ACCC 'perplexed' by Telstra decision on fibre-to-the-node investment

7 August 2006

The Australian Competition and Consumer Commission is perplexed by today's announcement by Telstra that it has unilaterally decided to discontinue talks with the ACCC over Telstra's proposed fibre-to-the-node network upgrade, ACCC Chairman, Mr Graeme Samuel, said today.

"The ACCC last received documentation from Telstra on a FTTN access service and its pricing for this new service in late June, and was awaiting details on a transition plan for access seekers from current unconditioned local loop arrangements", he said. "Given that Telstra only recently said that the discussions between it and the ACCC were '98 per cent' complete, the ACCC is perplexed that Telstra has now chosen to discontinue these discussions and withdraw its proposed fibre roll out.

"It is our view that it would have been preferable for Telstra to place details of its proposal on the table for public examination, but Telstra appeared unwilling to do so.

"The ACCC would be concerned if Telstra's decision not to proceed at this time were as a consequence of the ACCC's call last week to lay the FTTN plans open for public scrutiny. We are perplexed as to why Telstra would not want to do this.

"Telstra has indicated that 'the major stumbling block was the ACCC's unwillingness to recognise the actual costs that Telstra incurs in providing its services' …but from the commencement of the ACCC's discussions with Telstra, the ACCC accepted 'that Telstra should be entitled to recover its actual costs arising from the FTTN upgrade' and that 'Telstra faces a significant risk that should be reflected in the cost of capital used to calculate access prices' ".

"The ACCC notes that that the calculations which Telstra has provided, to date, on the costs of services on its existing network have been based not on its actual costs or its regulatory accounts, but on Telstra's own highly contentious economic model.

"What is equally perplexing is that as recently as yesterday [Sunday], Telstra provided comments to the ACCC seeking further feedback on its claimed costs for Telstra's existing network".

Mr Samuel also said that the ACCC will shortly proceed to finalise its views on current pricing for the unconditioned local loop. The ULL is used by several carriers today to provide high-speed DSL broadband services.

"There are multiple carriers in a position to put in place high-speed broadband networks using DSL, FTTN, wireless or other technologies. All they await is certainty as to Telstra's FTTN plans".

Mr Samuel said Telstra also claimed that it could not reach agreement with the ACCC on the extent of cross-subsidies to be provided by urban consumers to finance the cost of its services to rural and remote Australia.

"But at no stage in the discussions has Telstra ever proposed that its FTTN network would be rolled out to rural and remote Australia.

"Further, the ACCC does not agree with Telstra claims that there is an irreconcilable conflict between government policy on universal services and the ACCC's approach to access prices. In the ACCC's view, both are compatible with ensuring that Telstra's investment achieves a commercial return.

"Australians should be reassured that the ACCC, in accordance with government policy, is committed to safeguarding the rights of 20 million consumers, whilst providing reasonable regulatory outcomes for both investors and access seekers".

Release number: 
MR 175/06
ACCC Infocentre: 

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