ACCC rejects Telstra's $30 per month price of local loop access

By Stuart Corner
Tuesday, 28 April 2009 12:09

Strategy

The ACCC has issued a final decision to reject Telstra's access undertaking proposing a price of $30 per month for the unconditioned local loop service in metropolitan areas. This service, currently charged at about $16 per month, is the biggest cost component for many providers of ADSL broadband services that use their own DSLAMs and acceptance to Telstra's figure would force them to raise prices to a level that would likely have left them unable to compete with Telstra's own service.

The charge covers Band 2 (metropolitan areas) and applies to about 70 percent of Telstra's 10 million lines and is substantially above the currently price of $16.75 which the ACCC has been mandating when called in to arbitrate disputes.

The ACCC concluded that Telstra's proposed price was unlikely to promote competition in the broadband and telephony markets and would discourage investment in telecommunications infrastructure.

The ACCC also considered that a $30 monthly charge would result in Telstra recovering more than was necessary to promote its legitimate business interest in providing this service. And it noted that Telstra's proposed monthly charge was significantly above estimates derived from benchmarking against comparator countries.

Since 2004, Telstra has submitted four undertaking applications - one was withdrawn and with this current decision, three have now been rejected by the ACCC. Telstra appealed both the earlier decisions to the Australian Competition Tribunal which affirmed the ACCC's decision.
CONTINUED