets for telco services are the most competitive in the country and these are products that have multiple substitutes. There is no case that these products should start to be regulated now,” she said in a statement.

Telstra’s group executive of wholesale, Stuart Lee, last week said he could not “comprehend the logic behind proposing removal of the exemptions for CBD areas".

“These are products for which there are multiple substitutes and CBD areas are about the most competitive telco markets in the country,” he told the CommsDay Summit.

“When the ACCC considered the issue five years ago they concluded there was already a competitive market and competition has intensified in recent years. Between my office in Latrobe St and our HQ in Exhibition St I walk over the pits of no less than five alternative providers. This seems to me to be continuing evidence of a pretty competitive market and an absence of bottleneck facilities.” 

The current service descriptions for the WLR and LCS exempt Telstra from having to supply the services in the CBDs of Sydney, Melbourne, Brisbane, Adelaide and Perth. 

The ACCC said it had received evidence that Telstra was charging significantly higher WLR prices than the regulated price in the exempt areas - $31.77 per month for the basic service compared to the regulated $22.84 per month. 

This evidence supported its conclusion that Telstra was using its market power in the exempt areas to set above-cost WLR prices, the ACCC said.

Removing the exemptions would promote better competition with access seekers who were currently “limited in their ability to compete with Telstra in providing a whole of business voice and broadband package to nationally-based corporate end-users”, the commission's report noted.

The ACCC is also currently conducting a public inquiry into final access determinations (FADs) for regulated fixed line services and the wholesale ADSL service, which will determine pricing and terms and conditions for services where commercial agreements have not been able to be reached.

The regulator expects the inquiry to take most of the coming financial year, meaning new FADs will not be introduced before the existing FADs expire at the end of July.

It has extended the current fixed line and wholesale ADSL FADs until new ones are introduced, in order to make regulated prices available for services should negotiations fail while it conducts the inquiry.

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