ACCC issues second Telstra accounting separation reports

The Australian Competition and Consumer Commission today issued two of its second round of reports in relation to the accounting separation of Telstra. They cover Telstra's performance in the December quarter 2003. 

One report contains an imputation analysis comparing Telstra's retail prices with the prices of two core* telecommunications access services. This is designed to reveal whether there is a sufficient margin between Telstra's retail prices and the prices it charges access seekers to use its network (plus related costs) to enable efficient firms to compete at the retail level.

The imputation analysis does not apply to the wholesale ADSL service which is the subject of a current ACCC Competition Notice to Telstra.

The second report provides key performance indicators on non-price terms and conditions that compare Telstra's service performance between Telstra's retail and wholesale supplied basic access services.

The ACCC notes that there is little difference between the results in these reports and those of the reports for the previous quarter.  The information supplied by Telstra does not reveal any major concerns with how it is providing the specific services covered to access seekers to enable them to compete in retail markets.

Nevertheless, it is largely a matter for Telstra to ensure that the information supplied is accurate. The reports have not been audited yet and the imputation report lacks important information to cross-check what has been provided on this occasion.  Accordingly the ACCC is not able to vouch for the complete accuracy of the reports at this stage. 

The ACCC has previously expressed reservations about the utility of accounting separation at the theoretical level.  It is premature to draw conclusions on a practical level whilst the reporting requirements are still being refined. The ACCC will however provide a fuller assessment of its views of the contribution of the information to the regulation of telecommunications markets as refinements take place and the ACCC's experience in the use of this information grows.

The reports are available in a single document on the ACCC's website. They are also made available on Telstra's website.

* The two core access services comprise the local carriage service and PSTN originating and terminating access. The third core service is the unconditioned local loop service. Telstra is unable to perform an imputation test for this service at present.

Background

In December 2002 the Government made provision for an enhanced accounting separation of Telstra's wholesale and retail operations with the passage of the Telecommunications Competition Act 2002. In accordance with this Act, the Minister for Communications, Information Technology and the Arts issued a Direction on 19 June 2003, instructing the ACCC to issue Record Keeping Rules (RKRs) under its powers under the Trade Practices Act 1974, requiring Telstra to provide the ACCC with reports on:

• current costs in addition to historical costs under the Telecommunications Industry Accounting Framework (CCA reports)
• imputation analysis comparing Telstra's retail prices and the costs faced by access seekers in purchasing core telecommunications services (fixed network originating and terminating access, wholesale local calls and the unconditioned local loop service) from Telstra (imputation reports)
• key performance indicators on non-price terms and conditions that compare Telstra's customer service performance between specified retail and wholesale supplied services (NPTC reports)

It is a requirement of the Direction that information from the reports be made available to the public. The reports just issued by the ACCC comprise Telstra's imputation and NPTC reports for the December quarter 2003 that the ACCC is making available to the public under the terms of the Ministerial Direction. The imputation report is designed to reveal whether there is a sufficient margin between Telstra's retail prices and the prices it charges access seekers to use its network (plus related costs) to enable efficient firms to compete in retail telecommunications markets.

The key performance indicators (KPIs) on non-price terms and conditions measure the difference between the percentage of Telstra Wholesale's customers and Telstra Retail's customers (for business and residential customer separately) for which performance standards are met (defined in terms of the Customer Service Guarantee measures).

A third report, on Telstra's current costs for the core telecommunications services, is prepared on a different timetable and will be issued separately by mid-May.

The ACCC intends to issue new RKRs to Telstra that enhance the contents of all these reports by the end of June 2004.