Telcos come out swinging over Telstra wholesale pricing

The government should withdraw its submission to ACCC inquiry, telcos argue

The Competitive Carriers Coalition (CCC) has hit out at a government intervention in the Australian Competition and Consumer Commission's inquiry into the pricing of Telstra's wholesale services.

The prices that Telstra charges for a range of wholesale services on its copper network are regulated by the ACCC.

In June, the competition watchdog revealed it was considering a 9.6 per cent drop in the prices Telstra can charge for the period 1 October 2015 to 30 June 2019 (a decline in real terms over four years of around 12 per cent).

Telstra was predictably less than thrilled at the decision (it had argued it should be allowed to raise prices).

"This draft decision has some serious flaws and contradicts the ACCC’s own principle of full cost recovery," Telstra's executive director for regulatory affairs, Jane van Beelen, wrote in a blog entry earlier this week.

"Having accepted our cost and demand forecast, the ACCC’s approach then effectively pretends that the NBN is not happening, thereby assuming higher demand for Telstra’s services and accordingly lower average costs.

"The ACCC has also mischaracterised the deal we did with the Government to facilitate the NBN, which is about a loss of future revenue after services are disconnected from the copper network, not the cost of maintaining our network for those customers who remain on it as the NBN is rolled out."

In a submission (PDF) to the ACCC's inquiry, the Department of Communications said it was concerned the ACCC's draft decision could "prevent appropriate cost recovery", which may not be in the long-term interests of end-users (a test outlined in the Competition and Consumer Act 2010).

"The Department is also concerned that the ACCC's further draft decision does not adequately take the broader policy context into consideration, notably the importance of price stability in the transition to the NBN and potential disruption of migration of customers from Telstra's network to the NBN," the submission states.

The ACCC should revisit its draft decision "in order to assure that the ... prices for fixed line services reflect the actual cost to Telstra in supplying the services, reflect the general principle that investors should be able to recover their costs, and that price stability is adequately considered."

The Department of Communication's submission represents an "extraordinary, unwelcome, unwarranted" intervention and sets a dangerous precedent, said a statement from the CCC signed by Vodafone, Macquarie Telecom, iiNet, Nextgen Networks and Mynetphone.

"For a Government department to be calling for higher prices for ordinary consumers, and against the interests of competition, is surely a first at the Federal level raises serious question marks about their ability to maximize the opportunities of the digital revolution.

"For it to be doing so in the context of fixed line communications services, where we Australia has the national disgrace of the highest prices in the developed world, beggars belief."

"Yet here is a Government Department intervening to tell an independent pricing agency to throw out the result of a two year inquiry because it does not want prices to fall," the statement said.

Communications minister Malcolm Turnbull should instruct the department to withdraw its submission, the statement said.

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Tags Telstracompetitive carriers coalitionAustralian Competition and Consumer CommissionAustralian Competition and Consumer Commission (ACCC)

More about Australian Competition and Consumer CommissionDepartment of CommunicationsMacquarie TelecomNextgen NetworksVodafone

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