The competition watchdog, the Australian Competition and Consumer Commission, issued a draft decision on Friday to continue ADSL regulation for a further five years, saying that continuing to regulate the wholesale ADSL service would benefit customers by promoting competition in broadband markets until the NBN rollout is complete.
“Telstra retains its dominant position in both the wholesale and retail markets for the supply of ADSL fixed-line broadband services on a national level,” ACCC commissioner Cristina Cifuentes says.
“Continuing regulation will ensure network providers continue to have access to Telstra’s copper network at reasonable prices. This will encourage them to continue competing in the retail market to develop and offer different ADSL broadband products to meet the needs of customers as they prepare to shift to the NBN.”
The ACCC declared the wholesale ADSL service in February 2012 and the declaration will expire in February next year.
In its draft decision, the ACCC says it considers that continued declaration of the wholesale ADSL service will promote the long-term interests of end-users (LTIE).
The ACCC can declare a service if it is satisfied that the declaration would promote the long-term interests of end users. A declaration means a network operator has to open up its infrastructure to access seekers.
“Telstra, as the vertically integrated national supplier, has the incentive and ability to favour its own operations to maintain and grow its overall market share. Declaring the wholesale ADSL service will limit Telstra’s ability to do so,” the ACCC notes in the draft decision.
And, the regulator says that without declaration “the ability of access seekers to compete with Telstra in supplying wholesale ADSL services to a significant segment of the national wholesale and also, importantly, retail high speed fixed-line markets, would be reduced”.
“This is because access seekers have smaller digital subscriber line access multiplexer (DSLAM) footprints (compared with Telstra) and many purchasers of the wholesale ADSL service require national coverage to supply retail customers who have operations across Australia. Also, there are likely to be significant costs in obtaining wholesale ADSL services from multiple suppliers.”
The ACCC also says that declaration will not have an effect on Telstra’s ability to exploit economies of scale and scope or its ability to make a return on its investment.
“Declaration is unlikely to impact investment incentives. The slowing investment in the unconditioned local loop service (ULLS), line sharing service (LSS) and digital subscriber line (DSL) equipment is likely to be a result of access seekers reaching the limit of their efficient investment and the increasing pace of the NBN rollout with the transition of customers to NBN-based services,” the ACCC says in its draft decision.
The ACCC expects to finalise its decision on ADSL regulation early next year before the current declaration expires in February.