Federal Court upholds ACCC's pricing principles for mobile terminating access service
Vodafone's challenge to the Australian Competition and Consumer Commission's pricing principle determination for the mobile terminating access service (MTAS)* has been rejected by the Federal Court.
"By upholding the determination in full, the court has ensured that the ACCC has the power to include prices when making a pricing principle determination for a declared telecommunications service", ACCC Commissioner, Mr Ed Willett, said.
"As well as allowing the ACCC to get on with the job of regulating, the decision will also ensure that the benefits flowing through to consumers as a result of mobile termination rates falling in line with the ACCC's pricing principle determination will not be delayed", Mr Willett said.
In June 2004, the ACCC determined pricing principles for the MTAS that included a new approach to regulating the price of the service. It aimed at ensuring a closer correlation between its price and cost.
"To the extent the price of the MTAS is set above cost, the ACCC has consistently argued this will have negative impacts in downstream markets. This is particularly so in the market within which fixed-to-mobile services are provided, where high termination prices end up being passed on to consumers in the form of higher prices for fixed-to-mobile calls".
The pricing principle determination also included indicative price-related terms and conditions that set a conservative benchmarked 'target' price of 12 cents per minute, to be reached over a staged adjustment period from 1 July 2004 to 30 June 2007.
The ACCC is required, under the Trade Practices Act 1974, to have regard to the pricing principle determination when arbitrating an access dispute between telecommunications service providers on the MTAS.
Vodafone instituted proceedings in July 2004, challenging the power of the ACCC to include prices in its pricing principle determination. Vodafone also argued that the prices set out in the ACCC's pricing principles determination should not apply to third generation (3G) mobile networks.
Justice Edmonds found that the Act "does empower the Commission, if it decides to exercise the discretion vested in it by that provision, to specify a price or prices as part of its … determination…". It was noted that such specification of prices are indicative only.
Although not forming the basis of the decision, Justice Edmonds further commented that "the prices specified in Annexure 2 to the [pricing principle] Determination are in accordance with and consistent with the pricing principles in Annexure 1 of the Determination."**
Justice Edmonds also upheld the ACCC's decision that the price-related terms and conditions should apply equally to the supply of the service on second generation (2G) and 3G networks.
In dismissing Vodafone's application in full, the court also found that Vodafone should pay the ACCC's costs in this matter.
* 'The Domestic Mobile Terminating Access Service' (MTAS) is a wholesale input, used by providers of fixed-to-mobile and mobile-to-mobile calls, to allow their customers to call mobile phone users. It allows consumers (either fixed-line or mobile) to call mobile users connected to another network. The carrier whose customer initiates the call pays the carrier whose customer receives the call for the mobile terminating access service.
** Annexure 1 of the pricing principle determination provides that the price of the service should follow an adjustment path such that there is a closer association of the price and underlying cost of the MTAS.
Annexure 2 of the pricing principle determination sets out price-related terms and conditions which provide indicative prices for the MTAS along an adjustment path. The indicative prices suggested a price of 21 cent per minute for the last half of 2004, dropping to 18 cents per minute from 1 January 2005, then to 15 cents per minute from 1 January 2006 and, finally down to the conservative benchmarked 'target' price of 12 cents per minute from 1 January 2007.
