The Australian Competition and Consumer Commission today issued its draft decision to continue its regulation of local call services and to formalise its current approach to the regulation of line rentals.
"The ACCC's draft decision is that re-declaration of the LCS and formal declaration of a basic access service will be in the long-term interest of end-users", ACCC Chairman, Mr Graeme Samuel, said today.
The ACCC's review found that, with the exception of CBD areas, which will remain unregulated, there are currently no effective substitutes for Telstra's LCS or line rental service and the prospect of more extensive roll-outs in the foreseeable period still uncertain.
"However, in light of the potential for facilities-based competition to develop in the relatively near future, the ACCC has chosen to limit the period of declaration to two years from 1 July 2006. The ACCC will revisit the declaration of these services in 2008 to determine whether to continue regulation", he said.
A shortened declaration period will allow the ACCC to revisit its analysis of market conditions and reassess the extent to which alternative or substitute services to these local call and line rental services are evident. Over this time, a sufficient level of the current uncertainty around network and service alternatives should be removed.
"The line rental service is currently examined in the context of local call pricing. This is no longer seen as a satisfactory or efficient way to regulate the line rental service. Regulation should be explicit and transparent and the separate declaration of line rental will achieve this. The separate regulation of the line rental service is also justified in its own right, in part because this service can be used in conjunction with other services and not just local calls".
The ACCC has also set out its draft view on the future pricing of the LCS and line rental service. These services are currently priced on a retail-minus retail costs basis. The ACCC's draft view is that this approach is proving to be increasingly problematic in promoting desirable market outcomes. However, the maintenance of this pricing principle as an interim approach may need to be accepted, pending the development by the ACCC of an independent cost model which would be used to estimate cost-based prices for the declared services.
The review of current declarations is required under the Trade Practices Act 1974 which imposes a sunset on all existing declarations and this inquiry was begun in April 2005. Since then, the ACCC has begun a review of other fixed network services, including the unconditioned local loop and the basic PSTN interconnect services. It will continue to develop its views on wholesale regulation during these reviews. A final view on all these declarations is expected by July 2006.
The ACCC is now calling for submissions from interested parties on its views in relation to both the draft decision to declare the LCS and basic access services, and its draft view on the appropriate pricing principle to apply to these services.
Copies of the ACCC's draft declaration decision and other relevant documents (including the discussion paper and submissions from interested parties) will be available on the ACCC website.
The ACCC seeks submissions by interested parties on its draft view by no later than 21 April 2006.