ACCC issues discussion paper on access deficit issues

The Australian Competition and Consumer Commission today issued a discussion paper looking more closely at the merits of including an access deficit and other contributions in Telstra's charges to its competitors for access to its fixed network

An access deficit contribution (ADC) has been added to Telstra's fixed network access or interconnection charges (also known as PSTN originating and terminating charges) because of the effect of retail price controls which may have prevented Telstra from efficiently recovering its line-related costs from its retail customers. This has meant those seeking to interconnect with Telstra to supply their own retail services have had to make a contribution to this deficit.

The ADC has typically accounted for around half of the total access charge and is therefore the single biggest component of the charge.

The paper looks at both the need for an ADC and at the way the access deficit is defined and allocated to competitors.

"The ACCC has previously supported the need for an ADC because of concerns that Telstra could not efficiently recover its costs and that this would be inimical to its ability to compete effectively and to its incentives to invest efficiently in its fixed network", ACCC Chairman, Professor Allan Fels, said today.

"The access deficit is expected to decline over the next five years as a result of Telstra's greater ability to re-balance its rental and call prices under revised price cap arrangements. However, some of the underlying arguments for the ADC related to competition and investment concerns need to be re-examined in light of more information about Telstra's ability to recover its costs as well as the current level of competition in retail markets".

In addition to the ADC, Telstra has also proposed a surcharge on access prices to compensate it for what it claims are losses on its local calls caused by retail price controls. This issue is also examined in the paper.

The ACCC's discussion paper has been released as part of its further scrutiny of current access prices for core fixed network services as required under the recent legislative amendments to the Trade Practices Act 1974. These require the ACCC to determine model terms and conditions, including prices, for PSTN originating and terminating charges, unconditioned local loop (ULL) and local carriage services (LCS). The ACCC is required to complete this work no later than June 2003.

Interested parties are invited to make submissions by 28 February 2003.