ACCC issues Telstra accounting separation report for December quarter 2005

The Australian Competition and Consumer Commission today issued its tenth imputation testing and non-price terms and conditions report under the enhanced accounting separation regime for Telstra. The report presents data for the quarter ending 31 December 2005.

The report presents key performance indicators that compare Telstra's customer service performance in meeting certain non-price terms and conditions for its wholesale and retail customers. Key performance indicators for fixed-line telephony and ADSL services are reported. The report does not reveal any systematic discrimination by Telstra against its wholesale customers.

The report also presents an imputation analysis that compares Telstra's retail prices to the prices of three core* telecommunications access services. The analysis is designed to give an indication whether there is likely to be sufficient margins between Telstra's retail prices and the prices it charges other service providers to use the core services (plus related costs) to allow efficient firms to compete at the retail level. The analysis is not intended to detect all forms of potentially anti-competitive conduct.

The results for fixed-line voice services have been mixed, with increasing margins for fixed-to-mobile calls and declining margins for local services, international long distance and the overall bundle of fixed-line voice services.

The negative margins for residential local services (line rental and local calls) increased in the December quarter due to an increase in the access price of Telstra's wholesale residential local services product, Home Access.**

The results for services supplied over the unconditioned local loop core service deteriorated, with imputed margins remaining negative except when the ULLS is used to supply a bundle of ADSL and voice services to business customers.

*The three core access services are the local carriage service, the PSTN originating and terminating access service and the unconditioned local loop service. The ULLS allows a competitor to lease the use of the customer's line to supply any combination of access, voice, ADSL or other data services.

** Home Access is a wholesale input used by Telstra's wholesale customers to provide local services (i.e. line rental and/or local call services) to retail customers.

Background

The accounting separation regime was introduced to address competition concerns arising from the level of vertical integration between Telstra's wholesale and retail services and also to improve the provision of price and cost information to the ACCC, competing telecommunications providers and the public.

On 19 June 2003, the Minister for Communications, Information Technology and the Arts directed the ACCC to issue record-keeping rules to Telstra, requiring Telstra to report on:

• current costs in addition to historical costs under the Telecommunications Industry Regulatory Accounting Framework (CCA reports)
• imputation analysis comparing Telstra's retail prices and the costs faced by access seekers in purchasing certain core telecommunications services 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).

The direction requires that the ACCC make the reports publicly available and comment on the reports that are submitted. In accordance with the direction, the ACCC first issued record-keeping rules to Telstra in June 2003. The ACCC issued revised rules in September 2004.