ACCC grants Telstra further wholesale voice exemptions
The Australian Competition and Consumer Commission has decided to grant Telstra an exemption from its obligations to supply a "declared service" in parts of metropolitan Australia, subject to a number of conditions.
The service is the public switched telephone network originating access (PSTN OA) service. It is an input into wholesale voice services, but not broadband services – which are not subject to open access regulation.
The exemption, which covers 248 metropolitan exchange service areas, is not as broad as that requested by Telstra.
The exemption is consistent with the ACCC's recent decision to grant Telstra conditional exemptions in respect of the supply of two other inputs into wholesale voice services – wholesale line rental and the local carriage service.*
The rationale for granting the exemption is that access regulation should focus on those elements of the fixed-line network that continue to represent "enduring bottlenecks". Enduring bottlenecks generally refer to a network element or facility that exhibits natural monopoly characteristics and is "essential" to providing services to end-users in downstream markets.
The ACCC is of the view that wholesale voice services (including PSTN OA) no longer represent an "enduring bottleneck" in the areas subject to exemption. This is because access seekers are able to use their own DSLAM or MSAN facilities to provide voice services by making direct use of Telstra's unbundled copper through the declared Unconditioned Local Loop Service (ULLS).
The exemption is subject to a number of conditions dealing with impediments faced by some access seekers when seeking to use the ULLS. Specifically, these impediments include the capping of exchanges by Telstra, lengthy queues to enter into Telstra's exchange buildings and service disruptions when migrating from the line sharing service to the ULLS.
The ACCC has addressed submissions raised by access seekers that the Government's current National Broadband Network process is deterring investment in ULLS-based infrastructure due to concerns that this infrastructure could become stranded by a fibre rollout. The ACCC understands these concerns, but considers these exemption orders will not require access seekers to invest in significant amounts of new infrastructure. This is because, in the majority of areas covered by the exemption orders, a competitively-priced commercial offering of a re-sale voice service will likely be available.
An exemption was also granted in the CBD areas of Sydney, Melbourne, Brisbane, Adelaide and Perth - recognising the presence of alternative infrastructure in these areas capable of providing voice services.
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The PSTN OA is a wholesale voice service. The PSTN OA is used by access seekers to supply a range of voice-grade calls, including international, national long distance and fixed to mobile calls.
The PSTN OA was declared by the ACCC in June 1997 and re-declared 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.
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 SAOs 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.
On 8 October 2007, Telstra lodged two applications with the ACCC under section 152AT of the Trade Practices Act 1974 seeking individual exemptions from the Standard Access Obligations (SAOs) for PSTN OA.
The first application sought the removal of PSTN OA regulation in 17 ESAs in 5 CBD areas of Sydney, Melbourne, Brisbane, Adelaide and Perth. The second application sought the removal of PSTN OA regulation in 387 ESAs across metropolitan Australia.
On 5 September 2008, the ACCC issued a draft decision proposing to grant Telstra exemptions from its obligations to supply PSTN OA service in 15 CBD ESAs and 248 metropolitan ESAs, subject to a number of conditions and limitations.
In coming to its final decision on Telstra's metropolitan exemption application, 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 determined by the ACCC to be subject to the exemptions are those in which there are 14,000 or more addressable services in operation or four or more ULLS-based competitors (including Telstra), subject to a number of conditions and limitations.
