ACCC initiates broad ranging strategic review of fixed network services

21 December 2005

The Australian Competition and Consumer Commission today announced an inquiry to examine the future regulation of certain key fixed network and wholesale services and issued a discussion paper seeking industry and public views.

The inquiry has primarily resulted from the ongoing need to review a number of existing declarations of certain fixed services, as required by the Trade Practices Act 1974. These reviews are must be completed during 2006.

"However, the ACCC also wants to use this opportunity to look at the broader question of whether regulation of certain fixed services is required, including what combination of services may still need to be regulated, having regard to emerging market, technological and network developments", ACCC Chairman, Mr Graeme Samuel, said today.

Consistent with usual practice, the ACCC will examine pricing principles for any services that continue to be declared. Separately, the ACCC has been requested by the Government to provide advice on the compatibility of ULLS pricing with the Government’s policy on retail pricing parity. The ACCC will provide that advice as soon as practicable.

The ACCC in a separate decision has also rejected Telstra's ULLS and LSS undertakings (see A.C.C.C. Issues Decisions on ULLS and LSS Undertakings, MR 325/05). The ACCC has not, however, made any decisions to set prices for these services since the undertaking process is not a price setting process.

The adoption of such a broad inquiry departs somewhat from the ACCC's traditional approach of reviewing declarations individually. However, in addition to the price parity issues noted above, there is currently before the ACCC a range of related issues which, taken together, strongly suggest that the assessment of the need and form of regulation are best undertaken jointly.

These current and emerging developments are:

  • the pending expiry of declarations of a number of key network services: in particular the Unconditioned Local Loop service (ULLS); the Domestic PSTN Originating and Terminating Access (Domestic PSTN OTA) services, and the Local Carriage Service (LCS)
  • Telstra's recent announcements regarding its plans to introduce a IP core network, and indications it will consider rolling out 'fibre-to-the-node' (FTTN) covering some four million addresses
  • the continued evolution of potential substitute technologies such as new generation mobile and other wireless services and their impact on the sustainability of the existing fixed customer access bottleneck, and
  • on-going competition concerns surrounding the wholesale supply of certain currently non-declared services such as wholesale line rental (WLR) service, and various forms of wholesale Digital Subscriber Line (DSL) services.

"Overall, these developments could arguably amount to the most substantial changes to this industry since competition was first introduced, 15 years ago", Mr Samuel said. "It is therefore timely for these inquiries on the future need for regulation of various related fixed network services to be held at this time.

"This will also allow industry participants and other interested parties a full opportunity to debate and discuss the need and degree of regulation that may be appropriate for these services, the impact of the regulation of particular services on the availability of other services and the relative importance of and relationship between these services, particularly given the technological and other factors affecting the industry. While the review will draw on previous work of the ACCC, it provides an opportunity to consider all of these issues with a fresh and comprehensive approach.

The ACCC is also now in the process of finalising its inquiry into local call resale services, which began earlier this year. The discussion paper includes some comments on whether the existing regulation of the local carriage service (LCS) should continue, as well as whether a wholesale line rental should be declared.

A separate draft report on the ACCC's consideration of this matter will be issued early in 2006.

The discussion paper being issued today provides an outline of relevant issues and seeks constructive input from interested parties. While the time-frames for this inquiry are particularly tight, given the broad-ranging nature of the issues raised and the pending seasonal break, the ACCC has given interested parties to 17 February 2006 to respond. Submissions received after this date may not be considered.

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Release number: 
MR 324/05
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