Uniform price changes to use Telstra’s copper network will provide ‘stability’: ACCC

The Australian Competition and Consumer Commission (ACCC) has released a draft decision on prices other telcos and operators would pay to use fixed line services supplied by Telstra on its copper network.

The proposed price changes – which are to take effect on 1 July 2015 and go to 30 June 2019 – are a one-off uniform decrease of 0.7 per cent for unconditioned local loop service (ULLS), line sharing service (LSS), wholesale line rental service (WLR), local carriage service (LCS), fixed originating access service (FOAS), fixed terminating access service (FTAS) and wholesale ADSL.

In its draft document (page 167), the ACCC set out the new prices, which are listed below:

“The ACCC considers that the uniform price change will provide stability to the industry in the transition to the NBN,” ACCC wrote in its draft document.

“This will minimise incentives for access seekers to change the way they provide services to end users and allow for continued efficient use of infrastructure already in use, which will in turn promote efficient use of declared services.

“It will also avoid any adverse impacts on competition from changing price relativities.”

The current approach of making individual prices based on the cost of running each service is seen to result in instability in the markets, as some services would increase significantly and others would decrease significantly.

“This could create some unintended and adverse competition implications, both in downstream markets for fixed line services and for developing markets for NBN services.”

However, the ACCC said there is still uncertainty around the true costs of the NBN rollout, and it has still yet to get all the information on costs from Telstra to ensure its set of uniform prices are on par with future expenditure and demand forecasts.

To help address this, the ACCC is proposing a chance to review prices midway through the period the changes take place (mid 2015-2019) if the NBN rollout deviates significantly from Telstra’s forecasts.

“If this information indicates that the assumptions made about the rollout at the time of making the FADs [final access determinations] are significantly inaccurate, the ACCC will make a decision on whether to commence a variation inquiry to review the FAD prices.

“Any changes in prices would only apply from the date on which the variation comes into force, which would be no earlier than 1 July 2017.”

The ACCC also added that it will not allow Telstra to pass on capital expenditures costs incurred in making ready for the NBN.

“This means that the prices that access seekers pay do not include a component for the migration of customers off the legacy copper network and onto the NBN or NBN Co’s use of Telstra assets,” said ACCC chairman Rod Sims.

In October 2014 as part of an Inquiry into Final Access Determinations on the pricing, Telstra proposed a uniform price increase of 7.2 per cent across all services to ensure recovery of its supply costs.

Optus and TPG opposed Telstra’s proposal. Optus stated the country’s largest telco wouldn’t have to use a price increase to recover its costs, as there would still be incentive to invest in its fixed line network. TGP said the proposal is “completely inconsistent with the logic of the current methodology for assessing appropriate prices”.