Part XIC of the Trade Practices Act enables the ACCC to ‘declare’ telecommunications services. Upon declaration, standard access obligations apply. The access provider is obliged to supply the service to an access seeker upon request.
The ACCC has the ability to vary or revoke declarations but, with the exception of minor changes, must hold a public inquiry ahead of such changes.
Inquiry into possible variation of ULLS service declaration
On 17 December 2007 the ACCC released a position paper as part of its inquiry into the possible variation of the service declaration for the unconditioned local loop service (ULLS).
In March 2007 the ACCC received a request from the G9 consortium of companies to vary the ULLS declaration to ensure that sub-loop access falls within the definition of the declared ULLS. It was argued that a variation would provide certainty for a fibre-to-the-node provider as the provision of services over the network would be contingent on access to the sub-loop.
The focus of the inquiry is on whether to vary the service description so that a ‘potential point of interconnection’ need not be located at or associated with a customer access module.
Exemptions from access obligations
The Trade Practices Act enables carriers to apply for exemptions from the standard access obligations that apply to a declared services. The ACCC can only grant the exemption if it is in the long-term interests of end users.
Telstra’s applications for exemption from fixed service access regulations
Telstra submitted another two applications for exemption from its obligations to supply a range of fixed telecommunications services to access seekers.
On 20 December 2007 the ACCC published Telstra’s application for exemption from providing regulated fixed line services to Optus in areas of Sydney, Melbourne and Brisbane where Optus has deployed its HFC cable network. The ACCC began the consultation on this matter on 30 January 2008 with the release of a discussion paper.
On 28 December 2007 the ACCC published Telstra’s application for exemption of its supply of the domestic transmission capacity service (DTCS) for:
tail-end and inter-exchange DTCS in CBD areas of each capital city
inter-exchange transmission in metropolitan areas and certain regional centres for DTCS
tail-end transmission in metropolitan areas and certain regional centres for DTCS up to 2 Mbps only.
The ACCC will release a discussion paper on this application shortly.
Division 5 of Part XIC of the Trade Practices Act enables access providers to voluntarily lodge written access undertakings with the ACCC specifying the terms and conditions upon which they agree to supply a specified service. The ACCC can accept or reject the undertaking.
View the list of undertakings currently before the ACCC here.
Draft decision to reject G9's undertaking for fibre-to-the-node network
On 17 December 2007 the ACCC announced its draft decision to reject the G9 consortium’s special access undertaking that proposed terms and conditions for third parties to access to its proposed fibre-to-the-node (FTTN) network.
The 15-year undertaking set initial access prices of up to $29 to $50 per month (depending on the speed offered) for the first three years and included a pricing methodology for determining access prices in subsequent years. The undertaking also envisaged a degree of vertical separation between the FTTN network owner (FANOC) and retail carriers and service providers.
The ACCC found FANOC’s prices for the initial three-year access period may be within the reasonable range of prices for this type of service and network. However, the ACCC considered the undertaking lacked effective independent audit of the key inputs in the pricing methodology to determine access prices in subsequent years. The ACCC also considered the undertaking gave FANOC too much discretion to unilaterally determine non-price terms and conditions for the 15-year undertaking period without independent regulatory review.
New Telstra undertaking proposing a $30 monthly ULLS price in Band 2
On 21 December 2007 Telstra lodged an undertaking for the provision of the ULLS in Band 2 exchange service areas.
Telstra proposes that a price of $30 for each ULLS service in a Band 2 exchange service area should apply for the period to 31 December 2010.
Telstra has supported its latest undertaking with its Telstra Efficient Access model. The ACCC will now prepare a discussion paper seeking submissions on the undertakings.
Access disputes
The ACCC is vested with powers to arbitrate telecommunications access disputes and make a final binding determination to resolve a dispute. Arbitration hearings are private and the ACCC generally does not make any public comment on disputes except to announce when a dispute has been notified.
New access disputes
In December 2007 and January 2008, seven new disputes were notified to the ACCC under Part XIC of the Trade Practices Act:
Telstra notified the ACCC of access disputes with Optus Mobile and Optus Networks over their supply of the mobile terminating access service (MTAS)
EFTel notified the ACCC of an access dispute with Telstra over its supply of the line sharing service (LSS)
Wideband Networks notified the ACCC of an access dispute with Telstra over its supply of the LSS
Primus Telecommunications notified the ACCC of an access dispute with Telstra over its supply of the LSS
Digiplus notified the ACCC of an access dispute with Telstra over its supply of wholesale line rental
Telstra notified the ACCC of an access dispute with Digiplus over Telstra’s supply of the local carriage service.
The ACCC made final determinations in 12 access disputes in December 2007 and January 2008:
two access disputes concerning Telstra’s supply of the ULLS to Primus Telecommunications and Macquarie Telecom
seven access disputes concerning Telstra’s supply of the LSS to Primus Telecommunications, Amcom, TPG Internet, Agile, Adam Internet and Network Technology
four access disputes in relation to the price paid by Telstra and Optus Mobile/Optus Networks to the other for MTAS. The ACCC also published these determinations and accompanying statements of reasons.
The ACCC also published the final determination and accompanying statement of reasons for a previous access dispute regarding Telstra’s supply of the ULLS to Optus in multi-unit dwellings.
The ACCC made one interim determination during the period, for an access dispute over Telstra’s supply of the LSS to Chime Communications.
The register of final and interim determinations can be found here. Published determinations can be viewed here.
Federal Court finds Telstra misled consumers about Next G coverage
Following proceedings initiated by the ACCC, the Federal Court found in December 2007 that Telstra’s advertised claim that its Next G network would deliver equal or better coverage to CDMA was misleading. It also found that Telstra had engaged in misleading or deceptive conduct by advertising that Next G coverage was ‘everywhere you need it’.
The Federal Court made the findings because coverage on the Next G network depends, in part, upon where the person is, handset selection and whether the handset has an external antenna attached. These factors were not disclosed in Telstra’s advertising.
Federal Court affirms invalidity of competition notice to Telstra
Final orders handed down in December 2007 by the Federal Court affirmed that the ACCC was not entitled to issue the Part A Competition Notice in December 2005.
The competition notice alleged that Telstra had acted anti-competitively by raising the wholesale price of its Home Access line rental service.
On 5 April 2007 Justice Bennett found that the competition notice differed from the consultation notice on two matters held to be of substance. She found that, as Telstra was not given details of those matters when the ACCC consulted with it, Telstra was not afforded procedural fairness.
On 20 December 2007 the ACCC issued a record-keeping rule requiring 22 specified carriers to report on the locations of their core network and customer access network infrastructure.
Recent ACCC reviews have indicated that a consistent and coherent infrastructure database is needed to further inform the effectiveness and timeliness of future regulatory processes. This includes the assessment of a number of exemptions applications recently lodged by Telstra in relation to existing declared services.
ACCC issues Telstra accounting separation report for September 2007 quarter
On 18 January 2007 the ACCC issued its seventeenth 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 30 September 2007.
This report presents an imputation analysis comparing the retail price charged by Telstra with the prices of three core telecommunications access services. The reported imputation analysis is designed to indicate whether margins are sufficient to allow efficient firms to compete against Telstra in the retail market.
The results for fixed line voice services show that, although imputed margins for some services or customer segments have deteriorated and others improved, imputed margins across the bundle of services remained relatively constant in the September quarter 2007.
On 31 January 2008 the AER released its final decision on the transmission determination to apply to SP AusNet for the 2008–14 regulatory control period.
The final decision provides for over $750 million of new investment in SP AusNet’s electricity transmission network over the next six years, in aggregate some 57 per cent above the amount invested by SP AusNet over the 2003–08 period. The revenues approved for SP AusNet increase from $453.35 million in 2008–09 to $541.82 million in 2013–14.
The final decision provides for a cost of debt that is relatively high compared with previous regulatory decisions. This is reflective of the higher cost of borrowing prevailing in financial markets that would be faced by an efficient TNSP. These increases appear to be driven mainly by the ‘sub-prime crisis’ in the United States.
The AER’s final report and related documents are available from its website, www.aer.gov.au.
Publication of the AER’s PTRM and RFM for the 2009–14 ACT/NSW distribution determinations
On 30 January 2008 the AER published the post-tax revenue model (PTRM) and roll forward model (RFM) that it will use for the 2009–14 ACT/NSW electricity distribution determinations. Under clause 6.5.1(d) of the transitional Chapter 6 rules, the AER is required to publish the PTRM and RFM that it will use by 1 February 2008.
In preparation for publishing the PTRM and RFM, the AER released a preliminary position paper on 22 November 2007. In addition to ongoing consultation with key stakeholders, the AER invited interested parties to make written submissions to the AER on issues raised in the paper. In addition to the models, the AER published the following:
final decision document on the PTRM
final decision document on the RFM
the PTRM handbook
the RFM handbook.
The models and documents are available from the AER's website, www.aer.gov.au.
Release of preliminary positions paper for ACT/NSW distribution determinations
In preparing for the Australian Capital Territory and New South Wales electricity distribution determinations for the period 2009–14, the AER is developing a series of guidelines on its approaches to various schemes and models.
On 21 December 2007, the AER published a preliminary positions paper that sets out the AER’s preliminary positions on the following issues:
demand management incentive scheme
control mechanisms for alternative control mechanisms
approach to determining materiality for possible pass through events.
Submissions on the positions paper closed 29 January 2008.
Revocation and substitution of EnergyAustralia's 2004-2009 revenue cap
On 21 December 2007 the AER decided to revoke and substitute EnergyAustralia’s 2004–05 to 2008–09 revenue cap. EnergyAustralia requested the AER re-open its revenue cap in March 2007 on the grounds there was a material error in setting its revenue cap. Revocation and substitution of the revenue cap is permitted in these circumstances under clauses 6.2.4(d)(1) and (2) of the National Electricity Code (the code).
Following consultation with affected parties the AER determined that there was an error in establishing EnergyAustralia’s cost of debt and had the material error not occurred the ACCC would have reached a different conclusion in setting the revenue cap. In the circumstances the AER considered it appropriate to revoke and substitute the revenue cap, in accordance with the provisions of the code.
The AER’s reasons for this decision and the amendments to EnergyAustralia’s revenue cap are available on its website at www.aer.gov.au.
ElectraNet revised pricing methodology
On 28 November 2007 the AER released its draft decision on the ElectraNet transmission determination for the period 1 July 2008 to 30 June 2013. In its draft decision the AER decided not to approve ElectraNet’s proposed pricing methodology.
In accordance with the AER’s agreed interim requirements relating to pricing methodology, ElectraNet was required to submit a revised proposed pricing methodology to the AER by 14 December 2007. Written submissions on ElectraNet’s revised proposed pricing methodology closed Thursday 31 January 2008.
In accordance with the National Electricity Rules (NER) ElectraNet has also submitted a revised revenue proposal in response to the AER’s draft decision. The AER invited interested parties to make written submissions on ElectraNet’s revised revenue proposal to the AER by Friday 22 February 2008.
The AER will issue its final decision on the ElectraNet transmission determination by 30 April 2008.
Documents associated with the transmission determination, including the draft decision, consultants’ reports and ElectraNet’s revised proposals are available on the AER website.
TransGrid notice of proposed pass-through for network support
On 7 December 2007, TransGrid submitted a notice of proposed pass-through for network support of $30.5 million over the 2008–09 financial year.
On 24 January 2008, the AER formed the opinion that the proposed pass-through amount of $30 516 319 to be applied over the 2008–09 financial year satisfies the Pass Through Rules requirements.
Documents including the AER’s statement of reasons and consultant’s report are available on the AER's website.
Public forums in preparation for the ACT and NSW electricity distribution determinations
In December 2007 the AER held public forums in Sydney and Canberra to outline the process for the upcoming regulatory determinations for electricity distribution network service providers (DNSPs) in the Australian Capital Territory and New South Wales.
AER Chairman, Steve Edwell, and senior management hosted the forums which were attended by representatives from the AER, jurisdictional regulators, distribution businesses and stakeholder groups. These forums allowed the AER to explain its role, the legislative framework and key regulatory issues to be addressed in the upcoming distribution determinations. They also offered an opportunity for interested parties to provide initial feedback and input as the AER prepares for the 2009–2014 distribution determinations.
The Australian Capital Territory and New South Wales DNSPs are required to submit their regulatory proposals for the 2009–2014 regulatory control period by 2 June 2008. The AER's regulatory determinations for these businesses will take effect from 1 July 2009.
Powerlink contingent project application
On 5 November 2007 the AER received an application from Powerlink, the Queensland electricity transmission service provider, requesting approval to amend its current revenue determination to meet the additional cost of undergrounding a section of a project to support the augmentation of supply to the north-eastern Brisbane area (South Pine to Sandgate).
The application was considered in accordance with Powerlink’s 2007–08 to 2011–12 transmission network revenue cap decision (June 2007).
The AER conditionally approved the application subject to Powerlink formally notifying it that planning approval has been received from the Department of Mines and Energy. Upon receipt of planning approval the AER will notify Powerlink that an adjustment may be made to its revenue determination to take account of this contingent project.
Gas Code decisions
GasNet revised access arrangements 2008–2012
On 14 December 2007, the ACCC released its draft decision on GasNet’s revised access arrangements for 2008-2012, which proposes not approve GasNet’s revisions in their current form.
Submissions on the draft decision closed 14 December 2007. The ACCC will issue its final decision in early 2008 after considering submissions.
Documents associated with GasNet’s revisions application, including the draft decision and consultants’ reports are available on the AER website.
Markets
Auditing of generator performance standards
The AER committed to a program of auditing generators’ performance standards. To commence this process, it was decided to audit the compliance programs (required under Chapter 4 of the National Electricity Rules (NER)) of those generators that were explicitly referred to in the AER investigation report on the events of 16 January. In that report, the AER also indicated that it intended to audit SP AusNet’s protection and control systems and load shedding facilities. The process of auditing generators’ performance standard obligations and SP AusNet’s protection and control system obligations has now commenced.
Pursuant to clause 3.13.7(d) of the NER, the AER is also in the process of publishing reports relating to events when prices exceeded $5000/MWh.
These events occurred on 31December 2007, 4, 10, 26 and 30 January 2008.
National Transmission Planning Arrangements
The AER made a submission on 21 December 2007 responding to the AEMC’s issues paper for the implementation of new national electricity transmission planning arrangements. The submission addressed four key issues, namely:
the scope of the national planning function and the kind of information and level of detail appropriate to a national plan
the relationship between AER and national planner
the development of governance arrangements for the national planner
the establishment of a regulatory investment test (RIT) based on integrated limbs of the regulatory test.
The submission also provided responses to specific questions raised in the issues paper about the scope of the national planning function and the establishment of an RIT.
The AEMC’s draft report on national transmission planning is anticipated in late February 2008. The AER will continue to participate in this review.
North West Shelf joint venturers—application for revocation of authorisation
On 14 December 2007 the North West Shelf joint venture partners requested a revocation of authorisation A18492. The joint venturers have reviewed their activities and consider there is no need to maintain the authorisation. The joint venturers will continue their gas joint marketing practices without it. Interested parties were consulted on the revocation application over December 2007 and January 2008, and a final decision by the ACCC on the revocation application is expected in February 2008.
A comfortable oligopoly controlling domestic refineries and limited opportunities for independent operators to enter the importing and wholesale markets were among a number of factors preventing fully effective competition in Australia’s unleaded petrol industry, a major report by the ACCC has found.
In December the ACCC reported on its six-month national inquiry into the price of unleaded petrol in Australia. It found that while there was no direct evidence of illegal price fixing, there were problems within the market that may add to the price of unleaded fuel. The inquiry did not extend to diesel or LPG prices.
The report found the price of locally refined or imported unleaded petrol was not based on what it costs to produce, but on international benchmarks. According to refiners that gave evidence during the inquiry, this was due to petrol being an internationally traded commodity. If refiners were able to make more money selling imported petrol than producing it themselves, there would be little incentive for them to produce. Similarly, if motorists were able to buy imported petrol at a better price, they would be unlikely to pay more for domestically produced fuel.
However, during the 25 hearings conducted around the country the ACCC was told there was currently little scope for independents to expand their operations, with Shell, Mobil, BP and Caltex supplying around 96 per cent of all unleaded fuel sold in Australia.
A lack of access to suitable import facilities at the ports made it difficult for independent retailers to bring fuel into the country at cheaper prices, meaning many were reduced to sourcing and then reselling unleaded petrol from one of the big four local refiners.
The report found that Australian refineries were more costly to operate than competing refineries in the Asia-Pacific region. The development of new refineries in the region meant Australian producers could soon find themselves under greater price pressure as supplies increased. Addressing the shortage of access to port facilities may allow more overseas fuel to enter the Australian market, placing greater competitive pressure on local producers.
Despite the limited competition available at the wholesale level, Australians still enjoyed the fourth cheapest unleaded petrol prices among Organisation for Economic Cooperation and Development countries.
Petrol retailers were also getting an upper hand over motorists due to the extra pricing information they were able to access through the Informed Sources service. Informed Sources collects and distributes regularly updated information about prices around the country. Retailers subscribed to the service can therefore see in virtual real time when a competitor has put prices up or down, and can adjust theirs accordingly. Where a service station decides to drop its prices, it can monitor Informed Sources to see if its competitors follow and, if they do not, can quickly put prices back up.
The ACCC has suggested one way of addressing the information imbalance may be to consider a FuelWatch style system, similar to that used in West Australia (see below).
In the area of supermarket shopper dockets that typically provide a 4 cent per litre discount on fuel, the inquiry found little evidence that their use by Coles and Woolworths had harmed competition in the market. While there was little doubt the vouchers had helped supermarkets become established in petrol retailing, increasing numbers of motorists had been enjoying the benefits of discounted fuel as a result of their introduction. The inquiry also found there was no evidence the voucher schemes had increased the ongoing rationalising of the number of service station sites, and in many cases the schemes had spurred other sellers to become more competitive, to the benefit of consumers.
The ACCC has made a number of recommendations designed to improve competition in the wholesale, retail and refining of unleaded petrol—among the most significant are:
a more detailed examination of arrangements between petrol companies to buy and sell fuel to each other
subject to meeting environmental policies, that governments seek to align Australian fuel standards with appropriate overseas standards
a comprehensive audit of terminals that are suitable for importing petrol to Australia
ongoing monitoring of the use, leasing and sharing of terminals.
The ACCC also recommended some tightening up of the wording of the Trade Practices Act to make it easier to prove that understandings between competitors were in fact designed to fix prices and therefore against the law.
In responding to the report, Assistant Treasurer and Minister for Competition Policy and Consumer Affairs Chris Bowen said there was no magic bullet to reducing unleaded fuel prices, but there were longer term measures that the government would investigate to ensure the market was as competitive as possible and that motorists were getting the best prices possible.
He directed the ACCC to begin formal price monitoring of unleaded petrol and to report every year for the next three years. The minister and the ACCC chairman, Graeme Samuel, also agreed that the ACCC would conduct a more detailed examination of the buy–sell arrangements between petrol companies and an audit of terminals suitable for importing refined petrol into Australia. The government has also repeated its commitment to appointing a petrol commissioner who will report directly to the ACCC chairman.
What is FuelWatch?
Since 2001, most West Australian service stations have been required by state law to fix their petrol, diesel and LPG prices for 24 hours, every single day. The retailers are required to report those prices to the state’s monitoring service, known as FuelWatch, by 2pm every afternoon. By around 4pm motorists are able to use a phone service or web page to find out what the price of fuel will be the next day. This means if the price of petrol is going up the following day, they have between 4pm and 6am the next day to fill their cars at the cheaper price.
During the ACCC’s inquiry into the price of unleaded petrol, opposing views were presented as to how much benefit the FuelWatch scheme presented. The Western Australian Department of Consumer and Employment Protection, which administers FuelWatch, said the scheme had led to Perth enjoying the lowest capital city prices in the country. However, petrol companies claimed the limitations on intra-day discounting meant some consumers missed out on dips in the price that would otherwise be possible during the day.
Private price monitoring company Informed Sources claimed FuelWatch had increased petrol prices by 1c to 1.5c per litre.
The ACCC’s own economic assessment found price margins in Perth were about 1.9c per litre cheaper compared to eastern capital cities. The ACCC also found the 24 hour rule may work to iron out some of the large fluctuations in weekly price cycles compared with those in other major metropolitan cities. However, running such a scheme on a national scale would involve significant administrative and compliance costs. The inquiry was also told it may increase the potential for anti-competitive effects in rural and regional parts of Australia as a result of the more concentrated markets in those areas.
The ACCC has recommended a thorough examination of the implications of pursuing a FuelWatch scheme on a national basis.
