ACCC 'squibs' on pricing reform

Stuart Corner
Thursday, 03 December 2009 12:27

IT Policy - Government Tech Policy

Telstra's competitors are angry at the ACCC's decision to maintain the status quo on regulated prices for access to key Telstra wholesale services, claiming that the ACCC has reneged on long-promised reforms that would have seen prices come down significantly.

Ever since the introduction of full competition in telecommunications in 1997 the prices for these services, over which Telstra holds a de facto monopoly, have been crucial to the ability of other service providers to compete. The wholesale services to which the prices apply are the unconditioned local loop service (ULLS); the line sharing service (LSS); the public switched telephone network originating access and terminating services (PSTN OA) (PSTN TA); the local carriage service (LCS); and the wholesale line rental (WLR) service.

Prices have been set by the ACCC on a 'retail minus retail cost' basis, but the ACCC has for years been promising to a implement a more rigorous cost-based methodology and in 2008 commissioned UK consultancy Analysys to develop a comprehensive cost model. On the basis of early outputs from the model the ACCC indicated that prices for these key services would come down significantly, but it has now announced that it will maintain the current prices until December 2010 and has issued a fresh discussion paper canvassing another comprehensive review of the principles under which it determines indicative pricing for these wholesale services.

Announcing the review, ACCC chairman, Graeme Samuel, said "This is a critical review of pricing principles which have been in place since 1997. Since this time the telecommunications regulatory, technological and competitive landscape, have and continue to evolve, and a review is timely...It will draw a line in the sand and address the pricing principles afresh for the new environment."

He justified the ACCC's decision to maintain the status quo on pricing by saying "This will provide as much certainty as possible to industry and consumers while the fundamental approach to pricing is being reviewed."

However the competitive carrier's coalition (CCC) claims that the ACCC's 'price freeze' represents a massive failure of its commitment to the industry and one that will result in service providers paying significantly higher prices for access to Telstra services. CCC executive director, David Forman, told iTWire: "This has caused problems throughout the market because people have been working on the basis that these retail-minus prices would come down and they have built that into their budgets.

"Negotiations with Telstra in the second and third quarters of this year were all based on written assurances from the Commission that they would move away from retail minus pricing Some people struck agreements with Telstra on that basis and some did not [expecting the ACCC to announce new, lower prices] and now the ACCC has squibbed on the whole thing."

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