The Australian Competition and Consumer Commission today issued three reports on issues relating to competition in the telecommunications industry in 2002-03.

The annual reports into competitive safeguards, price changes for telecommunications services and Telstra's compliance with price control arrangements, will help inform the ACCC's approach to regulating the industry in the future.

ACCC Commissioner, Mr Ed Willett, said the Competitive Safeguards Report revealed competition in the telecommunications industry has not developed to the extent expected at the time the industry was substantially deregulated in 1997.

"Of the carriers to emerge in that time, many either operate solely at the retail level and have relatively few directly connected customers or operate in niche markets only", he said. "One result of this is that Telstra continues to account for the majority of directly-connected fixed-line services, and indeed Telstra and Singtel Optus account for around 99 per cent of these services between them".

In several markets, effective competition is limited principally to services or access based competition, with service providers competing at the retail level only.

"While access or service-based competition is certainly beneficial and can help companies build a retail customer base, the ACCC believes that in the longer term, facilities-based competition is required to continue to drive efficiency, wider choice of services and price competition".

The report shows that, more so than in previous years, there was evidence of consolidation in 2002-03.

"In the fixed line customer access market, there was some slow down in new carrier investment", he said.  "In the market more generally, there was a drop off in price reductions and, in some cases, price increases".

The report on Prices Paid For Telecommunications Services provides further insights into the state of competition in the telecommunications industry.

This report shows that, overall, average prices paid by telecommunications consumers increased by 1 per cent during 2002-03. This is the first time there has been a rise in this index since the base year in 1996-97.

Increases in the average price paid for both fixed line (PSTN) and mobile services underpin this result.

"With regard to PSTN services, the most significant increase was in the average price paid for basic access (or line rental) services", he said.  "While there was a decrease in the average prices paid for local, national long distance, international and fixed-to-mobile calls, these decreases were insufficient to outweigh the increase in charges for basic access".

The other notable feature of the prices report is the widening gap between price movements in the residential market and certain segments of the business market.

"In 2002-03, residential consumers paid on average 5 per cent more for PSTN services than the year before, and small business consumers paid 1.1 per cent more on average", he said.  "In contrast, however, other business consumers paid 8.6 per cent less, on average, for PSTN services during 2002-03".

This trend was also evident with regard to the provision of fixed-to-mobile calls. 

"While the overall average price paid for fixed-to-mobile calls during 2002-03, residential consumers paid on average 5 per cent more for these services and other business consumers paid 10.9 per cent less.

"It is not clear whether this disparity arises from the fact that big businesses are able to negotiate more favourable deals with carriers, or whether it reflects stronger facilities-based competition in more densely populated CBDs".

In respect of mobile services, the ACCC published changes in average prices paid for both GSM and, for the first time, CDMA mobile services.

While the overall average price paid by mobile consumers increased by 0.9 per cent, there was a decrease in the average price paid for CDMA services.

"The relative disparity between changes for GSM and CDMA services may reflect strategies by network operators to increase the existing low level of CDMA subscribers", he said.

"The other notable trend from the pricing report is that mobile operators appear to be competing more aggressively to attract pre-paid subscribers than post-paid services".

This year's report on Telstra's compliance with the price control arrangements was the first report prepared under the Government's latest price control arrangements, which apply for the years 2002-03 to 2004-05.
The report was provided later than anticipated due to delays in obtaining all the necessary information required to complete the analysis.

The report concluded that Telstra had adequately complied with all price control requirements established by the Government.

A dispute between Telstra and the ACCC in relation to the carry-in amount to 2002-03 from previous price controls for line rentals has been resolved, with Telstra agreeing not to use the disputed credits in the 2003-04 price cap for line rentals.  The ACCC believes that this is the appropriate way to ensure the benefits of the price control arrangements are passed onto end-users.