Wholesale access to Telstra network still required – Tribunal

The Australian Competition Tribunal has confirmed that there was an ongoing need for access to Telstra's network and that, in effect, the Australian Competition and Consumer Commission had proposed scaling back that regulation too soon.

The Tribunal rejected Telstra's applications for exemption from obligations to supply the wholesale line rental service and local carriage service in parts of metropolitan Australia. The Tribunal reviewed the decision made by the ACCC in August 2008, which was to grant more limited exemptions than those sought by Telstra.

The exemptions that the ACCC had granted were for exchange service areas (ESAs) where four or more Unconditioned Local Loop Service (ULLS)-based entrants had entered or where the ESA had 14,000 or more addressable services in operation. The ACCC also imposed a number of conditions dealing with impediments faced by some access seekers when seeking to use the ULLS.

The Tribunal stated that: "The problem is that… the fact of entry by one firm, or even by more than one firm, of itself does not establish that the incumbent is either presently restrained or is likely to be subject to the constraints of the competitive process in the future..."

ACCC Chairman, Mr Graeme Samuel said: "The ACCC recognises that this decision was a matter of judgement and understands that there are reasons why the Tribunal came to a different conclusion.  As with all court and Tribunal decisions, the ACCC will review those reasons and consider the implications for the ongoing performance of its regulatory functions."

In assessing the exemption applications, the ACCC considered that, in a limited number of metropolitan ESAs, and subject to a number of conditions and limitations, there were sufficient means by which competing telecommunications providers could supply voice services to consumers and that Telstra's provision of these wholesale services were no longer an enduring bottleneck.

The Tribunal, however, did not adopt the ACCC's reasoning. In relation to the question of timing of when to withdraw regulated access, the Tribunal said: "It would normally be easier to revisit a decision at a later stage and subsequently withdraw regulation, than it would be to re-regulate after the market had been divested of some or all of its regulatory constraints."

Media inquiries: Ms Lin Enright 02 6243 1108 or 0414 613 520
Infocentre: 1300 302 502

Background

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 (SAOs) 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.

The applications related only to wholesale voice services, not broadband services - which are not declared services subject to open access regulation.

On 22 August 2008, the ACCC granted a limited exemption in a sub-set of ESAs in which there were 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.

The conditions and limitations sought to minimise the impediments faced by some access seekers when seeking to use the ULLS. Specifically, the conditions and limitations sought to address the impediments with 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 (LSS) to the ULLS.

The rationale for granting the exemptions was 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 considered wholesale voice services (i.e., WLR and LCS) no longer represented an "enduring bottleneck" in the areas the ACCC granted the limited exemption. The ACCC considered 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 ULLS.