Line rental charge: ACCC concerns

The Australian Competition and Consumer Commission has not consented, at present, to Telstra's proposed line rental charge price rise.

Telstra is proposing a further $2.40 increase in line rental charges to $19.90 per month, a 13.7 per cent increase, from 1 September.

"While the ACCC has a limited role in approving these increases, the Government's price control determination provides that Telstra cannot introduce increases until it has made or will make available products, or other arrangements, to ensure that the average telephone bill of low-bill customers does not increase in real terms", ACCC Chairman, Professor Allan Fels, said today.

"The ACCC does not believe that Telstra is satisfying this 'availability' requirement. The low-bill provisions were introduced by Government to protect those who would be most affected by line rental increases. "The ACCC has increasingly become concerned about Telstra’s 'HomeLine Budget Plan' since its introduction in February, as it has attracted only 7,000 customers, from a potential market of over 700,000 eligible residential customers.

"This is an extremely low take-up that indicates that either customers are unaware of the plan or the conditions of the plan imposed by Telstra, such as a $2 'opt-in' fee, effectively precludes low-bill customers from joining. "The HomeLine Budget offering needs to be better promoted to eligible customers in comparison with other HomeLine products. This may help reassure the ACCC that Telstra is making the product available to eligible customers.

"Telstra must focus on the poor coverage of its HomeLine Budget offering in its brochures and on its website, particularly when compared against the rest of the Telstra HomeLine products. "It is open to Telstra to submit a further application. The ACCC will promptly consider this application provided it addresses the ACCC’s concerns on availability.

"Telstra has also advised the Commission that for the purposes of the application that the CPI figure released by the Australian Bureau of Statistics will be discounted to exclude any effects of the New Tax System. This is consistent with the ACCC’s GST pricing guidelines.

The application had originally assumed an unadjusted CPI figure".

Background

The retail price control arrangements on Telstra are set out in the Telstra Carrier Charges Price Control Arrangements, Notifications and Disallowance Determination No.1 of 2001 (the determination), made pursuant to s. 154 of the Telecommunications (Consumer Protection and Services Standards) Act 1999.

The determination provides a range of price caps and sub-caps. One of the price controls is that the ACCC, in effect, must consent to a real increase (i.e. net of inflation) in residential line rental charges by Telstra (s. 18 of the determination).

Before consenting to the increase the ACCC must be satisfied that Telstra has available, or will make available at the time the alteration takes effect, products or other arrangements which, if taken up by affected customers, would ensure that the average telephone bill of low-bill residential customers does not increase in real terms (s 22(1)(a) of the determination.

Low-bill residential customers are defined in s. 18(1) of the determination as those who are:

• pre-selected to Telstra 30 days prior to the proposed alteration being notified to the ACCC
  
• among the 10 per cent of customers with the lowest telephone bills at that time