ACCC rejects Optus' mobile termination charge

Stuart Corner
Tuesday, 08 November 2005 16:03

IT Policy - Regulation

The Australian Competition and Consumer Commission (ACCC) says the price Optus wants to charge for terminating calls on its mobile network is substantially above costs.

The ACCC has issued a draft decision rejecting Optus' access undertaking to supply its domestic GSM terminating access service at a price trending towards 17 cents per minute in 2007.

ACCC chairman, Graeme Samuel, said: "The ACCC has consistently argued pricing mobile termination significantly above cost will have negative impacts in downstream markets. This is particularly so in the market within which fixed-to-mobile services are provided, where high termination prices end up being passed on to consumers in the form of higher prices for fixed-to-mobile calls."

Optus' proposed price terms were based on modelling which estimated that the 'welfare-maximising' price for this service was 17 cents per minute (cpm) in 2004-05. Based on this estimate, Optus proposed that the access price of its service should trend toward a target price of 17 cpm over the period 2005 to 2007.

"The ACCC has a number of concerns with Optus' proposed undertaking", Samuel said. "This included concerns with the theoretical underpinnings of the methodology employed to determine its 17 cpm estimate. Even if the ACCC had found this methodology was appropriate, it could not have accepted the undertaking," he said.

"In addition to the ACCC's concerns with the underlying methodology, it has further issues with the application of the methodology and empirical concerns with some of the inputs used to generate the 17 cpm estimate".

The ACCC seeks submissions from interested parties on its draft view by no later than 29 November 2005.
The ACCC is also currently arbitrating four access disputes in relation to Optus' supply of the MTAS.