ACCC proposes five year regulatory pricing period in final access determinations for fixed line services

21 April 2011

The Australian Competition and Consumer Commission today commenced a public inquiry and issued a discussion paper on the making of final access determinations (FADs) for the six declared fixed line telecommunications services.

The discussion paper sets out proposed price and non-price terms for each of the declared services for a proposed five year regulatory period from 1 July 2011 to 30 June 2016.

“The proposed five year period will provide all industry participants with certainty regarding fixed line prices during the initial transition to the National Broadband Network,” acting ACCC chairman Michael Schaper said.

“Today marks a further step towards providing stability to industry in relation to wholesale access to Telstra’s fixed line network. While parties will still be able to negotiate their own terms and conditions of access, the FADs will, once they are made, establish a benchmark for Telstra and access seekers to fall back on,” Dr Schaper said.

The discussion paper follows the interim access determinations (IAD) made by the ACCC on 2 March 2011. As a result of legislative changes to the telecommunications access regime made late last year, the ACCC must hold a public inquiry to make FADs for each declared service. This must be commenced at least 6 months before the IAD expires.

The discussion paper includes the draft FADs. Prices for the five year regulatory period have been calculated using the same Building Block pricing framework as in the IADs, carried forward over five years.

After considering submissions received on the discussion paper and draft FADs, the ACCC plans to publish a Final Report and make five year FADs for the declared fixed line services. This approach recognises that many pricing issues have been previously subject to extensive consultation. This approach will provide price certainty and stability for the industry.

The ACCC recognises some issues may arise during this consultation process that will require further and more detailed consideration. The ACCC will adopt a flexible approach to dealing with any such issues, and notes that it has the power to vary the FADs if required.

The draft prices for the six fixed line services have been derived using a Building Block pricing framework, which is commonly used in other regulated industries. The discussion paper sets out in detail the methodology, assumptions and model inputs used by the ACCC to estimate these prices.

Consistent with the IADs, the ACCC proposes to set a single Unconditioned Local Loop Service price for the metropolitan and provincial areas where the majority of Australia’s population lives. This approach will promote industry stability and ease the transition to the NBN. Proposed wholesale prices for other services, including Wholesale Line Rental and the Local Carriage Service are lower than under the previous pricing approach, which was based on Telstra’s retail prices for these services.

The ACCC invites all interested parties to make submissions to the discussion paper by 3 June 2011.

The draft FAD prices for the declared fixed line services and a description of the relevant services are set out below.

The discussion paper and draft FADs can be found on the ACCC’s website at: Access determinations .

Guide to the declared fixed line services

The proposed draft FADs are specific to wholesale access to the six declared fixed line services. These fixed line services are currently used as inputs by retail telecommunications service providers to provide voice, facsimile and broadband internet products to consumers and businesses over Telstra’s copper network.

ULLS – The unconditioned local loop service is the use of the whole copper line from the telephone exchange to the home. By using this service a company can supply telephone and/or ADSL services to consumers using their own equipment in the telephone exchange.

WLR – The wholesale line rental service allows a company to supply voice services to consumers using Telstra's equipment.

LSS – The line sharing service allows a company to supply ADSL services to consumers using their own equipment in the telephone exchange, while the consumer is able to get their voice service from another provider.

PSTN OA and TA – This refers to both the public switched telephone network originating access and terminating access services. PSTN OA allows a telephone call from a caller to be connected to a point of interconnection within the network of a company that provides telephone services. PSTN TA allows a telephone call to be carried from a point of interconnection within the network of a company that provides telephone services to the party being called. The services together allow a company to connect their customers to customers on other networks.

LCS – The local carriage service allows a company to supply end-to-end voice services to consumers without having to install their own equipment in the telephone exchange. It is generally sold with the WLR so that a company is able to supply a full voice service.

Draft FADs prices for fixed line services

  Regulated prices to 31 December 2010 Prices: 1 Jan 2011 to 30 June 2011 Prices: 1 July 2011 to 30 June 2016
ULLS Band 1 to 3 ($/month) Band 1 -6.60 Band 2 -16.00 Band 3 -31.30 16.00 16.75
ULLS Band 4 ($/month) - 48.00 50.11
WLR ($/month) 27.00 22.10 22.47
PSTN (cents/minute) 1.0 1.0 1.0
LCS (cents/call) 9.28 9.1 8.7
LSS ($/month) 2.50 1.80 1.80

For ULLS services, the Bands relate to different geographical areas. The ACCC proposes to set an averaged price for Bands 1 to 3 and set a separate price for Band 4. Bands 1-3 cover the CBD, non-CBD metropolitan areas and regional areas, where the majority of Australia’s population lives. The proposed Band 4 price is for the most remote areas. In December 2010, there were only about 128 active ULLS services in Band 4 compared to over 914,000 active ULLS services across Bands 1, 2 and 3.

The ACCC also proposes set charges for some connection and disconnection services.

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