The Australian Competition and Consumer Commission today issued three telecommunications reports analysing competitive safeguards and price changes for telecommunications services and reporting on Telstra’s compliance with price control arrangements.
In its assessment of competitive safeguards, the ACCC argued that competition has not developed as extensively as was expected in 1997.
"Telecommunications markets are not yet effectively competitive", ACCC Chairman, Mr Graeme Samuel, said today. "The reasons for this include the structure of the industry, in particular Telstra's network ownership and high levels of integration, as well as the global downturn in the industry".
The report assesses that the extent and depth of competition varies greatly. For example, the extent of facilities-based competition varies across services and geographic regions.
It also examines the ACCC's regulatory work during the course of the year, focusing on key anti-competitive conduct and consumer investigations, declaration and exemption investigations, the release of pricing principles, and a range of monitoring and reporting activities.
"The ACCC's analysis shows that there was little change in the number and size of industry participants between 2000-01 and 2001-02. Of particular concern, the analysis shows that price decreases have slowed".
While the ACCC found that the overall price paid by consumers for telecommunications services in 2001-02 fell by approximately 2.7 per cent in real terms, this is the lowest rate of decrease since 1998-99. The trend of a slowing rate of decrease was experienced in the price movements for both the public switched telephone network (PSTN) and mobile telephony services.
The ACCC’s report on the changes in prices of telecommunications services explains these changes in more detail.
"Price falls have not occurred evenly across consumer groups", Mr Samuel said. "Large business consumers enjoyed a significant fall in the average price of PSTN services in 2001-02. Comparatively, small business consumers experienced a price increase, the first since the ACCC began monitoring price changes in 1996-97".
The fall in the average price of PSTN services for large business was also more than double that of residential consumers. This is likely due to larger businesses negotiating better discounts and the greater prevalence of facilities-based competition in central business district areas, where a significant number of large corporate businesses are located.
"Additionally, price falls have not occurred evenly across different telecommunications services".
While there was a general price decrease for PSTN services the rate of decline for particular services varied greatly:
- local calls decreased 11.7 per cent;
- national long distance calls decreased 8.7 per cent;
- international calls decreased 15.3 per cent; and
- fixed-to-mobile calls decreased 3.2 per cent.
Comparatively, the average price paid for basic access increased by approximately 13.2 per cent in 2001-02. This is the third consecutive year that the price for basic access has increased.
Like PSTN services, the rate of decrease of the average price of mobile telephony services has been in decline – reducing by approximately 2.5 per cent in 2001-02. But this is the smallest decline for mobile services over the 1997-98 and 2001-02 period.
While the Australian mobile industry has been characterised by high penetration rates since 1996, the level of growth has slowed such that in 2001-02, it appears to be reaching saturation in the growth of postpaid subscriber numbers. Mobile carriers are still competing for new prepaid customers, which is reflected in the falling rate of decline of postpaid prices compared to the larger decline in prepaid prices in recent years.
The ACCC has also released its annual assessment of Telstra's compliance with the price control arrangements. The Government sets the price controls and the ACCC's role is to assess Telstra’s audited report on its fulfilment of its price control obligations and determine compliance.
"The ACCC is satisfied that Telstra has complied with the price cap requirements for the 2001-02 financial year for both the overall CPI-5.5 per cent price cap and the individual CPI-0 per cent and CPI-1 per cent price caps on the sub-baskets.
"However, Telstra and the ACCC disagree regarding the measurement of price movements and the extent of carry-over in relation to the basket of services comprising local calls and line rentals. This may have implications for Telstra's compliance with the price controls in 2002-03".
The ACCC issued a new methodology for the 2001-02 report – the previous report to the Minister had recommended that a more robust and transparent method of measuring price movements be implemented. The source of disagreement between Telstra and the ACCC relates to the appropriate application of this methodology for calculating the yield on which the price movement for line rental is calculated.
The reports can be found in the Telecommunications topic in the right hand box.