ACCC issues draft view on future Telstra price controls
The Australian Competition and Consumer Commission today published its draft view on the current price control arrangements that apply to Telstra and the arrangements that should apply after 1 July 2005.
"The ACCC has consulted extensively with interested parties through written submissions and in 12 public meetings throughout Australia, including metropolitan, regional and remote locations", ACCC Chairman, Mr Graeme Samuel, said today.
"While the current price control arrangements have provided benefits to many consumers, the future price controls could do much to promote the long-term interests of low-income consumers and of consumers more generally".
The ACCC's draft recommendation is that price cap regulation be retained on the services to which it currently applies. In particular, the ACCC recommends that:
a basket containing line rental, local calls, domestic and international long-distance and fixed-to-mobile calls be subject to a price cap of approximately CPI -5 per cent
a basket containing only connection services be subject to a price cap of CPI.
The ACCC will consider further whether:
business services should be excluded from price-cap regulation and, if so, how the class of business services to be excluded should be determined
national long-distance calls and international calls should be excluded from price-cap regulation.
Additionally, the ACCC considers that line rental prices should be subject to a specific form of price control and will consider further whether this should be a price-cap over the line rental service generally, or price controls over Telstra's most basic local access products i.e. - HomeLine Part and BusinessLine Part.
The ACCC's draft view also recommends that:
measures should be introduced to encourage more efficient investment in telecommunications infrastructure, including such investment necessary to promote facilities-based competition
the current cap of 22 cents on the price of a local call should remain
the current cap of 40 cents on the price of a local call from payphones should remain-any increase would be likely to impact heavily on low-income consumers and no cost information is before the ACCC to support any price increase
dial-up internet calls to ISPs should be subject to the 22 cent local call cap
Ministerial consideration of directory assistance charges should remain but this not be extended to other ancillary charges
while discontinuance of the non-metropolitan local call relativity provisions is not recommended, direct government assistance should be considered as a better way to improve access for regional and rural consumers
discounts on line rental for schools would be more appropriately funded by direct government assistance.
The ACCC also considers that, while the inclusion of targeted measures to deliver benefits to assist potentially disadvantaged consumers has been a good initiative of the current price control arrangements, the current low-income package can be improved to better ensure that low-income consumers can make similar use of basic telecommunication services as other Australians.
The ACCC's draft recommendation is that the next price control arrangements should apply for a three years.
The ACCC invites submissions from interested parties responding to the draft report. Submissions are requested by 5 p.m. on Friday 3 December 2004 and should be addressed to Mr Sean Riordan, GPO 520J, Melbourne, 3001.
The ACCC will submit its final views to the Minister by 31 January 2005. That report will include more definitive views on the effect of the current arrangements after the ACCC receives the necessary data that it requested from Telstra in August 2004.
The report can be obtained from the ACCC's website, ACCC offices or by calling 1300 302 502.
The Minister for Communications, Information Technology and the Arts has directed the ACCC to hold a public inquiry on the current price control arrangements that apply to Telstra—and which are contained in Telstra Carrier Charges—Price Control Arrangements, Notifications and Disallowance Determination No.1 of 2002—and the nature of the price control arrangements that should apply in future. The current arrangements expire on 30 June 2005.
The ACCC must report to the Minister by 31 January 2005.
In conducting the inquiry, the ACCC is required to consider, among other things:
the form, duration and means of implementation of any future price control arrangements
whether any complementary arrangements are necessary
mechanisms for assessing and enforcing compliance.
Price control arrangements were first introduced in 1989. Since then, Telstra (or its predecessors, Telecom and the Overseas Telecommunications Corporation) has been subject to price controls on a range of telephone services. Price controls are considered an important telecommunications consumer safeguard that aim to ensure that efficiency improvements are passed to consumers as lower prices for telecommunications services in markets where competition is not yet fully developed. They have also been used to achieve the government's social policy objectives.
The government has commissioned periodic reviews of the price control arrangements. The most recent review concluded in 2001. The reviews have proven necessary because of the many changes in the telecommunications industry since 1989. In particular, the telecommunications market has changed from being supplied solely by two government-owned enterprises, to now being serviced by numerous carriers and carriage service providers.
