ACCC proposes to grant Telstra local carriage service and wholesale line rental exemptions
The Australian Competition and Consumer Commission today issued a draft decision proposing to grant Telstra exemptions from its obligations to supply two "declared" services in parts of metropolitan Australia.
The decision relates only to wholesale voice services, not broadband services - which are not subject to open access regulation.
The exemptions proposed by the ACCC are not as broad as that requested by Telstra. The proposed exemptions cover approximately four million of Telstra's copper lines – over half of Telstra's lines in metropolitan Australia.
The draft decision is subject to a number of conditions including a 12-month transition period and the on-going availability of the Unconditioned Local Loop Service.
The ACCC found that granting the exemptions would promote competition in the supply of voice services. This would occur through a combination of increased take-up of ULLS by access seekers and more efficient use of access seekers' existing ULLS-based infrastructure.
"Promoting ULLS-based supply of voice services will be in the long-term interests of end-users," ACCC Chairman, Mr Graeme Samuel, said today.
"Competitors using their own DSLAM facilities can more dynamically innovate their services than if they use pure resale of Telstra's services. This has already led to more dynamic and sustainable competition than pure resale models."
The ACCC also noted concerns that a fibre deployment would over time render DSLAM equipment, which depends on access to Telstra's copper at the exchange, obsolete. However, these concerns do not prevent efficient use of and investment in ULLS-based infrastructure in the near term. Transitioning to ULLS allows access seekers to build their reputation and customer base. Also, sufficiently certain migration arrangements would be required to prepare access seekers transitioning from ULLS to an alternative fibre-based service.
The ACCC's proposal, which is set out in its draft decision on Telstra's exemption applications, will be available on the ACCC website.
The ACCC is inviting interested parties to respond to the issues raised in the draft decision. The ACCC will consider submissions lodged with the ACCC by 27 May 2008.
The local carriage service is a wholesale local call service that allows access seekers to resell local calls to end-users.
The wholesale line rental service involves the provision of a basic line rental service that allows an end-user to connect to the public switched telephony network.
The LCS was declared by the ACCC in August 1999 and re-declared in July 2006. WLR was declared by the ACCC in July 2006.
Following the ACCC's decision to declare a service under Part XIC of the Trade Practices Act 1974, standard access obligations exist for any carriers or carriage service providers providing that service, whether to themselves or to other persons. The obligations include the requirement that the regulated service must be provided to service providers, along with specified ancillary services, on request.
A carrier can apply to the ACCC for a written order exempting it from any, or all, of the SAOs that apply to a regulated service. In deciding whether to make an order or not, the ACCC must consider whether it will promote the long-term interests of end-users of the carriage services, or services provided by means of carriage services.
On 9 July 2007, Telstra lodged two exemption applications pursuant to section 152AT of the Act, seeking exemption from its SAOs in relation to supply of WLR and LCS in 371 metropolitan exchange service areas (ESAs). On 12 October 2007, Telstra lodged two further applications for exemption, seeking exemption in a further 16 metropolitan ESAs. In total Telstra sought exemption from its SAOs to supply WLR and LCS in 387 metropolitan ESAs.
Telstra, in support of its exemption applications, argued that facilities-based entry by Telstra's competitors in recent years - especially DSLAM infrastructure - had made regulation of resale-based access in the form of LCS and WLR redundant in those 387 ESAs.
The ACCC, in assessing Telstra's exemption applications, considered whether granting exemptions in any or all of the 387 ESAs over which exemptions were sought would promote the long-term interests of end-users, as defined by the Act.
The ACCC noted that, as an alternative to reselling Telstra's services, access seekers are able to use their own DSLAM facilities to provide voice services by making direct use of Telstra's unbundled copper through the declared Unconditioned Local Loop Service.
The ACCC recognised that determining the precise sub-set of ESAs where ULLS-based entry and effective competition in fixed voice services is likely to occur upon granting exemptions was a finely balanced process – one which took into account the actual competition within each ESA as well as the potential for increased competition. The sub-set of ESAs proposed by the ACCC are those in which there are 14,000 or more addressable services in operation or four or more ULLS-based competitors (including Telstra).
One condition on the proposed exemption orders is that, if an ESA the subject of an exemption order becomes "capped" at any stage during the operation of the exemption order, the exemption will cease to apply to that ESA for the period in which the exchange remains "capped". An ESA is said to be capped when it is subject to a physical limit which can impede access seekers from deploying services that utilise ULLS.
This draft decision follows the ACCC's release last week of the draft pricing principles determination and indicative prices for WLR and LCS for the period 1 January 2008 to 30 July 2009.
