ACCC says industry structure limits consumers benefits from telecoms competition and investment

By Stuart Corner
Tuesday, 16 June 2009 13:46

Strategy

The ACCC has used the tabling in Parliament of its annual telecommunications reports to reinforce its calls for Telstra to be structurally separated into wholesale and retail units.

Two separate reports were tabled : the ACCC's "Telecommunications competitive safeguards for 2007–08" report and its "Changes in prices paid for telecommunications services in Australia, 2007–08" report. Both are required under legislation.

The ACCC said that: "While consumers have been rewarded with greater competition and investment in telecommunications, the current structure of the industry is likely to limit future payoffs."

In his covering letter to communications minister, Stephen Conroy, ACCC chairman, Graeme Samuel, said: "During 2007-08 the ACCC observed continued investment, innovation and price competition in the telecommunications sector. However, the competitive markets anticipated in 1997 [when the market was opened to full competition] do not appear to be emerging. The major downstream services continue to exhibit high levels of concentration, regulatory mechanisms are still heavily relied upon for promoting and maintaining competitive outcomes and the levels of consumer complaints about the industry reached new heights in 2007-8."

In its submission to the Government's discussion paper on the National Broadband Network the ACCC was unequivocal in calling for the structural separation of Telstra as the only solution to the problems of regulating the industry that it has struggled with for over a decade. It said: "The ACCC considers that structural separation is the only regulatory arrangement that will in practical terms address Telstra's incentives and ability to discriminate against its competitors...The ACCC's view is that ensuring equivalence in access can only be achieved by a non-integrated or a fully structurally separated network operator."

The reports identified substantial consumer gains, with the ACCC saying. "The Telecommunications Reports 2007-08 shows that service prices declined universally in that year. Fixed-line service prices fell by 5.5 percent, mobile voice services by 5.4 percent and Internet services by 6.2 percent. There was also ongoing investment in the industry, including: increased take-up of regulated unbundled services; enhancements to the coverage and data capability of 3G networks, and increases in the peak network speeds of Telstra and Optus' cable networks."

However Samuel told Conroy: "Despite the competitive gains made in some areas, the industry continues to rely heavily on regulatory mechanisms to promote and maintain these competitive outcomes. The industry continues to have an extremely high level of disputation and litigation - in 2007-08, the ACCC was notified of 28 new access disputes and had 18 of its arbitral determinations subject to judicial review by the Federal Court. This was in addition to merits review of a number of its exemption decisions (at least one of which has since been subject to further judicial review by the Full Federal Court)."

He added: "Whilst the ACCC recognises that parties are entitled to fully prosecute their legal rights, the level of disputation and litigation in the telecommunications sector far outstrips that in any other regulated sector and is contributing to some frustration of competitive outcomes."
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