Competition Tribunal rules on access to Telstra wholesale services

Stuart Corner
Thursday, 10 September 2009 13:32

IT Industry - Strategy

In a decision unlikely to please many of Telstra's competitors, the Australian Competition Tribunal has, according to the ACCC, confirmed the ACCC's view that there is a case for winding back regulated access to Telstra's wholesale voice services in certain metropolitan and CBD areas, when and where competition has sufficiently developed.

The services in question - the local carriage service (LCS), wholesale line rental service (WLR) and PSTN originating access service - are key inputs for telcos needing access to Telstra's network in order to deliver voice services to end users. The ACT's decision is the latest, although perhaps the last, chapter in a long saga that has seen the ACCC facing trenchant criticism from the many in the industry.

In 2007 Telstra sought exemption from the need to provide these service in around 250 exchange areas, arguing that the presence of one or more competitors' DSLAMs in these exchanges connected to unconditioned local loop services meant that there was now competition in the provision of these services and that removal of declaration would encourage investment in facilities based competition. If exemption were granted, Telstra could withdraw the services if it chose, and was no longer subject to pricing oversight from the ACCC. The ACCC, with some exceptions and conditions agreed with Telstra.

Telstra's competitors did not: they branded the decision that of a regulator that had lost its way. CCC executive director, David Foreman, said it had "shaken the competitive industry...badly" because it "sets two profound and disturbing precedents...[that] are also strongly at odds with the Commission approach from the past." He claimed that the ACCC had set a "stunning precedent" because it had for the first time removed regulation because there was insufficient competition," whereas in the past it had "assessed whether competition is strong and sustainable, and if so, whether it can be relied on to protect consumer interests."

Chime (iiNet) successfully appealed to the ACT to have the ACCC's decision reversed. Telstra then appealed the ACT's decision to the full Federal Court. AAPT, Agile (Internode), Macquarie Telecom, Powertel, Primus all joined with the ACT and Chime as respondents against the appeal, and the Federal Court handed the matter back to the ACT, in a judgement issued on 11 March, saying that the ACT had made a number of errors in law and ordering it to review the matter.

The ACT has now handed down the results of that review and, according to a statement from the ACCC, has varied the ACCC's initial decision to exempt these services in the approximately 250 exchanges and has said: "Whether an exemption will apply in a particular area will depend on a number of factors, including the number of Telstra's competitors already using the ULLS in that area as well as their market share."

Twice a year, the ACCC will be required to publish a list of geographic areas where the exemptions will apply. No exemptions will come into effect before the end of 2010.

The Tribunal also affirmed the ACCC's decision to grant an exemption for the PSTN OA service in five CBD areas subject to a minor variation to the expiry date. The WLR and LCS are not regulated in CBD areas.

The ACCC will make a copy of the Tribunal's decision available on its web site. Announcing the ACT's decision it said that "The Tribunal has confirmed there is a case for winding back regulated access to Telstra's wholesale voice services in certain metropolitan and CBD areas, when and where competition has sufficiently developed," but has offered no other comment as to how materially the ACT's decision differs from its original exemption ruling. iTWire will attempt to obtain comment from parties to the initial appeal to the ACT and will update this article in due course.

 The ACT's latest decision can still be appealed to the Federal Court, but this seems unlikely. When the last appeal was launched, Graham Phillips of law firm Herbertgeer, who was acting for the telcos, told iTWire "This [the ACT's initial decision] was the first decision [recently appointed ACT president Justice] Finkelstein made and his decision was about 30 pages. Typically these decisions have been 100 - 120 pages with a lot more detail. I think [Telstra's appeal to the Federal Court] has been a bit of a wake up call to the Tribunal to give much more detailed decisions that are less likely to be appealed."