ACCC deregulates local call services in major capital cities

22 July 2002

The Australian Competition and Consumer Commission today announced it will remove access regulation of wholesale local calls (the local carriage service) in the Central Business Districts of Sydney, Melbourne, Brisbane, Adelaide and Perth.

The decision will take effect immediately for all service providers except Telstra, which is the predominant supplier of the local carriage service. Telstra will be subject to regulation for one more year and thereafter subject to notification requirements for two years.

ACCC Chairman, Professor Allan Fels, said the decision demonstrates the ACCC is prepared to remove regulation where it is no longer deemed necessary.

"The ACCC is satisfied there are a number of alternatives by which local call services can potentially be delivered in these CBD areas and that removal of regulation of the local carriage service should encourage suppliers of local call services to consider these alternatives", he said.

"In these circumstances we believe that improved market outcomes will be achieved with less regulation".

In reaching its decision the ACCC considered the level of facilities competition that exists in the specified CBD markets.

"The ACCC observed that on top of Telstra's network, there are between seven and 10 alternative optical fibre or microwave networks in each city, owned by up to eight different providers", Professor Fels said.

"Further alternatives to the local carriage service are offered by other regulated access services which provide other service providers with access to Telstra's copper lines and interconnection at Telstra's local exchanges.

"The ACCC has noted that since it announced its draft decision there have been a number of positive developments surrounding access to Telstra's copper lines. These include the resolution of all related arbitration disputes, faster processes for facilitating line transfers and the release by the ACCC of cost-based prices for use of these lines.

"Enhanced investment in alternative services should encourage deeper competition in the provision of local call services over the longer-term. This is expected to lead to better service and price offering in the market than simple resale competition associated with use of the local carriage service".

Copies of the final decision report will be available from:

  • ACCC offices
  • the telecommunications section of the ACCC Website
  • the attachment below
  • by calling 1300 302 502.

BACKGROUND

Declaration of services

Part XIC of the Trade Practices Act 1974 establishes a process whereby providers of telecommunications services can obtain access to particular services which otherwise have no general right of access.

The process begins when the ACCC "declares" the service. Once a service is declared, access seekers are entitled to have access to the service according to the standard access obligations (SAOs) under s.152AR of the Act. If an access seeker and an access provider are unable to agree on the terms and conditions of access to a declared service, the ACCC can be requested to arbitrate.

The ACCC can declare a service on the recommendation of industry or after it undertakes a public inquiry process and decides the declaration will promote the long-term interests of end-users of telecommunications services.

The local carriage service was declared in August 1999. It is a service involving the carriage of telephone calls from customer equipment at an end-user’s premises to separately located customer equipment of another end-user in the same standard zone.

Application to exempt the local carriage service

On 7 June 2000, Telstra Corporation Limited applied to the ACCC for an individual exemption from the SAOs in relation to the supply of the local carriage service in the CBDs of Sydney, Melbourne, Brisbane, Adelaide and Perth. The application applied to calls that originate in these CBD areas and terminate in any area of the corresponding local call zone.

The ACCC issued a discussion paper in August 2000, detailing the issues surrounding its consideration of Telstra's exemption application. It sought submissions from interested parties in response to the discussion paper.

Issues relation to application

In assessing an exemption application in relation to a declared service, the Commission is required under the Act to have regard to the LTIE. This involves assessing whether the granting of the exemption would serve to:

  • promote competition in the markets for carriage services and services supplied by means of carriage services
  • encourage the economically efficient use of, and economically efficient investment in, the infrastructure by which carriage services and services provided by means of carriage services are supplied
  • promote any-to-any connectivity, for carriage services involving communication between end-users.

ACCC decision

The ACCC made a draft decision in September 2001 to grant a class exemption to Telstra and other carriers in the areas specified in Telstra's exemption application. Submissions from interested parties were received on this draft decision and considered by the ACCC.

The ACCC's final decision encompasses two separate exemptions.

One is an individual exemption that relates only to Telstra. This will not take effect for 1 year, and has a number of conditions attached that relate to provision of certain information to the ACCC for a period of two years from when the exemption takes effect.

The other is a class exemption that applies to all carriers and carriage service providers other than Telstra. It is to take effect from the time of gazettal and is not subject to any conditions.

Release number: 
MR 177/02
ACCC Infocentre: 

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