Telstra mounts constitutional challenge over pricing regime

Stuart Corner
Wednesday, 24 January 2007 07:20

IT Policy - Regulation

Telstra has initiated a High Court challenge to the telecommunications pricing regime, claiming that it breaches the Constitution by allowing Telstra to be compulsorily deprived of property (its access network) without just compensation.

The trigger for the move was a decision by the ACCC to set, as an interim move, a price for Telstra's line sharing service of $3.20 per month anywhere in Australia. This is the price at which a broadband provider would get access to a subscriber's line to operate an ADSL service using its own DSLAM while Telstra continued to use the line to provide the basic phone service.

The ACCC reached its decision through arbitrating an access dispute initiated by one such operator, Chime Communications. Telstra has no avenue of appeal to these decisions under Telecommunications or Trade Practices legislation. Separately Telstra has submitted to the ACCC an undertaking proposing a price of around $9 per month, which the ACCC has rejected. Telstra can appeal this decision, to the Australian Competition Tribunal, and has done so. A decision isexpected in March.

Telstra says the ACCC price decisions are made using laws that are invalid because they fail to comply with clause 51 (xxxi) of the Australian Constitution which guarantees just compensation when property is compulsorily acquired.

"The most recent decision of the ACCC, announced in the days before Christmas, allows Telstra’s competitors to buy broadband infrastructure for just $3.20 per month, and then re-sell it for around ten times that amount, forcing our shareholders to pay money from their back pockets to fund largely foreign-owned competitors,” Phil Burgess, Telstra's group managing director, public policy & communications, said.

However this is not strictly accurate: they are not buying any broadband technology, simply access to a copper pair to which they must attach their own broadband equipment in order to deliver a broadband service. The "ten times the price" is the typical starting price for a low end broadband service delivered of this copper pair, and which would have to cover not only the $3.20 and the cost of the broadband equipment but the cost of transmission backhaul and billing, support, sales and marketing and all the other costs of running a business.

Meanwhile Telstra continues to charge the customer the normal line rental fee for the standard telephone service which it would receive whether or not it was getting income from a line sharing customer.