ACCC decision delivers iiNet $16m windfall from Telstra

Stuart Corner
Friday, 13 July 2007 12:37

IT Policy - Regulation

The ACCC has finalised its decision on the price Telstra should charge iiNet for the line sharing service (LSS), setting a price of $2.50 per month backdated to June 2004.

The ACCC set an interim price of $3.20 per month in December 2006, well below the price of $9.00 per month that Telstra was then charging. Telstra will be required to refund the difference for every service iiNet has had in place since 1 June 2004. iiNet says this will amount to around $16 million, which the ACCC has directed must be paid by 24 August 2007.

Going forward, iiNet says the decision will save it $885,000 per month on the 136,155 broadband services it presently delivers over the LSS, compared to th $9.00 per line price.

 The Line Sharing Service (LSS) has been regulated since 2002. It allows the copper wires that provide voice telephony to also be used to supply broadband internet services, by using the low frequency part of the copper line spectrum for voice and making the high frequency spectrum portion available to access seekers for supplying ADSL services. Telstra retains the ability to provide voice services and obtain line rental revenue and voice call revenue from the connected customer.

iiNet said the final determination was in line with expectations and had been incorporated into guidance it gave the market on 3 May 2007. This forecast a full year EBITDA of $39 million. The impact of the decision in prior years will add a further $6.9 million to the 07-07 EBITDA figure.

"The ACCC has been consistent in its approach, despite an astonishing campaign by Telstra," said Managing Director Michael Malone. "The message from this decision is that carriers can invest with confidence. We all know the rules, and the independent umpire is there to ensure that all players play fair, even Telstra."

The process has taken close to two years: the dispute was originally notified by iiNet and subsidiary Chime Communications in November 2005.

In its interim determination the ACC said "Consistent with the Commission's published approach since declaration of the LSS (August 2002), a contribution to line costs has not been included in LSS annual charges, as line costs are being fully recovered in other charges. It is noted that from 2000 Telstra has progressively increased its line rental prices (such as from $11.65 to $27.23 (GST exclusive) for the majority of its retail residential customers) so as to recover line costs from line rental revenues. In these circumstances, to allow a contribution to line costs in LSS charges would permit Telstra to double-dip from revenues earned on downstream fixed-voice and ADSL services in over-recovering line-related costs."