ACCC gets an improved offer for Telstra low-bill customers on line rental increase

Around one million low-bill customers will get an improved offer from Telstra following Australian Competition and Consumer Commission negotiations over Telstra's HomeLine Budget plan. In particular, Telstra's requirement that customers wishing to benefit from the plan pay $2 a month in advance to take part in it has been removed.

Customers will also now be far better informed about the availability of this plan.

"The revised proposal is designed to protect these customers from increases in line rental charges", ACCC Chairman, Professor Allan Fels, said today.

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. The ACCC refused its consent last week to the price rise as Telstra was unable to satisfy the 'availability' requirement specified in the Government's price control arrangements.

"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. The ACCC's role goes only to the availability rather than the attractiveness of the product for low-bill customers.

"In Telstra's revised application, Telstra will now better inform customers about the availability of the plan by:

• providing a bill message to its lowest-bill customers outlining the HomeLine Budget offering

• republishing its brochure with as prominent reference to HomeLine Budget as to other HomeLine options

• including additional information relating to HomeLine Budget in its website, including information about the eligibility criteria, pricing and rebate

"The ACCC also requested Telstra to remove the $2 monthly plan fee which was seen as a real deterrent for customers taking-up this offer. Telstra has now agreed to remove this requirement.

"Under the previous plan customers had to pay $2 a month in advance to take part. This was a deterrent in itself. Additionally, there was a further deterrent in that customers would not always know in advance how many calls they might make in the upcoming month and, therefore, if they would benefit from the plan.

"The ACCC was concerned that under the existing plan, customers could forfeit the $2 plan fee and not receive the rebate if they made more calls than they expected.

"This risk associated with the need for customers to accurately forecast telephony usage has now been abolished.

"The ACCC will watch future applications from Telstra to raise line rental prices closely. Telstra must take its obligations under the Government’s price control arrangements very seriously. The ACCC will remain vigilant to ensure compliance with these obligations".

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

HomeLine Budget eligibility criteria

The eligibility criteria for HomeLine Budget are as follows:

• to qualify for HomeLine Budget, a customer’s previous two Telstra bills must be below the spend threshold of $25.30 per month

• the customer must be preselected to Telstra and use Telstra for their fixed line calls