The Australian Competition and Consumer Commission today issued its draft decision to reject Telstra's Unconditioned Local Loop Service monthly charges undertakings, which proposed a monthly $30 average charge.
The service, which allows access to the basic elements of Telstra's customer access network, is considered a key input into the development of facilities based competition in Australian telecommunications, providing greater benefits for end users.
"The ACCC considers that Telstra's proposed monthly charges for the ULLS are not reasonable", ACCC Chairman, Mr Graeme Samuel, said today.
Telstra has proposed for the first time averaging the significantly different cost estimates for providing the ULLS across all geographic regions into a single monthly charge of $30.
"The ACCC believes that Telstra's proposed average price is unlikely to promote competition on its merits and likely to heavily distort the use of and investment in telecommunications infrastructure", he said.
"Telstra's prices also adopt a proposed method of cost recovery for ULLS specific costs which has now been rejected by the Australian Competition Tribunal following Telstra's appeal on its undertaking for the Line Sharing Service".
Further, the ACCC continues to have concerns with Telstra's proposed network cost estimates for the service, which rely on its PIEII cost model. The model has been subject to further expert scrutiny as part of this assessment which has reinforced these concerns. This is particularly significant in this case, given the likely tendency of Telstra's cost model to overstate costs in rural areas and thereby support a much higher average charge for the service than is likely to be efficient.
On the material available to the ACCC to date, therefore, Telstra has failed to establish that its proposed charges are based on efficient costs.
Copies of the ACCC's draft report will be available on its website shortly. Other documentation relevant to the access undertakings (including the undertakings, Telstra's supporting submissions and other material) is already available on the ACCC website.
The ACCC seeks submissions by interested parties on its draft view by no later than 7 July 2006.