ACCC issues report on Telstra's compliance with its price controls

The Australian Competition and Consumer Commission has issued its latest assessment of Telstra's compliance with its retail price control arrangements.

This report concerns Telstra's compliance with the arrangements from January 2006 to June 2007.

"The ACCC's report notes that it is satisfied that Telstra has adequately complied with its price control arrangements," ACCC Chairman, Mr Graeme Samuel, said.

The report will be available from the ACCC's website, ACCC offices or by calling 1300 302 502.

Background

Price controls

The Government determines the retail price control arrangements that are to apply to Telstra. The first such price control arrangements were introduced in 1989. Since then, the Government has commissioned periodic reviews, the most recent changes being introduced from 1 January 2006.
Under the retail price control arrangements, the ACCC is responsible for developing a methodology by which to measure price changes, assessing the accuracy and completeness of Telstra's report and providing an annual report to the Minister on the adequacy of Telstra's compliance with them.
The price control arrangements include separate price caps on four baskets of services:

• the first basket comprises line rentals, local calls, trunk calls and international calls, which has a price movement cap of CPI – CPI per cent per annum – i.e., prices can't increase in nominal terms.
• the second and third baskets comprise basic residential line rentals, and basic business line rentals, which have a price movement cap of CPI per cent per annum.
• the fourth basket comprises connection services, which has a cap of CPI – 0 per annum. 

These caps apply to the weighted average of price movements for the services in the baskets. Compliance with these caps is to be assessed for three periods:

• January 2006 – June 2007
• July 2007 – June 2008
• July 2008 – June 2009

Where Telstra does not fully exploit the price cap in a particular period, it is entitled to claim a 'carry-forward credit' that increases the maximum permissible price movement in the next period.

These price control arrangements also required untimed local call charges to be broadly similar for both metropolitan and non-metropolitan consumers and for Telstra to comply with a number of other specific pricing and notification requirements.