The Australian Competition and Consumer Commission today issued its first Competition Notice* alleging Telstra Corporation Limited has engaged in anti-competitive conduct in breach of the telecommunications provisions of the Trade Practices Act.
The competition notice alleges Telstra contravened the competition rule** by charging its Internet competitors for services by Telstra while at the same time refusing to pay for a similar service it received from those same Internet competitors. "This is the first time the ACCC has used its special telecommunications powers, granted to it from July 1997, to issue a competition notice," Mr Rod Shogren, Commissioner with responsibility for telecommunications, said today.
"If Telstra does not cease the conduct by 5 June the competition notice comes into force and, providing the Federal Court is satisfied that Telstra has contravened the competition rule, Telstra will face penalties of up to $10 million and $1 million for each day the contravention continued. The ACCC was concerned that Telstra's conduct could lead to it monopolising the Internet industry in Australia".
Telstra and a handful of competing Internet Access Providers offer transmission and interconnection services to Internet Service Providers and amongst one another. Telstra charges its competitors 19 cents per megabyte for carrying their Internet traffic across its network but has refused to pay competitors when they carry Telstra's traffic. Last week Telstra signed an agreement, known as a 'peering' agreement, crediting OzEmail for the carriage of Telstra's Internet traffic.
However, until last week, Telstra's unrivalled position in terms of access to content providers and end users has allowed it to refuse peering agreements with its competitors. The effect of Telstra's refusal has been to increase the costs of competitors which, in turn, increased the costs to Internet Service Providers and, ultimately, consumers, resulting in a substantial lessening of competition. "Even now, Telstra has not entered into arrangements with the two major players, Optus and connect.com, for the provision of Internet Access Provider Services," Mr Shogren said.
"Telstra's arrangement with OzEmail last week is late recognition by Telstra that it has been acting anti-competitively in this market." He said the competition notice would serve as a warning to Telstra, and others in the wider industry, that the ACCC would use to the full its special telecommunications powers where it believed a carrier had been acting anti-competitively. He said he was particularly concerned that the ACCC had had to take the step of issuing a competition notice after a protracted investigation where Telstra had been given every opportunity to address the ACCC's concerns.
"Telstra were told in December 1997 that the ACCC had grave concerns about this matter yet only now is there real progress in Telstra reaching commercial arrangements for the exchange of traffic. "It would be helpful in the future for Telstra to pay heed to the ACCC early in an investigation so that matters can be resolved quickly without the need for the serious action that the ACCC found itself bound to take in this case".
* A competition notice is the method by which the ACCC sets out a breach by a carrier of the competition rule.
**The competition rule prohibits a telecommunications carrier from engaging in anticompetitive conduct.