ACCC proposes to reject Telstra's Optus HFC exemption but accept transmission exemption
The Australian Competition and Consumer Commission today issued a draft decision proposing to reject Telstra's application for exemption from its obligations to supply regulated fixed line services to Optus within Optus's Hybrid Fibre Coaxial cable network footprint.
The ACCC also issued a draft decision that proposes to allow certain exemptions relating to the Domestic Transmission Capacity Service.
The ACCC is not satisfied that granting the 'HFC exemption' would promote the long term interests of end users. The ACCC's draft decision highlights two major concerns with the application:
the singling out of a particular competitor would represent a discriminatory access policy which would be likely to discourage investment in the telecommunications industry
Telstra's strong position in the pay TV market, through its interest in Foxtel, would be likely to limit any possible competitive benefits from granting the exemption.
"Good regulation is about promoting competition and not about particular competitors," ACCC Chairman, Mr Graeme Samuel, said today. "The ACCC is concerned that this exemption application from Telstra focuses too much on one competitor, rather than benefiting consumers and competition generally.
"The ACCC has significant concerns that singling out competitors on the basis of their investments could, contrary to Telstra's arguments, actually discourage efficient investment by competitive carriers. This could undermine the potential for efficient facilities-based competition."
The ACCC also has concerns about the impact of the pay TV market, particularly Telstra's ownership of a competing HFC network, its interest in Foxtel and resulting control over content.
"As the ACCC has previously stated, Telstra's interest in Foxtel limits competition for content and services in the pay TV market," Mr Samuel said. "This acts to the detriment of consumers of other services, such as broadband and telephony, and impacts on the efficiency of further investment in the Optus HFC network."
The ACCC also issued today a draft decision proposing to grant Telstra exemptions from its obligations to supply the declared domestic transmission capacity service for:
capital-regional transmission on nine capital-regional routes
inter-exchange transmission in 16 CBD exchange service areas, and
inter-exchange transmission in 70 metropolitan exchange service areas
and to grant a class exemption to the same extent.
The ACCC, however, proposes to refuse Telstra's exemption applications for the supply of DTCS for tail-end transmission in metropolitan and CBD areas.
The ACCC's draft view is that certain DTCS services (of specified types) no longer represent an "enduring bottleneck" in the areas proposed for exemption. This is on the basis of evidence of two alternative fibre networks, in addition to Telstra, which the ACCC considers to be competitive or able to feasibly contest the market for transmission services.
The ACCC's draft decisions 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 these draft decisions by Monday 13 October 2008 for both the Optus HFC exemption and the DTCS exemptions.
Under Part XIC of the Trade Practices Act 1974, the ACCC may 'declare' services where it determines that this would be in the long-term interests of end-users. Once a service is declared, carriage services providers are required to comply with standard access obligations in the supply of this service. This includes that CSPs are required to allow service providers to provide carriage and/or content services to end-users.
The ULLS is a service for access to unconditioned cable, usually a copper wire pair, between a telephone exchange and an end user's home or office. The ULLS essentially gives an access seeker the use of the copper pair without any dial tone or carriage service. This allows the access seeker to use its own equipment in an exchange to provide a range of services, including traditional voice services and high speed internet access, to the end-user.
The line-sharing service allows similar functionality to a ULLS service to a competitor, but where the voice service remains provided by another party.
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 PSTN originating access service is a wholesale service used by access seekers to supply a range of voice-grade calls, including international, national long distance and fixed to mobile calls.
The domestic transmission capacity service is a generic service that can be used for the carriage of voice, data or other communications using wideband or broadband carriage.
Exemption Process
The ACCC has the power in section 152AT of the Act, upon application by a carrier or carriage services provider, to make an order exempting the carrier or carriage service provider from the standard access obligations for a declared service. The ACCC also has power under section 152AS of the Act to determine that the members of a specified class of carrier or class of carriage service provider are exempt from the SAOs for a declared service. The ACCC must not make such an exemption order or determination unless it is satisfied that granting the exemption will promote the long-term interests of end users as defined in section 152AB of the Act. An exemption order may be unconditional or subject to such conditions or limitations as are specified in the order.
Optus HFC Exemption Application
On 18 December 2007, Telstra lodged an application with the ACCC under section 152AT of the Trade Practices Act 1974 seeking individual exemptions from the Standard Access Obligations for the unconditioned local loop service, line sharing service, local carriage service, wholesale line rental service and PSTN originating access service to Optus in a defined geographic area of any customer premises within 75 metres of Optus' currently deployed HFC network in Sydney, Melbourne and Brisbane.
The HFC network was initially constructed to supply pay TV services, but can also be used for other services including voice and broadband.
Domestic Transmission Capacity Service Exemption Applications
On 24 August 2007, Telstra lodged an application with the ACCC under section 152AT of the Trade Practices Act 1974 seeking individual exemptions from the Standard Access Obligations for DTCS on 20 capital-regional routes.
On 21 December 2007, Telstra lodged four exemption applications respectively for:
inter-exchange transmission in 17 capital city band 1 ESAs for all declared bandwidths
tail-end transmission in 17 capital city band 1 ESAs for all declared bandwidths
inter-exchange transmission in 115 metropolitan band 2 ESAs or regional ESAs for all bandwidths and
tail-end transmission in 128 metropolitan band 2 ESAs for bandwidths up to 2 Mbps.
In its 2004 transmission capacity inquiry, the ACCC proposed that routes which have at least three optical fibre suppliers either serving these regional centres or in very close proximity (within one kilometre or less from the GPO of a regional centre for a given capital-regional route) be exempted from declaration.
