Telstra "surprised" by ACCC statements

Stuart Corner
Thursday, 03 November 2005 18:38

IT Policy - Regulation

Telstra's war of words with the ACCC over the ACCC's proposal to de-average unconditioned local loop prices has ramped up another notch with Telstra releasing to the ASX a letter criticising ACCC chairman Graeme Samuel for his comment made this week to a Senate Estimates Committee.

In the letter, Telstra CFO, John Stanhope says, "We were surprised to say the least to see you reported in today's media to the effect that the Commission has no idea of the source of Telstra's estimate of an $800 million annual loss if the ACCC's de-averaged pricing model for the ULL is adopted."

He went on to say "this figure is derived directly from detailed analysis of the ACCC's draft ULL determination."

Stanhope claimed that, on the basis of this analysis, Telstra had determined it would need to charge $144 per month for a ULL in rural and remote areas to obtain full cost recovery. However, at this price no other service provider would take up ULLS but would resell Telstra services returning an average to Telstra of $45 per month. The difference between these two figures for each of the 714,000 lines in rural and remote Australia adds up to $800 million per year in lost revenue, Stanhope explained.

However, Samuel had ever right to be surprised as all attempts by senators to extract an explanation of such precision and conciseness from Telstra executives in the Estimates Committee hearing the previous day had failed.

Shadow communications minister, Stephen Conroy, opened questioning by asking Kate McKenzie, Telstra's deputy group managing director, public policy: "There has been some suggestion that it would cost Telstra $800 million with the ULL undertaking if it stood as the ACCC is suggesting. As I said, I do not think that is Telstra saying that. I want to get it clear. Is there an $800 million figure attached to that one decision?"

He received a very qualified yes. "Yes, but it depends over what period of time. It depends what final price the ACCC comes up with. It depends on the rate of take-up of ULL. So there are many variables. But certainly it is a large impact and it would be of that order."

After intense questioning by Conroy, Telstra company secretary Douglas Gration said that no modelling to produce an $80m figure had been done: "We did not put out the $800 million figure. Ms McKenzie has been explaining why we think the order of magnitude of the impact might be like that figure. But I do not think we have put that figure out or said that we have done the modelling or whatever that gets us to an $800 million figure."
However, when asked again by Conroy: "So you have not done any modelling that gets you to an $800 million figure? Gration was contradicted by McKenzie who said: "We have clearly done a range of internal modelling on the impacts of this. I guess my concern is that we have not revealed those forecasts publicly and we would have to consider what our obligations were to disclose those to the market if they were to be disclosed anywhere else."

It would therefore appear that Stanhope's letter to Samuels is the first public disclosure by Telstra of why it believes the ACCC's ULL decision will cost it $800m per year.