ACCC rejects Vodafone undertaking for Mobile Terminating Access Service

The Australian Competition and Consumer Commission today announced its final decision in relation to the Vodafone access undertaking to supply its Mobile Terminating Access Service on its second generation GSM network. 

"The ACCC has rejected this undertaking because it considers that the terms and conditions contained within it are not reasonable", ACCC Commissioner, Mr Ed Willett, said today. 

Vodafone's price terms proposed that the access price of the MTAS on its 2G network should trend toward a 'target' price of 16.15 cents per minute over the period 2005 – 2007.  These prices terms are based on cost modelling undertaken by consultants on Vodafone's behalf.

"The ACCC has a number of concerns with Vodafone's methodology which have led it to the conclusion that Vodafone's proposed prices for its MTAS are likely to significantly overstate the efficient costs of providing the service in Australia", Mr  Willett said. 

"Even if the ACCC had found the methodology was appropriate, it would not have accepted the undertaking.  In addition to conceptual, methodological and empirical concerns, the ACCC has further concerns with some of the specific requirements on fixed-network operators to pass-through changes in the MTAS price to end-users making fixed-to-mobile calls". 

Copies of the ACCC's final report and other documentation relevant to the access undertaking (including the undertaking, Vodafone's supporting submissions and other material) will be available on the ACCC website.

The ACCC notes that seven access disputes in relation to Vodafone's supply of the MTAS are currently the subject of dispute resolution procedures set down Division 8, Part XIC of the Trade Practices Act 1974.  These arbitrations are continuing.

Background

On 30 June 2004, the ACCC allowed the existing declaration of the mobile terminating access service to expire, and replaced it with a new declaration under s.152AL of the Act.  The new declaration included termination of voice calls on 2.5G and 3G mobile networks.  On the same date, the ACCC issued a new pricing principle determination providing that the price of the MTAS should follow an adjustment path such that there is a closer association of the price and underlying cost of the service.  This pricing principle determination included indicative price-related terms and conditions that specified that the price of the MTAS should trend towards 12 cpm over the 30-month period from 1 July 2004 to 1 January 2007.

Under s.152BS of the Trade Practices Act 1974, a carrier or carriage service provider may provide the ACCC with a written access undertaking under which the carrier or carriage service provider undertakes to comply with the terms and conditions specified in the undertaking in relation to the standard access obligations applicable to that provider.

Vodafone lodged an ordinary access undertaking with respect its supply of the Mobile Terminating Access Service on its 2G GSM network with the ACCC on 23 March 2005. 

The Act provides that the ACCC may only accept or reject an undertaking.  Under s.152BV the ACCC must not accept an undertaking unless, among other things, it is satisfied that the terms and conditions specified in the undertaking are reasonable.  In determining if the terms and conditions of an undertaking are reasonable, the ACCC must have regard to the:

• long-term interests of end-users
• legitimate business interests of the access provider
• interests of persons who have rights to use the declared service
• operational and technical requirements necessary for the safe and reliable operation of a carriage service, a telecommunications network or a facility, and
• economically efficient operation of a carriage service, a telecommunications network or a facility.

On 23 December 2005, the ACCC released its draft decision to reject the undertaking.