Vodafone calls for price cuts on Tasmanian subsea cables

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Vodafone calls for price cuts on Tasmanian subsea cables

Asks ACCC to review regulated premiums.

Vodafone has made a play for lower internet transmission costs to and from Tasmania by asking the Australian Competition and Consumer Commission to review premiums currently chargeable on the route.

The call for a review was made in a submission to the ACCC’s inquiry into what is known as the domestic transmission capacity service or DTCS, which sets maximum prices that can be charged on transmission routes between domestic locations - for example, capital cities.

Though it mostly affects terrestrial routes, the DTCS also covers routes between the mainland and Tasmania, as well as to other Australian territories, such as Christmas Island.

However, the DTCS recognises that the costs of these subsea cables are much higher than a regular terrestrial route, so operators of these cables are permitted to charge a premium - a percentage on top - to access seekers.

On Bass Strait routes, the premium is 40 percent; on the newer route between Perth and Christmas Island, which is serviced by Vocus, a much larger 360 percent premium is being discussed.

Telstra, which has cables on the Bass Strait route, is unhappy at “the very large difference in uplift factors for Tasmania and Christmas Island.”

“Telstra does not have access to Vocus-specific costs for deploying and operating the cable to Christmas Island,” it said. [pdf]

“However, Telstra would expect that Vocus would face similarly higher costs for deploying and operating marine cable as other owners/operators of undersea cable links. 

“Telstra has previously provided information to the Commission on the relative costs of deploying and operating underseas cable to Tasmania. However, the Commission adopted an uplift of 40 percent.”

Telstra went on to say it hoped to see the ACCC “adopt a consistent approach to determining the appropriate rate of return for undersea cable investment it adopted for determining the 40 percent uplift for Tasmania”.

Vocus argues that a 360 percent premium still isn’t letting it recover its build costs.

“This pricing was significantly below the uplift supported by Vocus’ modelling for the supply of the DTCS to Christmas Island – which used data of Vocus’ actual costs, business rules and demand forecasts,” it said.

Vocus makes its own recommendation on an appropriate premium, though this is redacted.

While Telstra may believe it is being hard done by on the Bass Strait route, those paying the premiums aren’t particularly happy they even exist.

“The premium associated with the routes over the Bass Strait to Tasmania are arbitrary and should be reviewed by the ACCC,” Vodafone Hutchison Australia (VHA) said. [pdf]

“If the ACCC has detailed cost information on this route, VHA encourages it to remove links to Tasmania from the domestic benchmarking dataset and develop a cost-based pricing model using a regulatory asset base. 

“If the ACCC does not have cost-based information on transmission links to Tasmania then it should remove the uplift for these services in the 2019 DTCS FAD.”

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