ACCC proposes cuts to access charges: Draft access guidelines to core telecommunications services

The Australian Competition and Consumer Commission today issued draft determinations concerning model price and non-price terms and conditions for access to core telecommunications services.

"The model terms and conditions are not binding, but provide guidance to the ACCC's views on fair terms and conditions of access to core telecommunications services", ACCC Chairman, Professor Allan Fels, said today. "These services are the main fixed network access services for which competitors must pay Telstra so they can compete with it for a variety of retail services. The retail services include local, long-distance, international and fixed-to-mobile calls and various high-speed data and broadband services.

"The ACCC's proposed model prices mostly involve reductions to access prices. The rates are significantly lower than those proposed by Telstra in its access undertakings submitted to the ACCC earlier this year.

"While the ACCC is yet to decide on Telstra's undertakings, the factors used to determine the model terms and conditions are the same as those being used to assess the undertakings".

ACCC's model price terms and conditions

Broadly speaking, the ACCC confirms its previously expressed views on the pricing principles that should apply to each core service.

Under the draft determination, the ACCC has taken the view that the access deficit contribution (ADC*) that currently applies to the Public Switched Telephone Network (PSTN) originating and terminating services is a significant distortion to competitive outcomes. The determination says the ADC should be gradually reduced until it is completely removed by 2006-2007. The ADC currently represents approximately 50 per cent of the charges levied to competitors for fixed interconnection.

"After informed discussion with industry participants, including Telstra, the ACCC considers the ADC should be removed completely over a three year period".

This means PSTN rates should initially be reduced by around 10 per cent from current commercially determined rates, to between 1.2 and 1.25 cents per minute, in 2003-2004. They would be around 38 per cent lower than the rates proposed in Telstra's most recent undertakings of 1.7 cents per minute.

The ACCC also endorsed the current pricing approach for access to the Unconditioned Local Loop Service (ULLS). This service, which gives competitors direct access to the copper in Telstra's fixed network, is crucial if competitors wish to provide their own DSL services rather than wholesaling them from Telstra.

"With reductions in the level of network costs this has also meant significant reductions to ULLS charges in metropolitan areas of around 60 per cent, (compared with previous ACCC views). Metropolitan areas are where the greatest take-up in broadband technologies using the ULLS is expected".

"The prices for local loops recommended by the ACCC also compare more than favourably with international averages and it is hoped this will encourage uptake of the broadband services which are provided via the ULLS service".

The ACCC endorsed the current pricing arrangements relating to access to the Local Carriage Service (LCS) observing they reflect the approximate cost of retailing the local call service. This service is essentially seen as a "stepping stone" to facilities competition. The ACCC's approach is designed to ensure this continues to be the case.

ACCC's model non-price terms and conditions

The ACCC used the existing Telstra Access Arrangements as the starting point for its guidelines on non-price terms and conditions.

After extensive industry consultation, the ACCC identified key contentious issues arising from these arrangements, including terms and conditions relating to access to information systems, service migration, creditworthiness and ordering and provisioning.

The ACCC developed an 'in-principle' position and drafted model clauses to address each of the concerns raised by industry participants.

"In developing these clauses, the ACCC has attempted to strike a balance between the legitimate business interests of access providers and the rights of access seekers to use the declared services", Professor Fels said.

Consistent with recent changes to the Trade Practices Act 1974, which promote the use of access undertakings, the ACCC continues to welcome industry wide undertakings from Telstra which are broadly in line with the ACCC's views as set out in its model terms and conditions determination.

The draft determinations have been released for public comment and are available on the ACCC website. The ACCC has called for submissions from industry participants and other interested parties by 14 July 2003.

* The ADC refers to the contribution by competitors to Telstra's access deficit. The access deficit is generally defined as the difference between the costs associated with providing a telephone line to a customer and the retail revenue that can reasonably be generated from that line in the form of line rentals and connection charges by Telstra.

Draft determination model prices for core telecommunications service

The ACCC's proposed model price terms and conditions for the core telecommunications services are detailed in the following tables. These rates exclude Goods and Services Tax.

* PSTN O/T charges would be equal to conveyance costs after 2005-06.

Model access prices for ULLS ($ per SIO per month)for 2003-04*, 2004-05* and 2005-06*

Band	Model access prices	Previous ACCC access prices
1(CBD)	$11-14	$13
2 (metro)	$19-22	$35
3 (regional)	$35-$40	$39
4 (remote)#	$80-$100	$59

* Subject to adjustment each year depending on demand
# note no services are being offered by Telstra in remote areas

Background

The ACCC was required to provide its views as a result of changes to the Trade Practices Act 1974 which came into effect in December 2002.

The PSTN origination and termination services are used as inputs by access seekers primarily to supply long distance, fixed-to-mobile and mobile-to-fixed calls to end-users in Australia. They can also be used by other network operators to interconnect with Telstra's fixed network.

The ULLS involves the use of unconditioned cable (typically copper) between end-users and a telephone exchange, where the cable terminates. This service enables access seekers to supply advanced, high-speed data services, such as xDSL (digital subscriber line), to customers as well as local and long-distance voice services in competition with Telstra.

The LCS is a service for carriage of telephone calls from customer equipment at an end-user's premises to separately located customer equipment of an end-user in the same standard zone. It allows access seekers to provide local calls on a resale or wholesale basis in competition with Telstra.

The ACCC has so far published the following papers on indicative or model price terms and conditions:

• Future Access Pricing Principles for PSTN, ULLS and LCS – Discussion Paper, September 2002; and
• The Need for an ADC for PSTN Access Service Pricing – Draft Position Paper”, February 2003.

The ACCC has also previously published indicative prices for the ULLS and LCS:

• Pricing of unconditioned local loop services (ULLS) – Final Repor”, March 2002; and
• Local Carriage Service pricing principles and indicative prices – Final Report (Revised), April 2002

The ACCC previously published its views on PSTN origination and termination prices when assessing Telstra's 1999 undertakings for these services and subsequently in updating its views for subsequent periods, viz:

• A report on the assessment of Telstra’s undertakings for the Domestic PSTN originating and terminating access services, July 2000; and
• ACCC Issues its Views on Access Pricing to Encourage Negotiated Settlements Over Access to Telstra's Fixed Network in 2001-2002 (Media release, 18 May 2001).

All these papers are available on the ACCC website.