ACCC draft decision to reject Telstra's ULLS Undertaking
The Australian Competition and Consumer Commission today issued a draft decision proposing to reject Telstra's Undertaking application for a $30 ULLS monthly charge for metropolitan areas.
The ULLS monthly charge relates to the rent which Telstra charges competitors to access the copper wire from the telephone exchange to a house or office. Such access allows the provision of competitively priced voice and broadband services to consumers and businesses.
Telstra's undertaking only covers the monthly charge for the densely populated metropolitan areas of Australia serving about 70 per cent of the population but over only 0.2 per cent of the land.
"Following extensive consideration of Telstra's Undertaking including Telstra's own cost model (TEA model) and other supporting documentation, the ACCC consider that the proposed $30 monthly ULLS charge for metropolitan areas is unreasonable," ACCC Chairman, Mr Graeme Samuel, said.
The ACCC believes Telstra's proposed price is unlikely to promote competition on its merits and may discourage investment in telecommunications infrastructure.
In rejecting the undertaking the ACCC notes that Telstra's proposed monthly charge was significantly above estimates derived from international benchmarking.
The ACCC considers that a $30 monthly charge would result in Telstra recovering more than is necessary to promote its legitimate business interest by seeking a return on investment expenses it has not actually incurred.
Further, the way in which Telstra has applied the ACCC's long standing pricing principle in this undertaking has caused the ACCC to review the application of the current pricing principle to both the existing copper network and possible future network developments.
Telstra has submitted a number of ULLS Undertaking applications over recent years. All have been rejected as unreasonable by the ACCC. The most recent undertaking which also sought a $30 price in metropolitan areas as well as all other areas was rejected by the ACCC in August 2006. The ACCC's decision was affirmed by the Australian Competition Tribunal.
The ACCC's draft decision on Telstra's ULLS Undertaking will be available on the ACCC website.
The ACCC is inviting interested parties to respond to the issues raised in the draft decision by 12 December 2008.
For media inquiries to the ACCC Chairman, Mr Graeme Samuel, or Commissioner, Mr Ed Willett, please call Ms Lin Enright, ACCC Media, on (02) 6243 1108 or 0414 613 520. For general inquiries, please call the Infocentre: 1300 302 502.
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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.
There are approximately 10 million services in operation with around 7 million in Band 2.
On 3 March 2008, Telstra lodged the undertaking with the ACCC. The undertaking was lodged at the same time that Telstra withdrew its ULLS undertaking that had been lodged on 21 December 2007.
The undertaking specifies certain terms and conditions upon which Telstra undertakes to meet its SAOs for the supply of the ULLS and proposes a monthly charge of $30 payable by access seekers for the ULLS in Band 2 ESAs (covering around 70 per cent of the population).
Since 2004, the ACCC has received four Undertaking applications from Telstra. In addition to the current Undertaking, one the Undertaking application has been withdrawn and two rejected:
December 2004- $22 (rejected)
December 2005 - $30 (rejected)
December 2007 - $30 (withdrawn)
Both decisions to reject Telstra's undertaking application were appealed to the Australian Competition Tribunal where ACCC's decisions were affirmed.
