Inter-capital transmission decision

The Australian Competition and Consumer Commission today issued its final decision to declare most inter-capital and high bandwidth transmission services around Australia. It has also made some technical amendments to the current transmission services declaration.

The ACCC has decided not to declare inter-capital transmission capacity between Sydney and Melbourne as new entry is occurring on that route. This modifies the ACCC's preliminary view, issued in its May draft report, to declare all inter-capital routes.

'The decision to declare inter-capital routes, except for Sydney-Melbourne, means existing providers of transmission services (Telstra and Optus) must supply the services to access seekers on terms that ultimately can be arbitrated by the ACCC, if the parties cannot otherwise agree,' Mr Rod Shogren, Commissioner with responsibility for telecommunications, said today. 'In the case of the Sydney-Melbourne route, transmission services are being offered on a purely commercial basis by a growing number of providers.'

The ACCC will review this declaration decision within two years, or sooner, if sufficient evidence regarding new entry, pricing and service developments becomes evident. In relation to the Sydney-Melbourne link, the ACCC will monitor developments during the next two years to determine if its decision should be reviewed.

'The decisions should promote competition in the voice and data-related services markets, including national and international telephone services, Internet and other high-bandwidth data services. This should see a greater range of products and lower prices.'

After the ACCC's draft decision to declare all inter-capital routes, additional information was provided by new and prospective entrants into the transmission market, such as Macrocom, detailing their network roll-out, service and marketing plans. Information was also provided from existing suppliers on their recent service and pricing initiatives for transmission services.

This information showed new entry is most likely on the Sydney - Melbourne route, with a number of new entrants planning or deploying new capacity. The current carriers have responded by cutting wholesale transmission prices and offering more services across all routes. This is a major shift in prices and service quality for wholesale transmission services.

The ACCC has always viewed the inter-city or inter-capital transmission market as contestable. It considered that the new entrants' ability to enter the long-haul transmission market to compete with Telstra and Optus would be the prime driver of more competitive pricing and superior quality services over time. This is most evident so far in the Sydney-Melbourne link. Where substantive evidence of new entry is lacking or not clear, the ACCC believes regulation is appropriate to bring adequate pressure to ensure access to transmission capacity is effective.

Although the scope and timing of new entry into other inter-capital routes is not currently clear, the ACCC recognises that it will need to monitor market and technological developments which will influence new entry and intensity of price and service competition.

The ACCC will institute a comprehensive monitoring program to assess conduct and structural factors in the transmission market. The program will be discussed with interested market participants. It will involve the collection of quantitative and qualitative data on the development of competition.

In its May draft report, the ACCC sought views on possible pricing approaches to declared transmission services. It sought comments on estimating costs for inter-capital transmission, such as the treatment of excess capacity, scale and scope effects, term of commitment and required rates of return. The ACCC decided that each of the factors would be relevant in determining an access price if the ACCC is asked to arbitrate.

The ACCC will issue its final report on competition in data markets covering transmission services as well as digital data services and ISDN shortly, with the release of its ISDN decision in coming weeks. The report will also be available on its website, www.accc.gov.au.