The federal government decided yesterday to retain the price caps system which applies to Telstra.
According to Minister for Communications, Senator Richard Alston, under the new arrangements Telstra will be required to reduce average prices for some services by at least 15 per cent each year.
These services include connections, line rentals, local, trunk and international calls, leased lines and digital mobile services, officials said.
"The price caps system has played an important role in protecting telecommunications consumers - particularly those of limited means - against paying too much for vital telephone service, and has lead to significant price reductions in recent years," Alston said.
Although the introduction of open competition has lead to price reductions in some areas, particularly long distance and international call prices, the government believes there is " considerable scope" for further reductions in services such as local calls and mobiles, Alston said.
In addition to reducing average prices, there will be a basic access price cap and connection price cap, he said.
"The basic access price cap positions Telstra to give consumers significant reductions in local call charges. For any increase in Telstra's total, real-line rental revenue due to an increase in real-line rental charges, it must offer the Australian community savings in total, real local call spending of at least an equal amount," Alston said.
The new system will come into effect from July 1, 1999 and will operate until June 30, 2001. A further review is due prior to the end of 2000.
The price caps system was last reviewed three years ago.